PEST Analysis (Cambridge (CIE) A Level Business): Revision Note
Exam code: 9609
Conducting a PEST analysis
PEST analysis examines the external factors that are likely to impact the activities and outcomes of a business
Political
Economic
Social
Technological
PEST analysis can support effective decision-making by senior managers
It helps them to better understand the complex context within which the business operates
Understand the potential threats to the businesses's performance
Identify future difficulties so that appropriate strategies can be implemented
PEST factors
Factor | What is considered | Example strategy |
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Political |
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Economic |
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Social |
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Technological |
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Using the information from a PEST analysis
Case Study
Airbnb's external influences
Airbnb connects travellers with hosts who rent out spare rooms or whole homes in over 190 countries. In 2022 it still made nearly US $2 billion in profit, and hosts in cities like New York generated over US $1 billion and thousands of full-time-like jobs. Rapid growth has led to fines in Barcelona, New York and New Orleans for unregistered rentals and unpaid tourist taxes, and political events—such as the Ukraine war—forced Airbnb to suspend services in Russia and Ukraine while waiving fees and offering free stays to displaced Ukrainians.
Despite a travel slump in 2020–21, the platform remains popular because guests prefer cheaper, home-style stays, and Airbnb promotes “social impact” experiences that donate proceeds to charity. Its app and website—used by over ten million people—handle bookings, reviews, automated messaging and host training, so any technical glitch or data breach could quickly erode trust.
Airbnb also highlights environmental benefits: sharing existing homes uses less energy than hotels, and guests are more likely to take public transport, walk or cycle. Still, some neighbourhoods complain about noise and fewer long-term rentals, prompting Airbnb to tighten host rules and improve compliance with local regulations.
PEST Analysis for Airbnb
Factor | Key points |
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Political |
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Economic |
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Social |
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Technological |
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Strategies for Airbnb
PEST analysis helps managers develop strategies to capitalise on positive external influences and minimise the impact of negative external influences
In this case, Airbnb may choose to adopt one or more of the following strategies
Add automatic rule checks
Ask hosts to enter their licence numbers when they list a property, and then collect any required tourist taxes automatically
This would help Airbnb avoid fines by making sure every host follows local laws before a booking is confirmed
Encourage longer stays for remote workers
Offer special discounts and set up homes that have desks and reliable Wi-Fi so people working from home feel comfortable
This way, Airbnb still earns steady income even when fewer people are travelling for short vacations
Give eco-friendly hosts a boost
Mark homes that save energy or cut waste with a special badge, and make these listings appear higher in search results
Guests who care about the environment will spot these homes first, which encourages more hosts to follow green practices
Use AI to improve trust and safety
Let computer programs learn to spot fake or risky listings, delayed host replies and suspicious behaviour
When the system catches problems early, guests feel safer and the Airbnb brand is stronger
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