PEST analysis is a strategic tool used by businesses to understand the external factors that can impact their operations. The acronym stands for Political, Economic, Social, and Technological factors. By examining these areas, companies can identify opportunities and threats in their environment, helping them make informed decisions and adapt their strategies accordingly. This analysis is particularly useful for market research and planning. For instance, changes in government policies can affect regulations, while shifts in consumer behavior can influence demand. By regularly conducting a PEST analysis, organizations can stay ahead of trends and ensure they remain competitive in their industry.