Though structure and leadership play a large role in business success, external factors can also shape your company's potential. One method for systematically discovering and quantifying those factors is the PEST analysis. PEST is an acronym for political, economic, social, and technological – external factors that commonly affect business activities and performance. reated by !arvard professor "rancis #guilar #guilar in $%&, PEST can (or) alone or be used in combination (ith other tools, such as Porter's "ive "orces and "orces and S*OT analysis, analysis, to determine an organi+ation's overall outloo). im -a)os, founder of the Pestle #nalysis (ebsite, (ebsite, says PEST can help companies improve their decision ma)ing and timing. The b est outcome of the PEST analysis (ould be if your company is able ab le to ma)e the right decisions at the right time by analy+ing different factors. #nother benefit of PEST analysis is it could aid you in predicting the future by loo)ing at the present. /ou /ou (ill (ill be prepared to tac)le future challenges. 0t also helps you highlight the opp ortunities you can cash in on and a nd threats (hich could harm your business, -a)os told 1usiness 2e(s 3aily. PEST factors
To get the most out of a PEST analysis, businesses should understand each of the four factors. Political
This factor loo)s at ho( government regulations and legal issues affect a company's ability to be profitable and successful. 0ssues that must be considered include tax guidelines, copyright and property la( enforcement, political po litical stability, stability, trade regulations, social and environmental policy, employment la(s and safety regulations. ompanies should also consider their local and federal po(er structure, and discuss ho( anticipated shifts in po(er could affect their business. Economic
This factor examines the outside economic issues that can play a role in a company's success. 0tems to consider include economic gro(th, exchang e, inflation and interest rates, economic stability, anticipated shifts in commodity and resource costs, unemployment policies, credit availability and unemployment policies. Social
This issue analy+es the demographic and cultural cu ltural aspects of the company's mar)et. These factors help businesses examine consumer needs and d etermine (hat pushes them to ma)e purchases. #mong the items that should be examined are demographics, population gro(th rates, age distribution, attitudes to(ard (or), 4ob mar)et trends, religious and ethical beliefs, lifestyle changes, educational and environmental issues and hea lth consciousness. Technological
This factor ta)es into consideration technology issues that affect ho( an organi+ation delivers its product or service to the mar)etplace. #mong the specific items that need to be considered are technological advancements, government spending on technological research, the life cycle of current technology, the role of the 0nternet and ho( any changes to it may play out, and the impact of potential information technology changes. 0n addition, companies should consider ho( gene rational shifts, and their related technological expectations, are li)ely to affect those (ho (ill use their p roduct and ho( it is delivered. PEST example
To better better understand ho( a PEST analysis anal ysis should be conducted and the benefits it offers, businesses can examine numerous examples online. The online site 1u++le conducted several PEST #nalysis examples, including one for restaurants. restaurants. 0t examined the various political, economic, social and technological factors that a potential restaurant o(ner needs to consider (hen entering the industry.
Political factors: •
5overnment regulations regarding employee hygiene, health and food regulations, food standards, etc.
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5overnment policies regarding the restaurant industry and managing eateries. These may include licenses, inspections by health and food departments, etc. Economic factors:
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0nterest rates (ould affect the cost of capital, the rate of interest being directly proportionate to the cost of capital.
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6ate of inflation determines the rate of remuneration for employees and directly affects the price of the restaurant's products. #gain, the proportion bet(een the inflation rate and (ages7prices is direct.
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Economic trends act as an indicator of the sustainability and profitability of your business in the chosen region and help you in deciding your mar)eting strategy. Social factors:
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Eating habits of the people in your chosen business environment may, and certainly (ill, affect your mar)eting decisions.
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6atio of people preferring to eat out regularly. Technological factors:
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# good technical infrastructure (ould lead to better production, procurement and distribution logistics, resulting in reduced (astage and lo(er costs.
