PEST

Political, Economic, Social and Technological Forces and Businesses

What is PEST

• PEST is an acronym for Political, Economic, Social and Technological forces.

Define these words:Political: _____________________________Economic: ____________________________Social: _______________________________Techological: __________________________

Examples of PEST Forces

Give an example:Political force:____________________________Economic force:__________________________Social force:_____________________________Techological force:________________________

PEST & Businesses

• Businesses are aware of PEST forces because they can increase or decrease profits: PEST forces can change consumer needs.

• Example 1: The government increases taxes on gas to double its price. What businesses could suffer (profits decrease)? Gain (profits increase?)

• Example 2: The economy decreases and a people in a country become poorer. What businesses could suffer? Gain?

Possible Answers to Examples

• Example 1: The government increases taxes on gas to double its price. What businesses could suffer (profits decrease)? Gain (profits increase?)Car dealers selling SUVs could suffer. Car dealers selling fuel efficient cars could gain.

• Example 2: The economy decreases and a people in a country become poorer. What businesses could suffer? Gain?Retail stores selling luxury goods (example, Rolexes) could

suffer. Retail stores offering low prices/discounts could gain.

PEST Forces and Businesses

• Give 1 example of a current P,E,S, and T force in the U.A.E. that could change consumer needs in it. (The example must be different than the ones on the previous slide) Explain what type of businesses (and products) would be interested in this change.

a) Political. Give example. Explain how it can change consumer needs in the U.A.E. Explain what type of businesses would be interested in this change.

b) Economic. c) Sociald) Technological

Possible Answers to Examplesa) Political. Increase costs of water usage. Consumers will be interested in

using less water. A business selling water-saving devices will be interested in this change in consumer needs.

b) Economic. More and cheaper Chinese products enter the country. Consumers will be interested in buying cheaper products made in China, rather than more expensive ones made in the U.A.E. Production companies in the UAE will be interested in this change in consumer needs.

c) Social. The majority of the population in the UAE is under 30. These young consumers want fashionable goods. Businesses in the fashion industry will be interested in this change.

d) Technological. People want mobile devices for the internet, not laptops or desktops. Technology companies will be interested in this change (Example, desktop companies may start making mobile computing devices)

PEST Question

ABC Business in Fujairah sells fried chicken and soda drinks. What social force may change consumer needs to reduce ABC’s profits? What can ABC do to respond to this threat?

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PEST Question

ABC Business in Fujairah sells fried chicken and soda drinks. What social force may change consumer needs to reduce ABC’s profits? What can ABC do to respond to this threat?

A social force may be people wanting a healthier lifestyle and eat healthy food. ABC can respond to this threat by selling steamed chicken and fruit juices.

PEST Question

XYZ Business in Dubai sells expensive Christian Dior perfume. What economic force may change consumer needs to reduce ABC’s profits? What can ABC do to respond to this threat?

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PEST Question

XYZ Business in Dubai sells expensive Christian Dior perfume. What economic force may change consumer needs to reduce ABC’s profits? What can ABC do to respond to this threat?

The economy could significantly decline with people having less money to buy luxury goods such as expensive perfume. XYZ could respond to this threat buy selling a cheaper brand.

Review Questions

1. Why should businesses be aware of PEST forces in their country?

2. What are common PEST forces that a business should be aware of?

3. How can businesses respond to PEST forces that give opportunities (may increase profits) or present threats (may decrease profits)?

Review Questions: Answers1. Why should businesses be aware of PEST forces in their country?

PEST forces can change the needs of consumers in a country. A business may increase its profits if it meet these needs. On the other hand, a business may lose money if it doesn’t change its product(s0 to meet these changing needs.

2. What are common PEST forces that a business should be aware of?

Political: Government increases taxes on a product. Economic: Economy grows or declines significantly. A economy based on production of consumer goods will be

under significant threat from Chinese manufacturers.Social: The demographic forces in a country. Also, cultural forces determine consumer needs.Technological: Currently, computer and internet functions are going to mobile devices.

3. How can businesses respond to PEST forces that give opportunities (may increase profits) or present threats (may decrease profits)?

Consumer needs for products change, so businesses have to change their products to meet these changing needs.