What factors would you include in a PEST analysis and how might you collect the data necessary to conduct one? A market is composed of individuals or organisations who are interested in and willing to buy a good or service to obtain benefits that will satisfy a particular need or, who want and have the resources to engage in such a transaction. Therefore, it is important for a company to understand market attractiveness. Assessing market attractiveness requires that important macro environmental trends be noticed and understood. The PEST analysis can be used as a framework for assessing market attractiveness at a macroeconomic level. The elements that would be included in a PEST analysis are: political (focusing on regulatory), economics, sociocultural (including demographics and social trends) and technological (including the natural environment).
There are various methods to collect the necessary data such as conducting market research or using internal records. In every country and across some countries – those that are members of the EU, for example – there is a regulatory environment within which local and multinational firms operate. Political, legal and regulatory trends can have a powerful impact on market attractiveness. The power of deregulation to influence market attractiveness is now well-known.
Government, business, and the general public throughout much of the world have become increasingly aware that overregulation protects inefficiencies, restricts entry to new competitors, and creates inflationary pressure.In the United States, airlines, trucking, railroads, telecommunication, and banking have been deregulated. Markets are also being liberated in Western and Eastern Europe, Asia and many developing countries. Trade barriers are crumbling due to political unrest and technological innovation. Deregulation has typically changed the structure of the affected industries as well as lowered prices, creating rapid growth in some markets as a result. For example, the period following deregulation of the US airline industry (1978-1985) gave rise to a new airline category – the budget airline.
A similar story has followed in the European market, where discount airlines Ryanair, EasyJet, and others have made vacation destinations places to fly to rather than drive to.As regulatory prices wax and wane (increase then decrease), the attractiveness of markets often follows suit (to do as the other has done). For example, the deregulation of telecommunications in Europe, following earlier deregulation in the US, opened markets to firms seeking to offer new services and take market share from the established monopolies. The rise of internet retailing and internet telephony has policy-makers arguing over the degree to which these internet activities should be subject to state and federal tax in the US.
The outcome of these arguments may have considerable effect on consumers’ interest in buying and calling on the Web. Among the most far-reaching of the macro trend components is the economic environment.When people’s incomes rise or fall, when interest rates rise or fall, when the fiscal policy of governments results in increased or decreased government spending, entire sectors of economies are influenced deeply, and sometimes suddenly. With many Western countries mired in recession.
The near-term future of the developed economies appears to lie in the purses and wallets of their – or China’s or India’s – shoppers. Signs suggest that an economic rebound in the recently stagnant euro-zone and Japan, based largely on a consumer-led recovery of the kind that fuelled growth in the US in the early years of the new millennium remains tenuous.
