The Pest Concept in Market Analysis for International Business

Content

1. How to Conduct Market Analysis for International Business
2. Key Considerations in Using Information Systems to Make International Business Decisions
3. The Pest Concept
4. Information Gaps
5. Market Analysis and Segmentation
6. Key Components of the International Market Information System

The analysis provided by the PEST concept will be complemented by a market information system which allows in-depth analysis to take place. Market segmentation techniques can also be used successfully to pinpoint the needs and wants of particular customer groups. This concept is frequently quoted by international managers and academics as the starting point for analyzing new markets. The initials stand for:

• Political factors influencing a market;
• Economic situation confronting the new market entrant;
• Social structure and systems operating within the market; 
• Technology available and developed in the target market. The key point of the concept is that it gives you a ‘snapshot’ of the potential marketplace.

Examples of the political issues raised by the PEST concept are as follows:

• What is the political structure of the target market? 
• How is foreign capital viewed by the government of the new market and are there any restrictions on the movement of capital?
• What is the role of the private sector of the economy in relation to the public sector? The government may be encouraging private ownership and a commercial ethos within the public sector, which helps to build a dynamic economy. 

Here are some of the economic concerns:

• At which stage of the business cyclical, pre-growth or recession is the timing right to enter the market?
• In which direction are economic indicators such as interest rates and inflation heading?
• Are the levels of disposable income within the economy increasing or decreasing?

Social factors which must be considered are:

• Is the employee relations culture in the target market conducive to business? What is the level of strikes and stoppages in industry?
• Is there social mobility and movement of skilled people across the target market?
• Is educational support available throughout the economy and what are the methods being used? The number and quality of key people is also important; for example, the number of engineering, business, technology and computer-science graduates available in the market.

Technological factors are also important:

• Does national research and development expenditure compare favorably with the competition?
• Does technology transfer provide an opportunity to gain a competitive advantage in the marketplace?
• Is technological expertise available to support service and product development within your business?

Continue at: Information Gaps