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Effective technology may be a decisive factor for food technology innovation, better presentation, more effective business mar)eting, etc. Going further
0f you are interested in getting more from your PEST analysis, consider adding more vectors to the analysis or expanding into SWOT 8strengths, (ea)nesses, opportunities
and threats9, -OST 8mission, ob4ective, strategies, tactics9, or S6S 8strategy, current state, requirements, solution9 analysis. Some variations may also add legal, environmental 8converting into a PEST:E analysis9, demographics and ethical factors, (hich ma)es the analysis more po(erful because it considers more factors as compared to a normal PEST analysis, -a)os said. The more factors you consider for analysis, the better the results you can achieve from your strategy. ; See more at< http<77(((.businessne(sdaily.com7==$>;pest;analysis;definition; examples;templates.html?sthash.-!@**bA.dpuf
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Environmental regulation and protection. Taxation8orporate consumer9
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0nternational trade regulation
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onsumer protection
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Economic gro(th
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-onetary policy
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5overnment spending Policy to(ards unemployment
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Taxation
Employment la( 5overnment organisation 7 attitude
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Exchange rates
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0nflation
ompetition regulation •
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Stage of the business cycle •
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Economic mood ; consumer confidence
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0ncome distribution 3emographic s :abor 7 social mobility
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:ifestyle cha nges #ttitudes to (or) and leisure
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Education "ashions and fads
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!ealth and *elfare
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5overnment spending on research 5overnment and industry focus on technologica l effort 2e( discov eries and developmen t Speed of technology transfer 6ates of technologica l
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:iving conditions
obsolescenc e •
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Energy use and costs hanges in material sciences 0mpact of changes in information technology 0nternet
Political "actor; 5overnment regulation from a restaurant (ill be hygiene, health, food standards, and food they are allo( to serve. 6estaurant industry must include from the economic policies of government licenses, inspection by the health ministry department. Economic "actor; 0nterest 6ate, and it has to be proportionate to the cost of capital. Economic trends helps you to indicate the sustenance and profitability of the business Social "actor; ertain culture are not allo(ed to eat specific food. :i)e !indu's they are not allo( to eat beef and -uslim are not even allo(ed to touch por). Therefore, you need to learn the culture and the bac)ground of the country before starting up a restaurant.The eating habit (ill certainly may ma)e an affect on the business. #nd ratio of people li)e to eat out at the country. Technological; # good technical infrastructure (ould certainly help the business by alot. 1y using ne( technology (ill reduced (ages and lo(er some specific cost.
Published<# >B, -arch >@$=
ac) Sprat is the o(ner of seafood restaurant in a coastal to(n. !e is &@ year old and doctor has advised him to ta)e rest so he had appointed a -anager to loo) after the business operation and he use to come to see the business once in a (ee). 1ut once he handed over the business to the manager his business is not doing (ell and there is continuous declining in the business. So in order to find remedy o(ner has been approached to the author to analyse the case and suggest as (hat should be done to bring bac) the business of the restaurant. #uthor has analysed the business (ith the tools of business 8case9 analysis;S*OT, and PEST:E and further financial data has also be en ta)en into consideration to find out the declining trend and come to a conclusion as (hy business is going do(n.
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0n order to evaluate the business operation and put the findings in the report author has done extensive research;secondary research and analysed the case (ith his valuable suggestions.
#uthor (ould li)e to convey his gratitude to those entire people (ho helped him to enhance his understanding of the case and analy+ed the situation so that a valid conclusion of the case can be dra(n. #uthor has completed this case successfully and has been presenting his findings (ith suggestion in this report. So author (ould li)e to than)s to the -odule tutor for )ind support and guidance.
ac) Sprat is &B year old o(ner of &@ seat licensed seafood restaurant that is situated in a costal to(n. 1efore starting this business ac) (as simply a -anager at a local 1luebec)ers 6estaurant. 1ut an inheritance left this restaurant to him. Since the opening of this restaurant business it has given very good return. The belief of ac) to(ards success f this business is the -aintenance of high standards in fod production and presentation. Other fact is -enu and beverage list has been fairly constant since beginning of this restaurant. ac) did not change menu and beverage list because business (as giving modest return since beginning. 1ut 4ac) is not regular to the restaurant and he has appointed a -anager to manage the business operation and he use to come to the restaurant to see the business operation once in a (ee). This is because at this age 8&B9 he has been suffering from health problem and his doctor has advised him to ta)e rest. 1ut business of this restaurant has gone do(n as soon as it (as handed over to the manager. #bsenteeism of the staff has been increased. Ceeping in mind the remedy of the situation author has established aim and ob4ectives of this report, here are the aim and ob4ectives (ritten in detailed< #im of this report is to find remedy of the existing problem or discrepancies of the restaurant and give valuable suggestions to overcome from these problems so that business can be put on its old pattern;profitable. Ob4ectives are< "inding most important problems 0dentification of further information that (ould be helpful in ma)ing realistic plans for the future of the business To list the priorities 3ra(ing an action Plan
The structure of this report is as follo(s< "irst of all main body has been presented (herein S*OT, PEST, and other detailed analysis has been done. Then conclusion has been dra(n and bibliography 8list of references9 has been given follo(ed by appendix section (here additional informations has been provided.
