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, sociocultural, technological, ecological, and political.
|1. Demographic||Demographic factors encompass statistical information about people, including population size, age, gender, and occupation.||– Analyze population-related data and trends, such as age distribution, population growth, and geographic shifts. – Understand how demographics drive market development and demand.||– Guides marketing strategies based on target demographics and changing market trends. – Influences product design and distribution channels.||– Segmenting a market based on age and gender demographics for a new clothing line. – Adapting product features to meet the needs of an aging population.||Demographic Example: “Population growth, aging demographics, and geographic shifts influence market demand.”|
|2. Economic||Economic factors pertain to elements affecting consumer purchasing power and behavior, such as GDP, inflation, and income levels.||– Assess economic indicators, inflation rates, GDP growth, and unemployment rates that impact consumer spending and business operations. – Consider how economic conditions influence consumer behavior.||– Informs pricing strategies, budgeting, and resource allocation based on economic forecasts. – Helps anticipate demand fluctuations and adapt business models accordingly.||– Adjusting pricing strategies in response to inflation rates. – Monitoring GDP growth to assess market expansion opportunities.||Economic Example: “Inflation, GDP, and consumer disposable income impact purchasing behavior and business operations.”|
|3. Socio-cultural||Socio-cultural factors describe societal behaviors, values, and preferences that influence consumer choices and market dynamics.||– Explore societal values, cultural norms, lifestyle changes, and consumer preferences within different societies and cultures. – Understand how socio-cultural factors shape consumer behavior and market trends.||– Guides product design, marketing campaigns, and messaging to align with cultural preferences. – Helps in adapting products and services to cater to diverse consumer segments.||– Localizing marketing campaigns to resonate with specific cultural values and norms. – Tailoring product features to meet the lifestyle preferences of target markets.||Socio-cultural Example: “Understanding cultural norms and preferences to avoid marketing mishaps and connect with consumers.”|
|4. Technological||Technological factors involve advancements, innovations, and technological trends that can impact business operations and competitiveness.||– Evaluate emerging technologies, industry disruptions, and the rate of technological change. – Recognize how technology advancements affect various industries and business models.||– Drives innovation and competitiveness by adopting relevant technologies. – Informs technology adoption strategies and digital transformation initiatives.||– Integrating cloud computing solutions to enhance operational efficiency. – Embracing digital marketing strategies to reach tech-savvy consumers.||Technological Example: “Adopting new technologies to stay competitive and improve operational efficiency.”|
|5. Ecological||Ecological factors concern environmental sustainability and the impact of business activities on the environment and natural resources.||– Consider environmental concerns, sustainability practices, pollution reduction, and resource conservation within business operations. – Assess the ecological footprint of products and services.||– Encourages sustainability initiatives and compliance with environmental regulations. – Influences product development for eco-friendly and responsible practices.||– Implementing recycling programs and reducing waste in manufacturing. – Developing eco-friendly packaging to address environmental concerns.||Ecological Example: “Sustainability practices and pollution reduction efforts as key considerations for businesses.”|
|6. Political||Political factors encompass external political elements, including laws, regulations, government agencies, and political movements.||– Understand the impact of political decisions, legal frameworks, and government policies on business operations and market entry. – Recognize the role of political stability and trade regulations in international business.||– Ensures compliance with local and international laws and regulations. – Informs market entry strategies and government relations efforts.||– Adapting product labeling to comply with new food safety regulations. – Assessing the impact of trade policies on global supply chain management.||Political Example: “Navigating international trade regulations and local laws when entering foreign markets.”|
Generate a DESTEP Analysis
Understanding a DESTEP analysis
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 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 six categories of the DESTEP analysis
Here, there are six categories:
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.
Typically, change is driven by population growth, age structure, family structure, and geographic population shifts.
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.
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.
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.
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.
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
Whereas the DESTEP analysis helps businesses understand the external environment in which they operate.
The SWOT analysis is both internal and external.
In fact, it looks at four factors:
- and Threats.
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.
Launching a Sustainable Clothing Line
Situation: A fashion startup wants to launch a sustainable clothing line targeting eco-conscious consumers.
SWOT Analysis Application:
- Strengths: Ethically sourced materials, recyclable packaging, transparency in supply chain.
- Weaknesses: Higher production costs, limited initial brand recognition.
- Opportunities: Growing demand for sustainable products, potential collaborations with eco-friendly influencers.
- Threats: Established competitors, fluctuating raw material prices.
DESTEP Analysis Application:
- Demographic: Targeting millennials and Gen Z who are more eco-conscious.
- Economic: Premium pricing due to sustainable practices.
- Socio-cultural: Riding the trend of sustainability and ethical fashion.
- Technological: Use of sustainable tech in production, like water-saving dyeing techniques.
- Ecological: Positive impact by reducing carbon footprint.
- Political: Benefiting from government incentives for sustainable businesses.
Expanding a Digital Health App Globally
Situation: A health tech company wants to take its successful digital health app to international markets.
