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A framework for PEST analysis based

on fuzzy decision maps
Marco de trabajo para realizar el análisis PEST basado en
mapas de decisión difusos
Maikel LEYVA VÁZQUEZ 1; Jesús HECHAVARRÍA HERNÁNDEZ 2; Noel BATISTA HERNÁNDEZ 3; José
Abel ALARCÓN SALVATIERRA 4; Oiner GÓMEZ BARYOLO 5

Received: 11/12/2017 • Approved: 10/01/2018

Content
1. Introduction
2. Methodology
3. Case study
4. Conclusions
Bibliographic references

ABSTRACT: RESUMEN:
Currently PEST analysis framework provides mainly a Actualmente el marco de trabajo del análisis PEST
general idea about the macro environmental solo provee una idea general de las condiciones
conditions and situation of a company or project. In macro-ambientales de un compañía o proyecto. En el
this paper, a new model for PEST analysis is presente trabajo se propone un nuevo modelo para el
presented based on fuzzy decision maps. The análisis PEST basado en los mapas de decisión
proposed framework is composed of five activities difusos. El marco de trabajo propuesta está
obtaining a ranking of factors. A case study for a compuesto de cinco actividades. Se desarrolla un
vertical farming project was presented, allowing to estudio de caso basado en un proyecto de agricultura
rank factor according to importance. Further works vertical. Trabajos futuros se centrarán en la inclusión
will concentrate extending the model for incorporating del análisis de escenarios al modelo propuesto.
scenario analysis. Palabras clave: Análisis PEST, mapas de decisión
Keywords: PEST analysis, fuzzy decision maps, fuzzy difusos, mapas cognitivos difusos.
cognitive maps.

1. Introduction
PEST (Political, Economic, Social and Technological) framework, is used to assess these four
external factors in relation to business situation (Healey, 1994). When environment and
legal factors are included it is named PESTEL (Political, Economic, Socio-cultural,
Technological, Environment and Legal) analysis (Yüksel, 2012).
The conceptual structure and nature of PEST (Political, Economic, Socio-cultural, and
Technological) requires an integrated approach for considering importance and interrelation.
Standard technical framework of PEST does not adequately support that approach providing
mainly only a general idea about the macro environmental conditions and situation of a
company. Consequently PEST analysis lacks a quantitative approach to the measurement of
interrelation among its factors (Yüksel, 2012).
In this paper a new model PEST analysis based fuzzy decision maps (FDM)(Yu & Tzeng,
2006) is presented giving methodological support and the possibility of dealing with
interdependence, and feedback . This work is structured as follows: Section 1.1 and 1.2
reviews some important concepts about PEST analysis framework and fuzzy cognitive
maps(FCM), respectively. In Section 2, a framework for PEST analysis based on FDM
composed of five activities, identifying PEST factors and sub-factors, compare importance,
modelling influence, obtaining the steady-state matrix and derive the global weight vector is
presented. Section 3 shows a case study of the proposed model applied to vertical farming
project environment analysis. The paper ends with conclusions and further work
recommendations.

1.1 PEST Analysis

PEST (Political, Economic, Social and Technological), analysis is a precondition analysis with
the mains function of the identification of the environment within which the company or
project operates and providing data and information that will enable the organization to
make predictions about new situations and circumstances (Frynas & Mellahi, 2015;
Thompson & Martin, 2010). PEST analysis in the original formulation lack a quantitative
approach for measurement. Factors analyzed are generally measured and evaluated
independently (Yüksel, 2012).
PEST have a hierarchical structure of objective, factor and sub-factor. In (Yüksel, 2012) a
proposal for PEST analysis in a multicriteria environment is presented , but only
interdependency among general factor is taken into account. Additionally, factors and sub-
factor have ambiguity, vagueness in their interrelations.
This study presents a model to address problems encountered in the measurement and
evaluation process of PEST analysis considering interdependencies among sub-factors. The
integrated structure of PEST sub-factors was modeled by FCM and a quantitative analysis is
developed based on the FDM method.