1efore providing solution of anything one has to find the problems first. So to find problem related to any business it is very first step to conduct S*OT analysis and PEST or PEST:E analysis. 1efore going for the S*OT analysis of the business concerned it is important to understand S*OT first. S*OT #2#:/S0S is the detailed search and listing of factors from situational analysis that might or (ill impact the business's strategy. Strategic mar)eting is based on the S*OT analysis. The process by (hich S*OT factors are derived is to carefully revie( the internal analysis for strengths and (ea)nesses, an d the environmental analysis for opportunities and threats, and to then record. 86eich, D.#, $%%9
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#ccording to 8-orrison, >@@>9 The S*OT analysis is a commonly used planning tool, (hich assesses the firm's strategic profile in terms of its strengths, (ea)nesses, opportunities and threats. "ocusing on both internal and external environments, it serves to highlight a firm's distinctive competences, (hich (ill enable it to gain competitive advantage. 1ased on the above information from the scholars it is true that business environment can be divided into t(o part;internal and external environments. 0nternal environment consists of all factors that is internal part of the business. These internal factors are (ithin the control of the business. Strength and *ea)nesses of the business can be found in the internal environment of the business. External factors are those factors (hich are not (ithin the control of the business and to be into existence business houses has to chang e in their internal policy and ad4ust itself to cope (ith the external environment factors. Opportunities and Threats are the factors that are part of external environment of a business.
Earlier this business (as profitable
0t is established organi+ation -aintaining high standard in food and presentation Staffs are familiar (ith their (or) ustomers feel that restaurant is conveniently placed and charges reasonable price O(ner is not able to give full time attention to the business -anager is less empo(ered;as he feels less scope has been given to him for the development of this business 2umber of staff has been increased;(hich is extra burden on payroll expenses of the business. 2o refurbishment done properly G yearly -aintenance and !ygiene problem 0nsufficient fund7 resources for spending on maintenance and !ygiene -enu choice is stale and boring 0mproper management of food due to lac) of proper forecasting of guests.
6estaurant is old so having established mar)et -ar)et 0mage is good; reasonable price and consistent standard 3ilution of mar)et share due to inability to refurbishment Environment !ealth officer may not be informal in future and there (ill be time (hen formal notice (ill be issued.
1efore analy+ing PEST or PEST:E factors from a business point of vie( it is important to understand these factors< 8Political, Economical, Socio cultural, Technological and :egal9.
# PEST analysis is an analysis of an external macro environment that affects all firms. Such external factors usually are beyond the firms control and sometimes present themselves as threats. "or this reason, some say that pest is an appropriate term for these factors. !o(ever changes in the external env ironment also create ne( opportunities and letters sometimes are rearranged to construct the more optimistic terms of STEP #2#:/S0S. -any macro environmental factors are country specific and the pest analysis (ill need to be a performed for all countries of interest.
