What is a PEST analysis?

• A. A PEST analysis focuses only on internal operations.
• B. A PEST analysis examines pricing strategies.
• C. A PEST analysis examines Political, Economic, Social, and Technological external factors affecting a business.
• D. A PEST analysis is used to assess product quality.

Answer: (C)

A PEST analysis looks at the external macro-environment factors that can affect a business, focusing on Political, Economic, Social, and Technological influences. It helps a company scan the outside world to spot opportunities and threats that could impact strategy and performance, rather than looking inside the organization. It isn’t about internal operations or specifics like pricing strategies or product quality; those are separate areas of analysis. Instead, PEST focuses on broad forces such as government policies, economic trends, demographic shifts, and new technologies that could shape demand, costs, or competition. For example, political changes like new regulations, economic trends like inflation or exchange rates, social shifts in consumer behaviours, and technological advances in automation or online channels all represent the external factors a PEST analysis would consider.