PESTER

PESTER

  • P = Political
  • E = Economic
  • S = Social & Cultural
  • T = Technological
  • E = Ecological
  • R = Regulations

Also known as PEST, PESTLE, STEP, STEEP

As you work through the different categories you are interested in:

  1. How does this change affect my business and my ability to compete?
  2. How does it affect my customers (and potentially their customers)
  3. How does it affect my competitors (if they are very local, there may not be much difference with the impact on your business but if your competitors are international, there can be a huge shift in competitiveness because of exchange rates).

Look for the elephant in the room.

The big assumption or risk that no one is mentioning.

I live in Birmingham in the UK and the collapse of the Rover Group (the car plant formerly known as Austin Rover and British Leyland) had a big impact on the businesses based around the site at Longbridge.

It was estimated 8,000 people lost their jobs directly, 11,000 from the supply chain and 6,000 from local businesses which relied on the prosperity of the area. That’s not as bad as it would have been if the plant had been closed at its prime but it still shows the ripple effect.

I’ve listed the main factors under each of the PESTER factors to give you ideas. One factor may have a profound effect – good or bad – while others may make little impact.

Political

  • Current and potential political pressures and priorities
  • Local, national, international
  • Spending priorities
  • Tax policies
  • Political stability & instability
  • Intervention (interference)

Economic

  • Economic growth – national/local, industry, niche (accelerators & Beer Game)
  • Interest rates
  • Exchange rates
  • Inflation
  • Commodity prices
  • Unemployment

Social & Cultural

  • Demographics – baby boomer time bomb
  • Cultural changes & expectations – education, holidays, TV, Internet
  • Attitudes – health, debt, community, family, gender roles, leisure, cult of celebrity, lifestyles,
  • Mobility – labour mobility between jobs and geography, social between “classes”
  • Fashions and fads (so important today & gone tomorrow) vs permanent changes

Technology

  • Internet & digital
  • Information technology
  • Automation & robotics
  • Material sciences
  • Research & development
  • Technology transfer & obsolescence
  • Product, process, need

Ecology

  • Natural world – endangered species & habitats
  • Climate change
  • Energy
  • Desire to protect – act responsibly

Regulation

  • Employment law, health & safety
  • Product & consumer protection
  • Competition laws
  • Recycling
  • Intellectual property
  • International trade regulation

Factors To Consider In Using PESTER

  • Brainstorm
  • Then group – don’t be too concerned with categories as some may impact several
  • Incremental or disruptive (probability & impact)
  • Trends – directions and rates
  • Analyse and evaluate
  • Can be useful to look back to look forward
  • Back 10, forward 5
  • Back 5, forward 3

Keep It Simple And Focused

If you try to use PESTER on a situation which is too general, you won’t get much out of it.

I had a client with a new product with environmental and cost saving benefits that could be sold to hotels and restaurants, large corporates, domestic homes, commercial office providers and many more.

Because the markets are so varied, it made sense to break it down and use PESTER to identify what’s changing in the customers world by broad category.

In another example, I used to work for a business that sold a wide range of electrical products for the building industry, made in very different ways. Because everything was linked to construction, PESTER worked very well at the top level.

If you are in doubt, pick the main area of your business and apply PESTER to that and identify all the changes.

Then move onto your second biggest area of your business and applying that filter, ask yourself whether everything you’ve written still fits and whether anything is missing.

Keep doing it until you’ve covered 80% or more of your business or you’re satisfied that you’ve picked up all the issues.

PESTER Form

To help you to complete the PESTER exercise, you should use this form.

PESTER

Go back to P3M2 The External Environment

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