Tax policy Employment la(s Environmental regulations Trade restrictions and tariffs Political stability
Economic gro(th 0nterest rates Exchange rates 0nflation rate
!ealth consciousness Population gro(th rate #ge distribution areer attitudes Emphasis on safety
6G3 activity
#utomation Technology incentives 6ate of technological change
0nformation to the case is very important to analy+e any business health or problem. 0t is equally important li)e medical tests are important for human bod y for remedy of any )ind of complain of a patient. There are other tests or scanning is needed for business analysis. -ar)et segmentation is one of them. -ar)et segmentation< ; mar)et consists of buyers differ in one or more (ays. They may differ in their (ants, resources, locations, buying attitudes and bu ying practices. 1ecause buyers have unique needs and (ants, each buyer is potentially a separate mar)et. 0deally, then a seller might design a separate mar)eting program for each buyer. "or example a caterer can customi+e the menu, entertainment, and the setting to meet the needs of specific clients. !o(ever, most companies are unable to o ffer complete segmentation. The cost of complete segmentation is high and most customers cannot afford completely customi+ed products. ompanies therefore, loo) for broad class of buyers (ho differ in their product needs or buying responses. The restaurant industry offers many examples of segmentation by a variety of variables. 8)otler,p >@@H9
This essay has been submitted to us by a student. This is not an example of the (or) (ritten by our professional essay (riters.
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The reason behind )no(ledge of mar)et segmentation is needed because until unless its not )no(n that (hich segment is being targeted by the organi+ation concerned 8in this case 6estaurant of ac) Sprat9, it (ould be very difficult to compare the strength of that segment for the business. 0n this case its not given in the case so its important to analyse this business from its segment point of vie(.
To get success of the business it's needed to deal (ith customers, suppliers, employees, and others. 0n almost all cases there (ill also be other organi+ations offering similar products to similar customers. These other organi+ations are competitors. Ob4ective of the other organi+ations is the same as yours ; to gro(, ma)e money and succeed. Effectively, the businesses are at (ar ; fighting to gain the same resource and territoryK the customer. #nd li)e in (ar, it is necessary to understand the enemy< !o( he thin)sK *hat his strengths areK *hat his (ea)nesses areK *here he can be attac)edK *here the ris) of attac) is too great EF L. #nd so on. #nd li)e in (ar, the competitor (ill have secrets that can be the difference bet(een profit and loss, expansion or ban)ruptcy for the business. 0dentifying these secrets is thus crucial for business survival'. 8http<77dspace.dial.pipex.com9 accessed on >7@$7>@$$ Other information needed is about its competitors. 0nformation of competitors is very important to )no( the business of competitors and further business concerned can be compared (ith the competitors. So competitor analysis is very important.
"irst of all instant action should be ta)en to solve !ygiene problem. Proper forecasting of guests so that underproduction and overproduction both can be )ept under control Extra manpo(er has to be reduced so that there (ill be less burden on payroll cost hoice of menu has to be increased -anager should be empo(ered or can be changed 8as information is not given properly and in detailed so it is impossible to say to change9 Someho( o(ner has to be in touch even over the phone to monitor the business operation and if possible frequency to visit may be increased. :ocal ban) should be approached for short term loan for the refurbishment activities.
#ction plan is a process that includes assessments of o(n strengths, available resources and mar)et opportunities. There must be idea about mar)eting ob4ective of the organi+ation concerned then a plan can be prepared and further implemented to achieve the determined ob4ective. 0n other (ords these informations are basic and needed at very first step to(ards ma)ing action plan< -ar)et and trading environment of the business concerned 3ecision about mar)et business is targeting to Cno(ledge about differentiation or advantage of uniqueness of o(n product and services 3eciding mar)eting mix Estimation of "und etc.
P6O3T< Option in -enu list (ill be given P60025 < -ay charge little higher than (hat has been charging P6O-OT0O2< There is need to promote the product and create a(areness to remove the negative image of the organi+ation. So it can be done through normal aids of
advertisement;2e(s papers or T.A hannels. Through T.A hannels it may little costly affair in that point of vie( daily is better. Other #ctions to be ta)en< 0t could have opened even on Sunday to attract customers (ant to utili+e their holidays. So it (ill be open all days. "und should be managed instantly; 0t can be done by approaching ommercial 1an)s for short term loans. 6efurbishment (ill have to be done as soon as loan is approved. Employees have to be re;motivated so that absenteeism of staff can be )ept under control.
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"ood sales has been increased in >@@;M by H.BN compared to >@@&;, and it gone do(n in the financial year >@@M;% by B.%=N compared to >@@;M sales of food. :iquor Sales has been increased in >@@;M by =.%N compared to >@@&; and further it increase by $=.=%N in the year >@@M;% compared to >@@;M.
