In business analysis , PEST analysis (political, economic, social and technological) is a framework of external macro-environmental factors used in strategic management and market research .
41-478: PEST may refer to: PEST analysis , framework used in strategic management PEST sequence , is a peptide sequence in proteins Specialized Unit for Special Tactics (Slovene: Posebna Enota za Specialno Taktiko ), special forces unit of the Slovenian Military Police See also [ edit ] Pest (disambiguation) Topics referred to by
82-410: A company should only seek to subcontract in those areas in which it demonstrated no special ability. The business strategy outlined by his slogan recommended that companies should take advantage of a specialist provider's knowledge and economies of scale to improve performance and achieve the service needed. In 2009, by way of recognition, Peter Drucker posthumously received a significant honor when he
123-540: A company's products and how that company operates. Through analysis of social factors, companies may adopt various management strategies to adapt to social trends. Technological factors include R&D activity, automation , technology incentives and the rate of technological change . These can determine barriers to entry , minimum efficient production level and influence the outsourcing decisions. Technological shifts would also affect costs, quality, and innovation . Many similar frameworks have been constructed, with
164-419: A different country from the one where the software will be used. The global software R&D services market, as contrasted to information technology outsourcing (ITO) and business process outsourcing (BPO), is rather young and currently is at a relatively early stage of development. Canada, India, Ireland , and Israel were the four leading countries as of 2003. Although many countries have participated in
205-479: A government outsourcing arrangement poses difficulties. There are many outsourcing models, with variations by country, year and industry. Japanese companies often outsource to China, particularly to formerly Japanese-occupied cities. German companies have outsourced to Eastern European countries with German-language affiliation, such as Poland and Romania . French companies outsource to North Africa for similar reasons. For Australian IT companies, Indonesia
246-408: A government, and the impact of governments on health , education , and infrastructure of a nation. Economic factors include economic growth , exchange rates , inflation rate , and interest rates . Social factors include cultural aspects and health consciousness, population growth rate , age distribution, career attitudes and safety emphasis. Trends in social factors affect the demand for
287-446: A half page cartoon showing someone who had just ordered a pizza online, and was seeking help to download it. Step-in rights allow the client or a nominated third party the right to step-in and intervene, in particular to directly operate the outsourced services or to appoint a new operator. Circumstances where step-in rights may be contractually invoked may include supplier insolvency , a force majeure event which prevents or impedes
328-630: A limited, short-term basis, may also be described as outsourcing. Outsourcing includes both foreign and domestic contracting, and therefore should not be confused with offshoring which is relocating a business process to another country but does not imply or preclude another company. In practice, the concepts can be intertwined, i.e. offshore outsourcing , and can be individually or jointly, partially or completely reversed, as described by terms such as reshoring , inshoring , and insourcing . Global labor arbitrage can provide major financial savings from lower international labor rates, which could be
369-577: A major motivation for offshoring. Cost savings from economies of scale and specialization can also motivate outsourcing, even if not offshoring. Since about 2015 indirect revenue benefits have increasingly become additional motivators. Another motivation is speed to market. To make this work, a new process was developed: "outsource the outsourcing process". Details of managing DuPont 's chief information officer Cinda Hallman 's $ 4 billion 10-year outsourcing contract with Computer Sciences Corporation and Accenture were outsourced, thus avoiding "inventing
410-725: A major source for the advantages of a highly educated labor force, a large bilingual population, stable democratic government, and similar time zones as the U.S. It takes only a few hours to travel between Costa Rica and U.S. Companies such as Intel , Procter & Gamble , HP, Gensler , Amazon and Bank of America have big operations in Costa Rica. Unlike outsourced manufacturing, outsourced white collar workers have flextime and can choose their working hours, and for which companies to work. Clients benefit from remote work , reduced office space, management salary, and employee benefits as these individuals are independent contractors . Ending
451-481: A process if we'd done it in-house". A term subsequently developed to describe this is midsourcing . Outsourcing can offer greater budget flexibility and control by allowing organizations to pay for the services and business functions they need, when they need them. It is often perceived to reduce hiring and training specialized staff, to make available specialized expertise, and to decrease capital, operating expenses, and risk. "Do what you do best and outsource
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#1732869544620492-495: Is a business practice in which companies use external providers to carry out business processes , that would otherwise be handled internally. Outsourcing sometimes involves transferring employees and assets from one firm to another. The term outsourcing , which came from the phrase outside resourcing , originated no later than 1981 at a time when industrial jobs in the United States were being moved overseas, contributing to
533-433: Is different from Wikidata All article disambiguation pages All disambiguation pages PEST analysis PEST analysis was developed in 1967 by Francis Aguilar as an environmental scanning framework for businesses to understand the external conditions and relations of a business in order to assist managers in strategic planning. It has also been termed ETPS analysis . PEST analyses give an overview of
574-427: Is one of the major choice of offshoring destination. Near-shore location, common time zone and adequate IT work force are the reasons for offshoring IT services to Indonesia. Another approach is to differentiate between tactical and strategic outsourcing models. Tactical models include: Strategic consultancy includes for business process improvement . When offshore outsourcing knowledge work, firms heavily rely on
