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What is PEST Analysis? 4 Lenses to Read the 'Outside World' Surrounding Your Business

PEST analysis is a strategic management tool that thoroughly examines the uncontrollable macro-environment facing a company through four lenses: Political (P), Economic (E), Social (S), and Technological (T). Political factors act as a force changing the 'rules of the game' through policies, regulations, and taxes, exemplified by the electric vehicle subsidy case where 'policy is the market.' Economic factors (interest rates, exchange rates, inflation) directly affect consumption and investment decisions and must be viewed as interconnected flows rather than isolated indicators. Social factors (changes in values and perceptions) and technological factors (new technologies and battery competition) alter the market size and competitive landscape itself, with all four factors working in an interconnected manner. PEST is used to paint a big picture during the new business and market entry stages, which then leads to SWOT, and there is also an expanded PESTEL version that adds environmental and legal factors.