Overall Total Sales has been increasing in the financial year by H.&N in the financial year >@@;M compared to >@@&;, and further increased by &.=N in the financial year >@@M;% compared to >@@;M.
0n the financial year >@@&; food cost (as H>.@=N of its sales and in >@@;M it became little favorable by going do(n to H$.$&N of its sales figure and in the year >@@M;% in again gone up to HB.&BN 3irect cost of :iquor is =%.>N of its sales in the financial year >@@&;, and =.@N in >@@;M and further =.%$N in >@@M;%. So its favorable as its in declining trend. Total direct cost is =H.@$N, ==.$$N and =>.MMN in the financial year >@@&;, ;M, and >@@M;% respectively (hich also seems favorable because in ;M it gone little up but again it gone do(n by good margin;around > to BN
5ross profit of food is =.%=N, =M.MHN and =&.BN in the financial year >@@&;, ;M, M; %. This sho(s increase in ;M and further decline in M;%. 5ross profit of :iquor is H@.>MN, H>.B@N and H>.@%N in the financial year &;, ;M, and >@@M;% respectively. Overall it is in favorable trend. 5ross profit in the financial year >@@&; is =H.@$N, ==.$$N in >@@;M and =>.MMN in >@@M;% (hich seems declining trend. 0n the year >@@;M it gone up but in >@M;% it came do(n. This is because there (as declining of sales of food in the financial year >@@M;% by B.%=N, other(ise sale of liquor in this financial year (as goo d and direct costs (ere also behaving favorably.
There are three component of indirect expenses;labour, overheads and operating expenses and maintenance expenses. #mount spent in labour is in increasing order i.e., >%.&N, B$.=$N and BB.>$N in the year &;, ;M, and >@@M;% respectively. This sho(s restaurant is spending more N every year in its staffing. Overheads and Operating expenses seems (ithin control as its M.MN, .>$N and M.B&N in the year >@@&;, >@@;M, and >@@M;% respectively.
-aintenance expenses is $.&$N of sales in the financial year >@@&;, $.H@N in the financial year >@@;M and @.%$N of sales of financial year >@@M;%. This sho(s that organi+ation is spending very less on maintenance expenses. Overall total indirect expenses is H@.$=N of its sales in the financial yea r >@@&;, H@.$>N in >@@;@M and gone up in the financial year >@@M;% to H>.HMN
2et profit is $B.M&N, $H.%%N and
[email protected]@N in the financial years >@@&;, ;M, and M;% respectively. This sho(s that 2et profit has going do(n, and in the financial year its gone do(n (ith huge gap compared to previous years percentage. Overall it's a matter of discussion and management should pa y attention to the indirect costs as percentage of indirect cost is very high. #s gross profit is in =@N so almost H@N of sales are being spent for indirect expenses. #lthough management is not spending much in maintenance component of indirect expenses but other components i.e., overhead and operating expense, and payroll expenses are very high that is the reason 2et profit of the restaurant is not attractive.
#uthor has analysed the case of ac) Sprat's restaurant and found that ma4or problem is its hygiene and maintenance and indirect expenses. These t(o of the factors has to be )ept under control and converted into favorable mode only then this organi+ation can earn profit li)e previous time. There are other areas also that needs attention i.e., arrangement of fund, manpo(er management, empo(ering manager etc.
1ritton, and *orthington. 0 8>@@B9 The business environment, Hth Edition, C
@@H9 -ar)eting strategy and competitive positioning, Brd edition< C< Prentice !all Cotler, P. 8>@@H9 mar)eting for hospitality and tourism, Brd Edition, 3elhi
-orrison, 8>@@>9 the international business environment, $st Edition, 2e( /or)K Pal grave. 6eich, D.# 8$%%9 -ar)eting -anagement for the hospitality 0ndustry,$st Edition,< *iley and sons anada. *earne.2 8>@@$9 !ospitality -anagement, $st Edition, 2e( 3elhi< 5lobal (((.netmba.com7strategy7pest7 #ccessed on >7@$7>@$$ http<77dspace.dial.pipex.com9 #ccessed on >7@$7>@$$
Sample of a SWOT Analysis for a Restaurant by Nancy Wagner, Demand Media /our restaurant may serve the most delicious food or provide the best table service in your area. 1ut if you do not )no( the strengths and (ea)nesses of your business or the opportunities and threats facing your business, your business may suffer. #s you prepare to perform your S*OT analysis, invite your restaurant manager as (ell as your chef and assistant managers to get involved so you gain more insight from different points of vie(.