615-466: Is pure R&D or run-of-the-mill IT outsourcing. Focusing on software quality metrics is a good way to maintain track of how well a project is performing. Globalization and complex supply chains , along with greater physical distance between higher management and the production-floor employees often requires a change in management methodologies, as inspection and feedback may not be as direct and frequent as in internal processes. This often requires
656-406: Is when on-site hardware interacts with outside identity services. This contrasts with an "all in-the-cloud" service scenario, where the identity service is built, hosted and operated by the service provider in an externally hosted, cloud computing infrastructure. Offshore software R&D is the provision of software development services by a supplier (whether external or internal) located in
697-589: The 2016 U.S. presidential election "the most disruptive change agent for the outsourcing industry", especially the renewed "invest in America" goal highlighted in campaigning, but the magazine tepidly reversed direction in 2019 as to the outcome for employment. In the case of armament acquisition, section 323 of the National Defense Authorization Act for 2014 requires military personnel "to solicit information from all U.S.-owned arsenals regarding
738-566: The International Association of Outsourcing Professionals gave recognition to Electronic Data Systems Corporation's Morton H. Meyerson who, in 1967, proposed the business model that eventually became known as outsourcing. The growth of offshoring of IT-enabled services, although not universally accepted, both to subsidiaries and to outside companies (offshore outsourcing) is linked to the availability of large amounts of reliable and affordable communication infrastructure following
779-601: The PESTLE framework, which allow for the evaluation of factors affecting management decisions for coastal zone and freshwater resources, development of sustainable buildings, sustainable energy solutions, and transportation. Demographic factors have been considered in frameworks such as STEEPLED. Factors include gender, age, ethnicity, knowledge of languages, disabilities, mobility, home ownership, employment status, religious belief or practice, culture and tradition, living standards and income level. Military analyses have used
820-509: The PMESII-PT framework, which considers political, military, economic, social, information, infrastructure, physical environment and time aspects in a military context. The TELOS framework explores technical, economic, legal, operational, and scheduling factors. PEST analysis can be helpful to explain market changes in the past, but it is not always suitable to predict or foresee upcoming market changes. Outsourcing Outsourcing
861-564: The U.S. in 2007, which could exceed 400 times more than average workers—a gap 20 times bigger than it was in 1965, is not a factor. Other reasons include reducing and controlling operating costs, improving company focus, gaining access to world-class capabilities, tax credits, freeing internal resources for other purposes, streamlining or increasing efficiency for time-consuming functions, and maximizing use of external resources. For small businesses, contracting/subcontracting/"outsourcing" might be done to improve work-life balance . Following
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#1732869544620902-412: The adding of management layers in the 1950s and 1960s to support expansion for the sake of economy of scale, corporations found that agility and added profits could be obtained by focusing on core strengths; the 1970s and 1980s were the beginnings of what later was named outsourcing. Kodak 's 1989 "outsourcing most of its information technology systems" was followed by others during the 1990s. In 2013,
943-650: The addition of other components such as environment and law. These include PESTLE, PMESII-PT, STEPE, STEEP, STEEPLE, STEER, and TELOS. Legal factors include discrimination law , consumer law , antitrust law , employment law , and health and safety law , which can affect how a company operates, its costs, and the demand for its products. Regulatory factors have also been analysed as its own pillar. Environmental factors include ecological and environmental aspects such as weather, climate, and climate change , which may especially affect industries such as tourism, farming, and insurance. Environmental analyses often use
984-463: The area of call-center outsourcing, especially when combined with offshoring, agents may speak with different linguistic features such as accents , word use and phraseology, which may impede comprehension. In 1979, Nobel laureate Oliver E. Williamson wrote that the governance structure is the "framework within which the integrity of a transaction is decided", and that "because contracts are varied and complex, governance structures vary with
1025-416: The assimilation of new communication methods such as voice over IP , instant messaging , and issue tracking systems , new time management methods such as time tracking software , and new cost- and schedule-assessment tools such as cost estimation software . The term "transition methodology" describes the process of migrating knowledge, systems, and operating capabilities between the two sides. In
1066-655: The availability of technical personnel at offshore locations. One of the challenges in offshoring engineering innovation is a reduction in quality. Co-sourcing is a hybrid of internal staff supplemented by an external service provider. Co-sourcing can minimize sourcing risks, increase transparency, clarity and lend toward better control than fully outsourced. Co-sourcing services can supplement internal audit staff with specialized skills such as information risk management or integrity services, or help during peak periods, or similarly for other areas such as software development or human resources. Identity management co-sourcing
1107-521: The bank. Richard Baldwin 's 2006 The Great Unbundling work was followed in 2012 by Globalization's Second Acceleration (the Second Unbundling) and in 2016 by The Great Convergence: Information Technology and the New Globalization . It is here, rather than in manufacturing, that the bits economy can advance in ways that the economy of atoms and things cannot: an early 1990s Newsweek ran
