Pest Analysis: Home Depot's Macroeconomic Factors

Home Depot’s PEST Analysis

There are many macroeconomic factors that impact the performance of an organization. An organization needs to carefully analyze the external macroeconomic factors with the strategic analytical tool called PEST. The PEST tool analyzes the political, economic, social and technological factors of the external environment which may impact with opportunities and threats to the organization. In other words, the PEST analytical tool helps to assess the macroeconomic factors in relation to the organization’s success. In this essay, I am going to identify key external forces such as political, economic, and technological that might influence in the success of Home Depot (HD).

The political factors that might impact HD are

The organization depends on the economic stability of the country. When unemployment is low, HD can benefit from this positive environment because people have more buying power and purchase more homes. When there is more demand for homes, HD increases its sales and makes more profit. However, in the 2008 real estate crash, purchasing power was less and many people couldn’t afford to buy houses or even to rent. Home Depot was negatively affected because people were prioritizing other essential things than buying home repair products or services. Unemployment and real estate can impact the organization’s success. When the unemployment is low, people have more purchasing power and can afford to pay mortgages, down payment and credit (Frue,

Home Depot depends on the middle class and millennial’s ability to buy their products. However, the middle class has been greatly affected by the rising wealth gap and the millennial are not buying enough homes (Ferguson, 2017). One of the reasons why millennials have low purchasing power is because there aren’t enough credits available for them. Moreover, this segment group is increasingly demanding for higher quality products at lesser cost. In this sense, Home Depot could offer this demographic group high quality and more durable products.

The technological factors that can impact HD are the automation and mobile technology (Ferguson, 2017). These factors could be seen as opportunities for the organization because automation can increase productivity and efficiency. The rising use of mobile technology gives the organization a unique opportunity to capture more consumers such as the millennials. The younger generations hardly go to a physical store to purchase anything, they prefer to procure online and request home