SWOT Analysis Application:
- Strengths: Proven track record in the home market, robust technology platform.
- Weaknesses: Lack of understanding of international health regulations, cultural differences in health perceptions.
- Opportunities: Untapped markets, potential partnerships with international health organizations.
- Threats: Local competitors, regulatory hurdles.
DESTEP Analysis Application:
- Demographic: Targeting tech-savvy populations, urban areas with high smartphone penetration.
- Economic: Pricing strategy adapted to purchasing power of target markets.
- Socio-cultural: Adapting app content to local health beliefs and practices.
- Technological: Ensuring compatibility with popular devices in target markets.
- Ecological: Promoting digital health as an eco-friendly alternative to traditional healthcare.
- Political: Navigating health regulations and data privacy laws in different countries.
Introducing a Plant-based Meat Alternative
Situation: A food company wants to capitalize on the rising trend of vegetarianism and veganism by launching a plant-based meat alternative.
SWOT Analysis Application:
- Strengths: Expertise in food production, established distribution channels.
- Weaknesses: New entrant in the plant-based segment, potential backlash from traditional meat consumers.
- Opportunities: Growing vegetarian and vegan population, restaurant partnerships.
- Threats: Established plant-based meat brands, potential regulatory challenges.
DESTEP Analysis Application:
- Demographic: Targeting health-conscious consumers, vegans, and vegetarians.
- Economic: Premium pricing due to high production costs of plant-based proteins.
- Socio-cultural: Aligning with the movement towards ethical and sustainable eating.
- Technological: Investing in R&D to perfect the taste and texture of the meat alternative.
- Ecological: Marketing the product as a more sustainable alternative to traditional meat.
- Political: Ensuring the product meets food safety regulations, potential lobbying against plant-based products.
Opening a Chain of Smart Gyms
Situation: A fitness entrepreneur wants to launch a chain of gyms that leverage technology for personalized workout experiences.
SWOT Analysis Application:
- Strengths: Unique value proposition, use of cutting-edge technology.
- Weaknesses: High initial investment, reliance on technology that may face glitches.
- Opportunities: Growing fitness-conscious population, potential for app integrations.
- Threats: Established gym chains, rapid technological obsolescence.
DESTEP Analysis Application:
- Demographic: Targeting millennials and Gen Z, urban areas.
- Economic: Membership pricing in line with premium services offered.
- Socio-cultural: Catering to the trend of tech-integrated lifestyles.
- Technological: Continuous upgrades to ensure the latest tech is available to members.
- Ecological: Promoting the gym as an eco-friendly space with sustainable equipment.
- Political: Ensuring compliance with health and safety regulations.
- 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.
- Definition: DESTEP analysis is an extension of the PEST analysis, used by businesses to understand their external environment and the factors that may impact them. DESTEP stands for Demographic, Economic, Sociocultural, Technological, Ecological, and Political factors.
- Purpose: It provides an overview of macroeconomic factors that influence organizations, aiding in strategic planning, decision-making, and identifying potential threats and weaknesses.
- Categories: DESTEP analysis breaks down external factors into six categories:
- Demographic: Population size, age, gender, occupation, etc.
- Economic: GDP, inflation, unemployment, purchasing power, etc.
- Sociocultural: Behaviors, values, and preferences of different societies and cultures.
- Technological: Influence of new technologies on business operations.
- Ecological: Concerns about the environment, sustainability, and pollution reduction.
- Political: Factors related to laws, governmental agencies, minority groups, and movements.
- Advantages: It offers a holistic view of macroeconomic factors, stimulates discussions about external factors, and maintains focus on adapting strategies to the target demographic.
- Disadvantages: It lacks a way to weigh the importance of various categories, combines political and legal aspects into one category, and requires significant time and resources to gather information.
- DESTEP vs. SWOT Analysis: DESTEP is focused on understanding the external environment and complements SWOT analysis. SWOT is both internal and external, analyzing the organization’s strengths, weaknesses, opportunities, and threats, providing a broader understanding of factors affecting the business. Both frameworks are useful in developing a comprehensive business strategy.
Connected Analysis Frameworks
Related Strategy Concepts: Go-To-Market Strategy, Marketing Strategy, Business Models, Tech Business Models, Jobs-To-Be Done, Design Thinking, Lean Startup Canvas, Value Chain, Value Proposition Canvas, Balanced Scorecard, Business Model Canvas, SWOT Analysis, Growth Hacking, Bundling, Unbundling, Bootstrapping, Venture Capital, Porter’s Five Forces, Porter’s Generic Strategies, Porter’s Five Forces, PESTEL Analysis, SWOT, Porter’s Diamond Model, Ansoff, Technology Adoption Curve, TOWS, SOAR, Balanced Scorecard, OKR, Agile Methodology, Value Proposition, VTDF Framework, BCG Matrix, GE McKinsey Matrix, Kotter’s 8-Step Change Model.