STEP analysis (also often referred to as PEST) is a marketing analysis tool that is designed to identify social, technological, economic and political factors affecting a company. The results allow us to identify environmental factors that contribute or hinder business development.
The research results are presented in the form of a matrix, where each factor is assigned a certain rank based on an expert assessment of its significance.
There are also modernized types of STEP analysis. For example, in a PESTLE analysis, legal and environmental factors are additionally included. The SLEPT analysis takes into account the legal aspect. In STEEPLE analysis, environmental, legal and ethnic factors fall into the object of research.
Political factors
Political factors can create a favorable environment for the development of a company, or, on the contrary, create barriers to its activities. The number of political drivers may include programs to support certain sectors of the economy. For example, in the form of targeted research programs in the field or stimulating sales markets. The state can determine priority sectors of economic development and establish tax incentives or other preferences for them. Also, the positive aspects include the government's protectionist measures to support domestic producers in the form of increased import duties.
Government decisions can also become a source of political risks and create barriers to the development of a company. For example, in the form of various administrative barriers to business development, the spread of corruption, or by increasing the tax burden. Also, political factors include elections, joining economic unions and alliances.
Economic forces
It would be incorrect to analyze the company's activities without taking into account the influence of the macroeconomic environment. The economic factors include such important indicators as the dynamics of GDP and inflation, the ruble exchange rate, and the refinancing rate. For companies operating in consumer markets, effective demand, statistics on employment and disposable income of the population are taken into account. Whereas for representatives of industrial markets, the state of industrial production is important, as well as the activity of the business environment.
The economic ones include the general market dynamics of the industry, as well as trends in the market for substitute goods. The dynamics of prices for raw materials and electricity and other factors are taken into account.
Social factors
The group of social factors includes changes in basic values, as well as in consumer preferences. These trends are determined based on consumer surveys and other consumer analysis techniques. Timely identification of trends in consumer preferences allows you to timely adjust the assortment.
Also, the group of social factors includes demographic parameters, religious motives, the influence of the media.
Technological factors
Technological factors are of great importance. These include R&D trends, new patents and products. For example, some of them may be aimed at improving production technology, which will allow the company to reduce its own production costs. Particular attention should be paid to identifying developments in the field of substitute products.
The value of PEST analysis
STEP analysis allows you to create a holistic picture of the company's external environment, identify drivers and barriers to its development. Based on this, it is possible to develop steps to increase the company's competitiveness in the market, as well as find ways to level negative factors. STEP analysis allows you to look at the company from the outside. It makes it possible to identify the leading risks that the company will have to face. This is the reason for the wide popularity of the STEP analysis method among analysts.
STEP analysis is more suitable for strategic long-term planning, because it does not take into account the company's internal development environment. Therefore, this method is not used for tactical planning.
