What framework is used to analyze the political, economic, social, and technological environments that affect business activity?

• A. SWOT analysis
• B. Porter’s Five Forces
• C. Ansoff Matrix
• D. PEST analysis

Answer: (D)

Analyzing the wider external environment by grouping factors into political, economic, social, and technological areas. PEST analysis is used to scan these macro forces to identify opportunities and threats that could affect strategy or operations. It helps you anticipate changes like policy shifts, economic cycles, demographic trends, or new technologies that could alter demand or costs. This framework is distinct from SWOT, which mixes internal strengths and weaknesses with external opportunities and threats; Porter’s Five Forces, which examines industry structure and competitive rivalry; and the Ansoff Matrix, which centers on growth options. The four-factor approach described matches the scenario, and note that it can be extended to PESTLE if legal and environmental factors are also considered.