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    2.2 Pest Analysis

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    otienogodwin130

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    2.2 Pest Analysis

    Uploaded by

    otienogodwin130
    3 views4 pages

    Original Title

    2.2 PEST ANALYSIS

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    © All Rights Reserved
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    3 views4 pages

    2.2 Pest Analysis

    Uploaded by

    otienogodwin130

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    A PEST analysis is a tool used to assess the Political, Economic, Social, and

    Technological factors that may affect a business. It helps organizations understand


    the external environment and anticipate potential opportunities or threats. Here's a
    breakdown of each factor:

    1. Political Factors

    These refer to how government actions and policies impact businesses. Political
    factors can create both opportunities and challenges for organizations. Key
    considerations include:

     Government Stability and Policies: Changes in leadership or political


    instability can create uncertainty for businesses.
     Regulation and Deregulation: The introduction or removal of regulations,
    such as labor laws, environmental regulations, and trade policies, affects how
    businesses operate.
     Taxation Policies: Corporate taxes, value-added taxes (VAT), and tariffs can
    affect profitability and pricing strategies.
     Trade Restrictions and Tariffs: Policies on imports, exports, and trade
    agreements can affect supply chains and market expansion.
     Labor Laws and Employment Legislation: Minimum wage laws, worker
    safety regulations, and labor rights can affect business costs and human
    resource management.

    Example for Kisumu County: Changes in local government policies regarding


    micro-enterprises, taxation, or licensing could either support or hinder business
    performance.

    BY; CHESANG’ JK +254720607245 EMAIL ADDRESS: [email protected]


    2. Economic Factors

    These are factors that affect the economy as a whole, influencing the business
    environment. Economic factors directly affect consumer purchasing power and
    organizational operations. Key considerations include:

     Economic Growth Rate: A growing economy means increased consumer


    spending, while a recession reduces demand for goods and services.
     Inflation Rates: High inflation can increase costs for materials, wages, and
    other inputs, potentially squeezing profit margins.
     Interest Rates: Higher interest rates make borrowing more expensive,
    affecting businesses that rely on loans or credit.
     Exchange Rates: For businesses involved in international trade, fluctuations
    in currency values can affect import/export prices.
     Unemployment Rates: High unemployment can reduce consumer spending,
    while low unemployment might drive wage increases.
     Consumer Confidence and Spending Power: The overall economic climate
    impacts consumer behavior and willingness to purchase goods or services.

    Example for Kisumu County: Inflation or changes in national interest rates can
    impact the cost of capital and goods for micro-enterprises, altering their profitability.

    3. Social Factors

    These are the societal and cultural factors that affect consumer needs, purchasing
    behavior, and the workforce. Key considerations include:

     Demographics: Age distribution, population growth, and migration patterns


    influence market demand and labor availability.

    BY; CHESANG’ JK +254720607245 EMAIL ADDRESS: [email protected]


     Lifestyle Changes: Changes in consumer preferences, such as the rise of e-
    commerce or healthy living trends, can open new markets or render others
    obsolete.
     Cultural Norms and Attitudes: Societal values, customs, and traditions can
    shape consumer behavior and product expectations.
     Education Levels: Higher education levels can influence the availability of
    skilled workers and demand for complex products or services.
     Health Consciousness: Increasing health awareness may lead to higher
    demand for health-related products and services.

    Example for Kisumu County: A growing youth population may lead to higher
    demand for technology-driven services, while social changes in health awareness
    could increase demand for healthcare-related products in the local markets.

    4. Technological Factors

    These involve the pace of technological advancement and how it influences the
    business environment. Key considerations include:

     Technological Advancements: Innovations in automation, AI, and


    digitalization can improve efficiency, create new products, or disrupt existing
    markets.
     Research and Development (R&D): Investment in R&D can lead to
    breakthroughs in product development or operational efficiencies.
     Adoption of New Technology: The speed at which industries adopt new
    technology can provide a competitive edge or expose laggards to disruption.

    BY; CHESANG’ JK +254720607245 EMAIL ADDRESS: [email protected]


     E-Commerce and Digital Platforms: Increasing reliance on digital
    platforms and e-commerce can redefine market access and consumer
    interaction.
     Cyber security: As businesses increasingly rely on digital technologies, data
    protection and cyber security become essential.

    Example for Kisumu County: The increasing use of mobile payment platforms
    (e.g., M-Pesa) can transform how micro-enterprises conduct transactions, improving
    convenience and access to larger markets.

    How PEST Analysis Helps in Business Decision-Making

    By analyzing these external factors, businesses can:

     Identify potential threats and opportunities in their operating environment.


     Adjust their strategies to mitigate risks or capitalize on new trends.
     Anticipate future changes in the market that may affect long-term planning.

    BY; CHESANG’ JK +254720607245 EMAIL ADDRESS: [email protected]

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