PEST analysis of the B2B IT industry! A clear explanation of the importance of analysis with concrete examples
Posted: Wed Dec 04, 2024 6:52 am
As of 2023, there are rapid successions of turmoil that are adversely affecting markets on a global scale, such as the COVID-19 pandemic and the Ukraine crisis. In Japan alone, the current situation is that it is also facing various problems, such as the serious declining birthrate and aging population that has continued since 1997, and the rapid depreciation of the yen that has occurred since 2022.
In order for companies to continue their business activities under such circumstances, they must predict external factors and prepare countermeasures in case of such an event. Rather than just hedging risks, analyzing the external environment can help discover new needs and lead to the creation of innovation.
So, this time, we will explain the macro-environment analysis framework "PEST analysis", which is essential for BtoB and SaaS companies when formulating business strategies. In addition to basic knowledge of PEST analysis, we will also introduce case studies of PEST analysis based on actual BtoB IT companies, so we hope you will find it useful.
What are the basics of PEST analysis?
PEST analysis is a framework for analyzing the macro environment netherlands business email list proposed by American business scholar Philip Kotler. PEST consists of four elements: "Politics," "Economy," "Society," and "Technology."
PEST analysis
When companies develop a strategy, the pipeline is "research/information gathering → clarification of issues → hypothesis building → hypothesis verification → strategy formulation," and this is a framework that is used in the phases of "research/information gathering" and "clarification of issues."
Purpose of PEST Analysis
The purpose of PEST analysis is to "identify markets in which to make new investments" or "identify markets in which to withdraw." Kotler, the proponent of PEST analysis, describes it as "redefining the market." In other words, by understanding in detail all the environmental factors surrounding your company, you can clarify the factors that may affect your company's business development.
For example, when entering an overseas market, emerging countries have political, economic, and social environments that differ from those of developed countries, so naturally business development must take into account these. Analyzing the macro external environment is a very important task in understanding the overall structure of the market.
However, the ultimate goal of PEST analysis is not to "analyze" but to keep your company's business viable for the long term and maximize profits. This can also be said for frameworks other than PEST analysis, but PEST analysis can only "analyze and organize" the internal and external environment from a certain perspective.
The important thing is to plan strategies and make decisions based on the analysis results, so try not to make the PEST analysis the goal itself. There are many derivatives of PEST analysis, such as PESTEL and PESTLE, so you can choose the type that is most appropriate for your industry.
What the acronym PEST analysis means
From here, we will explain what we can learn from each PEST element from a SaaS and BtoB perspective.
The P in PEST
P stands for "Politics" and we will analyze the following items:
<Example of P (Politics)>
Changes in political systems and their impacts
Changes in the law (tightening and relaxing regulations)
Political corruption
National economic vision
Taxation
Politics is, so to speak, the rule that exists above business. Changes in political systems and government policies, both domestic and international, have a major impact on corporate business. Laws regarding data protection and privacy are also important factors for SaaS and B2B companies.
Globalization has progressed in recent years, and it is now said that tech companies, with power surpassing that of nation states, are beginning to influence global geopolitics, with giant corporations such as GAFA at the forefront.
As the political and economic trilemma suggests, the three of "national sovereignty," "democracy," and "globalization" cannot be realized at the same time, creating a virtual tug-of-war between nations and global corporations. In other words, when corporations become too powerful, nations move to regulate them.
In addition, when the business market changes too quickly, the law always follows reality. This means that problems emerge even without touching the current law, and once a political decision is made, the law is established and a "rule change" occurs. Companies will need to predict future laws and regulations and conduct business with an ethical sense.
On the other hand, there are also cases where a market expands rapidly when a country "focuses on promoting a particular industry" or "relaxes regulations."
Recent examples include the promotion of the space industry , support for unicorns , and, more familiarly, the growth of the teleworking market due to the promotion of work style reform. In any case, political movements often pose great opportunities or threats for companies, so it is important to constantly gather information.
