Analysis of current business performance and strategic planning for the future are two extremely important components of company well being. In a tough competition it is very difficult to retain customers and make profits. Rivals are looking for to wiping competitors out. You can probably find no markets with a little or no competition. If you want to be successful you have to withstand rivalry. In order to gain and maintain competitive advantage that’s not enough just to analyze financial results for the past periods to plan future activity. Strategic planning is a key problem. Strategic planning is about anticipation of problems even before they really occurred. And there is no magic here.All forecasts and decisions are based on obtained information on past and current performance of the company. A complete analysis of all factors influencing co performance (both internal and external) will provide top managers with the most complete information on how to run business in order to be successful. Of course, strategic analysis never substitutes top managers in decision making. This is only information that can be both helpful and harmful in managers’ hands.
PEST analysis is known to be one of the most popular and widely spread throughout various businesses and industries. PEST stands for political, economic, social and technological factors, all of them having a direct influence on company performance. It should be noted that some of these factors are more important for certain businesses, which means that there is no universal analysis formula. Every business is individual and if for some companies economic factors play the most important roles, social environment is all important for the others. Managers engaged in PEST analysis should give proper of weights to each factor depending on company current performance, strategic goals, mission and values, as well as past and current problems, competition rate etc.
Political factors are very often arguable since many top managers do not believe politics can be interfered with economy. Well, admit it or not, but political decisions may turn national and international markets upside down. Just one statement of a prominent world leader may send currency down or cause a great demand for certain products, for example oil and gas.
Economic factors are without any doubts the most important for any business looking to selling products and services to end customers. If the company is operating on a national or international level certain economic indexes are to be taken into account such as GDP, national debt, inflation rate and others.
Social factors are often underestimated. Business owners sometimes forget that business is a part of society and it cannot be run in a complete isolation. It is very important to track and analyze important social trends and events. Analysis of social factors as much to do with marketing and advertising since company should provide customers with the exact products they need.