What does vulnerability to uncertainty look like and what has changed in the PEST analysis of the business environment
Olena Obukhivska, Communications Director of Arricano
No matter how accurate excel tables are, there are always more variables in business than constants. Even in the description of the achievements of previous periods, there are some uncertain factors that exactly contributed to or counteracted the goals set. And where there are more opportunities or obstacles, inside the business or in the external environment. That is, in every success or failure there is an inexplicable mystery hidden, the mysticism of luck or the fate of losses.
One of the convenient tools for determining the factors of market influence is PEST analysis. The abbreviation stands for as follows:
P (political) – the political environment of the business and to what extent the state intervenes or supports the industry
E (economic) – economic state, development prospects, market and competitors, taxes, GDP, etc.
S (social) – socio-cultural factors, such as demographics, customs and values, level and style of life, the role of education and culture in society
T (technological) – new technologies, discoveries, patents, gadgetalization and digitalization.
Each of these factors is equally weighty and, with proper analysis, it is possible to predict the emergence of new or the decline of existing industries, products, and services. For example, with the advent of fax on the market, the need for postage stamps and envelopes has decreased. That is, technologies have replaced the service of mass transmission of information via mail. But at the same time, the status of "a letter in an envelope" has changed. One of the most influential prerogatives of using classic letters with stamps was the diplomatic corps and embassies, where the letter acquired a new importance and value. And in a more secular life, receiving a letter written by hand in a "small handwriting" becomes more emotional, personalized and even exclusive. That is, the new technology of information transfer has simplified and accelerated the processes, and the primary product has retained the status of elitism.
And there are many such examples, among the latest expected changes is the growth of online trading at the expense of offline. Especially during the pandemic and lockdown, when access to shopping malls was limited, many experts confidently predicted the victory of online orders. But in reality, the need for real shopping sensations won. The click did not replace the mirror in the fitting room, but the deferred demand and the desire for customer socialization, emotional fullness, stress relief during purchases and the acquisition of a new customer experience worked. This is proved by the increase in the average receipt in Fashion stores, and the dynamics of traffic in the shopping mall, and the arrival of new operators in Ukraine, and the constant updating of the tenant mix.
However, the lockdown brought another important factor to the market – this is the direct dependence of business, especially in the retail sector, on government decisions. And now the P from the PEST analysis plays a crucial role, where exactly to put "not" before "to work" or "to close".
2020 and 2021 demonstrated that this "not" is put very quickly, without preparation and elaboration, without official resolutions and orders of the authorities, and sometimes just an announcing quote about a lockdown during a videoappeal.
Predicting possible scenarios for the development of events this fall, already in the summer, many shopping malls have assumed social obligations to promote vaccination of the country's population, have established special points where doctors work, have introduced additional security measures for shopping mall spaces and social moderation to keep a distance among visitors, and also control respiratory etiquette. After all, no one wants to be "closed" again by the decision of the state authorities. Moreover, business has much more obligations to employees, partners and customers than the state has to business.
In this regard, the factors of influence on business have shifted: from technological to domestic political, from progressive to vulnerable, from growth to an alternative scenario when closing. The current situation violates the perception of market models of planning and forecasting. Consequently, uncertainty forces many entrepreneurs to start a standby mode in order to quickly "turn off".