1.2 Fuzzy cognitive maps and Fuzzy decision maps

Cognitive maps were introduced by Axelrod (Axelrod, 2015) where nodes represent concept
or variables in a domain and arcs indicate positive or negative causal relations. Fuzzy
cognitive maps (FCM)(Kosko, 1986) (Figure 1) are fuzzy graph structures for representing
causal knowledge, extending cognitive maps with fuzzy values in the [-1,1] interval to
indicate the strength of causal relations.
The matrix representation of FCM allows to make causal inferences. In FCM there are three
possible types of causal relations between nodes represented in the matrix: negative,
positive and no relationship (M. Leyva-Vázquez, Santos-Baquerizo, Peña-González, Cevallos-
Torres, & Guijarro-Rodríguez, 2016).

Figure 1
Example of FCM graphical representation
 (Maikel Leyva-Vázquez, Karina Pérez-Teruel, Ailyn Febles-Estrada, & Jorge Gulín-González, 2013).

FCM have been applied diverse areas specially decision support and complex systems
analysis (MY Leyva-Vázquez, KY PÉREZ-TERUEL, Ailyn Febles-Estrada, & Jorge Gulín-
González, 2013). Fuzzy decision map (FDM) were proposed in 2006 for solving the
multicriteria decision making problem with dependence and feedback (Yu & Tzeng, 2006).
For overcoming the shortcoming of AHP and ANP method it incorporates the eigenvalue
method, FCM, and the weighting equation (Elomda, Hefny, & Hassan, 2013).
The advantages of FDM (Elomda et al., 2013; Tzeng, Chen, Yu, & Shih, 2010) are
overcoming the drawbacks of the AHP and ANP, employing the different threshold functions
to indicate the various kinds of relationship among criteria, dealing with direct and indirect
influences. The ability to solve both the compound and the interaction effects is another area
of advantage.

2. Methodology
Our aim in the proposal is developing a framework for PEST analysis based on FDM. The
model consists of the following phases (graphically, Figure 2).

Figure 2
Proposed framework for PEST analysis
2.1 Identifying PEST factors and sub-factors
In this step, the relevant PEST factors and sub-factors are identified. PEST factors are
derived from the themes: political, economic, socio-cultural, technological factors.
Identifying PEST factors and sub-factors allowing to form a hierarchical structure of the
model.

2.2 Compare importance

Compare the importance among criteria to derive the local weight vector using the
eigenvalue approach (Elomda et al., 2013). This should be done by domain experts
according to the preference scale shown below.

Table 1
Scale for realshionship among criteria
 Description Numerical Value

Equal importance 1

Moderate importance 2

Strong importance 3

Very strong importance 4

Extreme importance 5

2.3 Modelling influence

Depict the fuzzy cognitive map to indicate the influence among criteria by the expert. Causal
interdependencies among PEST sub-factors are modelled. This step consists of the formation
of FCM of sub-factors, as nodes according to the views of the expert team.

2.4 Obtaining the steady-state matrix

Calculate the updating equation to obtain the steady-state matrix:

2.5 Derive the global weight vector

We should first normalize the local weight vector () and the steady-state matrix (M) as
follows:

3. Case study
Environmental concerns, including issues of ecological justice, attention to sustainability, and
focus on issues of food security have gathered increased momentum in vertical farming
(Besthorn, 2013). This case study is based in a vertical farming project proposal at the
University of Guayaquil. In recent years, Guayaquil has become a city of cement with
scarcity on green areas (Delgado, 2013).
The main goal of the project is the optimization and use of spaces not suitable for
cultivation, such as walls and terraces; with systems of supports helping in the beautification
of the environment and allow the planting distinct types of plants obtaining a commercial
harmony sustained in the environment.
Initially factors and sub-factors were identified. Figure 3 shows the hierarchical structure.

Figure 3
The hierarchical model of PEST in the vertical farming project.