Strengths The strengths of your r estaurant lie in (hat you do best, (hether its serving tasty food, offering quality service at the table or providing decor that ma)es the fun of eating at your restaurant a memorable experience. Other strengths may consist of your pricing structure, such as offering a lo(er;priced menu than similar restaurants in your area. 0f you currently generate traffic during slo( times by offering special promotions, such as buy t(o meals, get one free before = p.m.Q to get patrons in the door, thats a strength. Other strengths may include serving a specific type of ethnic food not served else(here in the area.
Weaknesses *ea)nesses give you an idea of things to improve in your restaurant. "or instance, your (ait staff may create a (ea)ness for your restaurant, since youre dependent on them for the personal service they provide to each table. #nother (ea)ness may exist if you d o not provide adequate employee training, such as sho(ing (ait staff ho(
they should attend to tables or explaining to culinary personnel ho( you (ant food prepared and presented. Other (ea)nesses may include not getting consistent supplies that result in menu items not being available. 6elying on an outdated point;of;sale system or using paper to )eep trac) of ordering and stoc)ing is a (ea)ness, because there are better (ays of calculating your stoc)room, order and financial needs. Related Reading: S*OT
#nalysis Techniques
Opportunities :oo) for opportunities that help your res taurant increase its profits, such as expanding or providing different types of food and beverages. Ta)ing advantage of trends r elated to eating healthier may mean featuring more organic dishes or salads on your menu. "inding (ays to generate more traffic during slo( times, such as in the afternoon, may represent an opportunity for gro(th. Selling some of your restaurant products, such as salad dressings or ba)ed goods, f or people to buy and ta)e home represents an opportunity. Offering delivery services and ta)e;out or setting up a drive;through to meet the needs of people on the go represents another potential opportunity.
Threats ompeting restaurants located nearby represent a threat to your business, especially if you sell similar types of food or have similar dining experiences. 2e( restaurants opening up in your area also represent a threat, since area diners have more options on (here to spend their dining dollars. Other threats consist of the po tential rising price of certain foods. "or instance, if you ma)e seafood dishes and something negative impacts the shrimp mar)et, a threat exists if you need to raise prices or find ne( suppliers, because you may lose business.
Strengths<
Selling products directly to the customers
Ceeping costs belo( that of competitors
!igher responsiveness to customer demands
Weaknesses:
2o partnerships or strong relationships (ith computer retailers
Opportunities:
3esire of customers for one;stop shopping
ustomers increasing )no(ledge about (hat they (ant in computers
0nternet as a mar)eting tool
Threats:
Stronger brand name of competitors li)e 01- and ompaq
Strong relationship of competitors (ith retailers
Try more general SWT analysis examples "or more general SWOT Analysis examples , here is one (ith some general entries. /ou can let the factors relevant to your situation stay (hile removing and adding accordingly<
Strengths:
!ave an excellent staff for handling sales (ith strong
Weaknesses:
)no(ledge of current products
Too many missed deadlines and a lot of (or) on pending
Strong customer relationships
!igh cost of rental for the office
Strong internal communications system
0nfrequent cash flo( system
# strong geographical location (ith high traffic input
Too much stoc) in inventory and higher inventory
*ell;designed and successful mar)eting strategies
1usiness reputation of being innovative
costs
#n inefficient record maintenance system in place
Outdated mar)et research data
Opportunities:
Products similar to yours in the mar)et are expensive
Threats:
or of poor quality
# lot of competitors in the mar)et (ith similar products
ustomers in the mar)et are loyal
# ne( advertising campaign launched by competi
Seasonal high demand of the product
# competitor opening ne( shop in a nearby locati
!igh demand for product or similar merchandise
# do(nturn in economy and less spending budget people
*ith these S*OT #nalysis examples, you can easily understand ho( you can use this to analy+e a business situation in a comprehensive (ay. #fter careful analysis, you can determine (hether a ne( venture have enough positives in its favor to be pursued.
