Pest Analysis - Political, Economic, Social and Technology

PEST Analysis

Kotler (1998) claimed that PEST (Political, Economic, Social and technological) analysis is a useful strategic tool for comprehending market dynamics, business position, potential and direction for operations. Along with the SWOT and Porter’s Five Forces models, PEST can be performed by the companies to analyze the macro-environment of an organization.

Political Factor

Political factors have a significant impact on healthcare. There are many rules and regulations such as environmental regulations, industry-specific regulations, competitive regulations, consumer protection and various kinds of employment laws which companies need to comply. For the company like Athenahealth, Inc. which is operating in Healthcare Information Services in many countries, it is very common to get exposed to the different political environment, its system and the risks associated. It was the legislative mandate to adopt EHR countrywide that opened tons of opportunity for information technology companies to develop an integrated system in the healthcare domain. But some decisions might adversely impact the company's business, for example: In the past U.S. government has declared that U.S companies that outsource IT work to other locations other than the U.S. will not get tax benefit (The Economist). This might have influenced the company’s performance like Athenahealth highly dependent on outsourced labors.

The other example is China's tech policy leads tech company to find it difficult to set-up business there. According to the country's system, firms are required to partner with domestic companies and share or license their intellectual property with those partners (The Economist). This poses a threat to practice, known as "technology transfer," that enables partner companies to steal IP from the other companies.  

Economic Factor

The Macroenvironment factors which determine the aggregated demand and aggregated investment in an economy are inflation rate, savings rate, interest rate, foreign exchange rate and economic cycle, etc. When the economy grows, it increases the purchasing power of the consumer thereby consumer demand for more.  In the case of healthcare, the consumer spends more to achieve and maintain good health. When the Consumers need for attaining good health has been perceived by the companies, it drives them to innovate and bring advances in medical technology to promote good health.  Research shows that the use of medical care rises with income: as people and the nation become wealthier, they provide a fertile market for new medical innovations (George B. Moseley III, 2005).

In the field of healthcare, expectedly the changing technology and consumer need will lead to the industry to grow substantially. According to PR news report “The global eHealth market is projected to reach USD 132.35 billion by 2023 from USD 47.60 billion in 2018, at a Compound Average Growth Rate of 22.7%”. This will provide the great opportunity to the Athenahealth to continue to innovate and grow to keep its competitors in check.  

Social Factor

Demographic shifts and change in social structure and dynamics are increasing pressures on health care delivery systems. Different age group demands different products. Given the demographic shifts and change in social dynamics, companies put concerted effort to design products which might cater people from all walks of life. Not only this changing culture but also the shared beliefs and attitudes of the population play a significant role in determining the sustainability of any product or services. The difference in acceptance of technology geographically can be learned from the outcome of a study conducted by Oshlyansky et al. (2007). They studied technology acceptance cross-culturally. There were nine countries sampled cross-culturally: the Czech Republic, Greece, India, Malaysia, New Zealand, Saudi Arabia, South Africa, United Kingdom, and the United States. They found that the effect of social influence in website acceptance in Saudi Arabia is more than the other countries. This kind of analysis helps company make decision and design strategy on global expansion. The marketing strategy of their product and services should also be in such a way that it should attract and meet the specific population needs.