A DESTEP analysis is a framework used by businesses to understand their external environment and the issues which may impact them. The DESTEP analysis is an extension of the popular PEST analysis created by Harvard Business School professor Francis J. Aguilar. The DESTEP analysis groups external factors into six categories: demographic, economic, socio-cultural, technological, ecological, and political.
The DESTEP analysis is an extension of the popular PEST analysis created by Harvard Business School professor Francis J. Aguilar.
The analysis provides an overview of the macroeconomic factors that influence organizations. While these factors cannot be controlled, they nevertheless affect how business is conducted.
Essentially, the DESTEP analysis is a simple framework for breaking down the complexities of strategic planning.
Identifying key market factors promote constructive internal discussion and serve as a decision-making tool.
DESTEP vs. PEST analysis
The PEST analysis looks primarily at factors that relate to the macro environment where a business develops.
The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.
The DESTEP analysis also adds a contextual side that looks at other factors like demographics.
Other analyses, like the STEEP analysis, are also a good complement to the DESTEP and PEST analyses.
Those are all frameworks and tools, which can be used, to analyze the business landscape from a qualitative standpoint.
The STEEP analysis is a tool used to map the external factors that impact an organization. STEEP stands for the five key areas on which the analysis focuses: socio-cultural, technological, economic, environmental/ecological, and political. Usually, the STEEP analysis is complementary or alternative to other methods such as SWOT or PESTEL analyses.
The six categories of the DESTEP analysis
Like the PEST analysis and its many variants, the DESTEP analysis is based on an acronym describing key external factors.
Here, there are six categories:
Demographic
Comprising statistical information about people such as population size, density, age, gender, or occupation.
Demographic information is important because people provide the impetus for a business existing and are a driving force in market development.
Changing demographics means changing markets, which in turn influences marketingstrategy.
Typically, change is driven by population growth, age structure, family structure, and geographic population shifts.
Economic
Or factors affecting consumer purchasing power or behavior.
These include the gross domestic product (GDP), import duty rate, sales tax, inflation, unemployment, and disposable personal income.
Socio-cultural
These factors describe the behaviors, values, or preferences of different societies and cultures.
One example of a business failing to understand this factor was Pringles, which released a new flavor of smoky bacon potato chips in a campaign wishing Muslims a blessed Ramadan.
Technological
A significant influence on business operations because new technologies constantly replaced outdated technologies.
While many businesses benefitted from the wireless communication revolution, many others were left behind.
Ecological
Concerns around the exploitation of the environment and natural resources are also a crucial factor.
Sustainability and pollution reduction are two factors every business needs to consider.
Political
These are external political factors related to laws, governmental agencies, minority groups, or movements.
Understanding these factors is seen as particularly important for a business entering a foreign country.
Advantages and disadvantages of the DESTEP analysis
The DESTEP analysis is a simple and holistic account of macroeconomic factors and can be completed by an individual or a group.
It also stimulates discussion about sometimes overlooked external factors and maintains focus on adapting strategy to the target demographic.
However, it does have some disadvantages:
It does not provide a way to weigh the importance of the various categories.
It combines the political and legal aspects into one category, which some businesses may find restrictive.
As extensive as the analysis is, it does need to be complemented by an analysis of internal and competitive factors.
Lastly, the DESTEP analysis requires a significant investment of time and resources to collate the necessary information. By the time the analysis is complete, the prevailing market conditions may have shifted.
DESTEP vs. SWOT analysis
A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
Whereas the DESTEP analysis helps businesses understand the external environment in which they operate.
Indeed, strengths and weaknesses are assessed as internal factors, meaning you want to understand the main advantage/disadvantage your business has compared to other businesses, by looking at these as internal factors.
Instead, opportunities and threats are considered external factors in relation to the business.
In short, how the external environment affects the business.
From that respect, a company has more control over its strengths and its ability to limit its weaknesses.
Whereas a bit less control over how opportunities and threats affect the business, yet, opportunities and threats can also be taken into account to enable a proper business strategy.
Thus, the DESTEP analysis is more useful for understanding external factors in the business, which are harder to control.
The SWOT analysis is more complete as it offers both an internal and external understanding.
By using both frameworks, a business can have a wider understanding of the external and internal implications of various factors affecting the business.
Key takeaways:
The DESTEP analysis is a variation of the PEST analysis. It helps businesses understand their external environment and the issues which may impact them.
The DESTEP analysis groups external factors into six categories: demographic, economic, socio-cultural, technological, ecological, and political.
The DESTEP analysis is a simple and detailed means of stimulating discussion around external threats. However, some businesses may find the lack of a scoring system and significant upfront investment restrictive.
The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.
The STEEP analysis is a tool used to map the external factors that impact an organization. STEEP stands for the five key areas on which the analysis focuses: socio-cultural, technological, economic, environmental/ecological, and political. Usually, the STEEP analysis is complementary or alternative to other methods such as SWOT or PESTEL analyses.
The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.
Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces.
A SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.
BCG Matrix
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful businessproduct portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.
First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is valueinnovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.
Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision-making by avoiding two pitfalls: underprediction, and overprediction.
Gennaro is the creator of FourWeekMBA, which reached about three million business students, executives, and aspiring entrepreneurs in 2021 alone | He is also Head of Enterprise Sales for a high-tech startup, which he helped grow at a double-digit rate since the onset | In 2012 Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
