PEST Analysis Quiz

Analyzing the External Environment: Political-Legal and Economic Forces

• Strategic managers must consider forces outside the industry before developing strategic plans.
• The external environment consists of political-legal, economic, social, and technological forces.
• The acronym PEST is derived from the first letter of each of the four categories of forces.
• Understanding the effects of external environmental forces on a firm's industry is crucial before evaluating strategic options.
• Political-legal and economic forces are addressed in this chapter, while social and technological forces are addressed in the next chapter.
• Firms operating in distinct geographical markets may be affected differently by external forces in each market.
• Large organizations and trade associations attempt to influence change in the macroenvironment, but these forces are usually not under the direct control of business organizations.
• A dominant firm like Wal-Mart may be able to exert some degree of influence over one or more aspects of the macroenvironment.
• Strategic managers seek to enable a firm to operate effectively within largely uncontrollable environmental constraints while capitalizing on the opportunities provided by its environment.
• Understanding a force's broad effects should precede understanding its specific effects.
• Applications of these forces that are unique or specific to the firm are considered as opportunities and threats later in the strategic management process.
• Firms can face risks when they seek to influence the political landscape, as demonstrated by Target's contribution to a political group that backed a candidate who opposed same-sex marriage.

Test your knowledge on the external environment's political-legal and economic forces with this quiz. Learn about how strategic managers must consider these forces before developing strategic plans and how the acronym PEST is derived from the four categories of external forces. This quiz covers the effects of external environmental forces on firms' industries, how firms operating in different geographical markets may be affected, and the role of large organizations and trade associations in influencing change. Discover how dominant firms like Wal-Mart can exert some degree of influence over aspects