The E in PEST
E stands for "Economy." For E (Economy), you will mainly need to gather information on the following items:
<Example of E (Economy)>
Exchange rate (strong yen/weak yen)
Interest rate trends
Domestic and international economic growth rates (GDP)
Economic indicators such as job availability ratio and consumer price index
Inflation rate
Over the long term, the economy goes through cycles of boom and bust, such as the collapse of the bubble economy, the Lehman shock, and the economic slowdown caused by COVID-19.
In order for companies to continue their business activities under such circumstances, they must predict external factors and prepare countermeasures in case of such an event. Rather than just hedging risks, analyzing the external environment can help discover new needs and lead to the creation of innovation.
So, this time, we will explain the macro-environment analysis framework "PEST analysis", which is essential for BtoB and SaaS companies when formulating business strategies. In addition to basic knowledge of PEST analysis, we will also introduce case studies of PEST analysis based on actual BtoB IT companies, so we hope you will find it useful.
What are the basics of PEST analysis?
PEST analysis is a framework for analyzing the macro environment netherlands business email list proposed by American business scholar Philip Kotler. PEST consists of four elements: "Politics," "Economy," "Society," and "Technology."
PEST analysis
When companies develop a strategy, the pipeline is "research/information gathering → clarification of issues → hypothesis building → hypothesis verification → strategy formulation," and this is a framework that is used in the phases of "research/information gathering" and "clarification of issues."
Purpose of PEST Analysis
The purpose of PEST analysis is to "identify markets in which to make new investments" or "identify markets in which to withdraw." Kotler, the proponent of PEST analysis, describes it as "redefining the market." In other words, by understanding in detail all the environmental factors surrounding your company, you can clarify the factors that may affect your company's business development.
For example, when entering an overseas market, emerging countries have political, economic, and social environments that differ from those of developed countries, so naturally business development must take into account these. Analyzing the macro external environment is a very important task in understanding the overall structure of the market.
However, the ultimate goal of PEST analysis is not to "analyze" but to keep your company's business viable for the long term and maximize profits. This can also be said for frameworks other than PEST analysis, but PEST analysis can only "analyze and organize" the internal and external environment from a certain perspective.
The important thing is to plan strategies and make decisions based on the analysis results, so try not to make the PEST analysis the goal itself. There are many derivatives of PEST analysis, such as PESTEL and PESTLE, so you can choose the type that is most appropriate for your industry.
What the acronym PEST analysis means
From here, we will explain what we can learn from each PEST element from a SaaS and BtoB perspective.
The P in PEST
P stands for "Politics" and we will analyze the following items:
<Example of P (Politics)>
Changes in political systems and their impacts
Changes in the law (tightening and relaxing regulations)
Political corruption
National economic vision
Taxation
Politics is, so to speak, the rule that exists above business. Changes in political systems and government policies, both domestic and international, have a major impact on corporate business. Laws regarding data protection and privacy are also important factors for SaaS and B2B companies.
Globalization has progressed in recent years, and it is now said that tech companies, with power surpassing that of nation states, are beginning to influence global geopolitics, with giant corporations such as GAFA at the forefront.
As the political and economic trilemma suggests, the three of "national sovereignty," "democracy," and "globalization" cannot be realized at the same time, creating a virtual tug-of-war between nations and global corporations. In other words, when corporations become too powerful, nations move to regulate them.
In addition, when the business market changes too quickly, the law always follows reality. This means that problems emerge even without touching the current law, and once a political decision is made, the law is established and a "rule change" occurs. Companies will need to predict future laws and regulations and conduct business with an ethical sense.
On the other hand, there are also cases where a market expands rapidly when a country "focuses on promoting a particular industry" or "relaxes regulations."
Recent examples include the promotion of the space industry , support for unicorns , and, more familiarly, the growth of the teleworking market due to the promotion of work style reform. In any case, political movements often pose great opportunities or threats for companies, so it is important to constantly gather information.
The E in PEST
E stands for "Economy." For E (Economy), you will mainly need to gather information on the following items:
<Example of E (Economy)>
Exchange rate (strong yen/weak yen)
Interest rate trends
Domestic and international economic growth rates (GDP)
Economic indicators such as job availability ratio and consumer price index
Inflation rate
Over the long term, the economy goes through cycles of boom and bust, such as the collapse of the bubble economy, the Lehman shock, and the economic slowdown caused by COVID-19.