1148-559: The capability of that arsenal to fulfill the manufacturing requirement" when undertaking a make-or-buy analysis. Furthermore, there are growing legal requirements for data protection , where obligations and implementation details must be understood by both sides. This includes dealing with customer rights. UK government policy notes that certain services must remain in-house, citing the development of policy , stewardship of tax spend and retention of certain critical knowledge as examples. Guidance states that specific criteria must govern
1189-508: The contract between the client and the suppliers, fraud cases have been reported. In April 2005, a high-profile case involved the theft of $ 350,000 from four Citibank customers when call-center workers acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified
1230-608: The different macro-environmental factors to be considered by a business, indicating market growth or decline, business position, as well as the potential of and direction for operations. The basic PEST analysis includes four factors: political, economic, social, and technological. Political factors relate to how the governments intervene in economies. Specifically, political factors comprise areas including tax policy , labour law , environmental law , trade restrictions , tariffs , and political stability. Other factors include what are considered merit goods and demerit goods by
1271-452: The early 21st century. The digital workforce of countries like India and China are only paid a fraction of what would be minimum wage in the United States. On average, software engineers are getting paid between 250,000 and 1,500,000 rupees (US$ 4,000 to US$ 23,000) in India as opposed to $ 40,000–$ 100,000 in countries such as the U.S. and Canada . Closer to the U.S., Costa Rica has become
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1312-647: The economic and cultural collapse of small, industrial towns. In some contexts, the term smartsourcing is also used. The concept, which The Economist says has "made its presence felt since the time of the Second World War ", often involves the contracting out of a business process (e.g., payroll processing, claims processing), operational, and/or non-core functions, such as manufacturing, facility management , call center /call center support. The practice of handing over control of public services to private enterprises ( privatization ), even if conducted on
1353-758: The effect of what looks like outsourcing from one side and insourcing from the other side can be unexpected; The New York Times reported in 2001 that "6.4 million Americans .. worked for foreign companies as of 2001, [but] more jobs are being outsourced than" [the reverse]. While U.S. companies do not outsource to reduce high top level executive or managerial costs, they primarily outsource to reduce peripheral and "non-core" business expenses. Further reasons are higher taxes, high energy costs, and excessive government regulation or mandates. Mandated benefits like social security , Medicare , and safety protection (e.g. Occupational Safety and Health Administration regulations) are also motivators. By contrast, executive pay in
1394-573: The identification of such services, and that "everything else" could potentially be outsourced. Inflation, high domestic interest rates, and economic growth pushed India's IT salaries 10–15%, making some jobs relatively "too" expensive, compared to other offshoring destinations. Areas for advancing within the value chain included research and development, equity analysis, tax-return processing, radiological analysis, and medical transcription . Although offshoring initially focused on manufacturing, white-collar offshoring/outsourcing has grown rapidly since
1435-618: The nature of the transaction". University of Tennessee researchers have been studying complex outsourcing relationships since 2003. Emerging thinking regarding strategic outsourcing is focusing on creating a contract structure in which the parties have a vested interest in managing what are often highly complex business arrangements in a more collaborative, aligned, flexible, and credible way. Reduced security, sometimes related to lower loyalty may occur, even when 'outsourced' staff change their legal status but not their desk. While security and compliance issues are supposed to be addressed through
1476-471: The offshore outsourcing of software development, their involvement in co-sourced and outsourced Research & Development (R&D) was somewhat limited. Canada, the second largest by 2009, had 21%. As of 2018, the top three were deemed by one "research-based policy analysis and commentary from leading economists" as China, India and Israel." Gartner Group adds in Russia , but does not make clear whether this
1517-403: The outsourced service provision, where the client believes that there is a substantial risk to the provision of the services, or where performance fails to meet a defined critical level of service. Suitable clauses in a contract may provide for the outsourced service provider to pay any additional costs which are faced by the client and specify that the provider's obligation to provide the services
1558-459: The rest" has become an internationally recognized business tagline first "coined and developed" in the 1990s by management consultant Peter Drucker . The slogan was primarily used to advocate outsourcing as a viable business strategy. Drucker began explaining the concept of "outsourcing" as early as 1989 in his Wall Street Journal article entitled "Sell the Mailroom". From Drucker's perspective,
1599-452: The same term [REDACTED] This disambiguation page lists articles associated with the title PEST . If an internal link led you here, you may wish to change the link to point directly to the intended article. Retrieved from " https://en.wikipedia.org/w/index.php?title=PEST&oldid=1255923245 " Category : Disambiguation pages Hidden categories: Articles containing Slovene-language text Short description
1640-472: The telecommunication and Internet expansion of the late 1990s. Services making use of low-cost countries included: In the early 21st century, businesses increasingly outsourced to suppliers outside their own country, sometimes referred to as offshoring or offshore outsourcing . Other options subsequently emerged including: nearshoring, crowdsourcing , multisourcing , strategic alliances / strategic partnerships , strategic outsourcing. Forbes considered
1681-495: Was inducted into the Outsourcing Hall of Fame for his outstanding work in the field. The biggest difference between outsourcing and in-house provision is with regards to the difference in ownership: outsourcing usually presupposes the integration of business processes under a different ownership, over which the client business has minimal or no control. This requires the use of outsourcing relationship management . Sometimes