For choosing the best alternative, we should derive the influence scores of each criterion and
calculate the influence scores of each factor.
The Scoring matrix (E) was elicited as follows:
From the matrix above, we can calculate the local weights by means of the eigenvalue
method (Table 2).

Table 2
Local Weights

Local Weights

P1 0.10114946

P2 0.2240859

E1 0.23404327

E2 0.18179133

S1 0.18529311

S2 0.08191048

S3 0.14962954

S4 0.28632044

T1 0.38587305

T2 0.47227449

T3 0.44762893

Interdependencies are identified and modelled by means of a FCM. using the Mental Modeler
Tool(Gray, Gray, Cox, & Henly-Shepard, 2013).

Figure 4
Fuzzy Cognitive Map

Adjacency matrix of the FCM, which contained all of the weights of the connections is as
follows:
Next, by using the pure-linear, we can calculate the steady-state matrices. Finally, using Eq.
(3), we can obtain the global weights as shown in Table 3.

Table 3
global weights

Local Weights

P1 0.05261132

P2 0.06682977

E1 0.08166517

E2 0.07696188

S1 0.04843403

S2 0.0214107

S3 0.03911188

S4 0.11139439

T1 0.16259815

T2 0.21052621

T3 0.1284565

Calculations were made using the IPython kernel for Jupyter Notebook interface (Ragan-
Kelley et al., 2014).

Figure 5
Jupyter Notebook interface

The ranking obtained is as follows:

Support of research and development activities by the government was selected as the top
environment factor at this vertical farming initiative. After application in this case study the
model is found to be practical to use. The FDM gives a high flexibility and consider
interdependencies within PEST analysis.

4. Conclusions
This study presents a model to address problems encountered in the measurement and
evaluation process of PEST analysis considering interdependencies among sub-factors and
modeling uncertainty. The integrated structure of PEST sub-factors was modeled by FCM.
To demonstrate the applicability of the proposal a case study to a vertical farming project
proposed at the University of Guayaquil. Most notably, this is the first study to our
knowledge to integrate FDM to the PEST analysis Schema. Our approach has many
applications in complex decision problem that include interdependencies among criteria, and
such as complex agriculture decision support.
Further works will concentrate in extending the model for dealing scenario analysis and the
use of compensatory operator in static analysis (M. Y. Leyva-Vázquez, Bello-Lara, & Espín-
Andrade, 2014) . Another area of future work is the developing a consensus model for FCM
and the development of a software tool.

Bibliographic references
Axelrod, R. (2015). Structure of decision: The cognitive maps of political elites: Princeton
university press.
Besthorn, F. H. (2013). Vertical farming: Social work and sustainable urban agriculture in an
age of global food crises. Australian Social Work, 66(2), 187-203.
Delgado, A. (2013). Guayaquil. Cities, 31, 515-532.
doi:https://doi.org/10.1016/j.cities.2011.11.001
Elomda, B. M., Hefny, H. A., & Hassan, H. A. (2013). An extension of fuzzy decision maps for
multi-criteria decision-making. Egyptian Informatics Journal, 14(2), 147-155.
doi:http://dx.doi.org/10.1016/j.eij.2013.05.001
Frynas, J. G., & Mellahi, K. (2015). Global strategic management: Oxford University Press,
USA.
Gray, S. A., Gray, S., Cox, L. J., & Henly-Shepard, S. (2013). Mental modeler: a fuzzy-logic
cognitive mapping modeling tool for adaptive environmental management. Paper presented
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Modelo para el análisis de escenarios basados en mapas cognitivos difusos: estudio de caso
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1. PhD. En Ciencias Técnicas, , MSc. En Bioinformática, Facultad de Ciencias Matemáticas y Físicas, Universidad de
Guayaquil, Guayaquil Ecuador. mleyvaz@gmail.com
2. PhD. En Ciencias Técnicas, MSc en Diseño y Fabricación Asistida por Computadoras CAD/CAMFacultad de
Arquitectura y Urbanismo, Universidad de Guayaquil, Guayaquil Ecuador. jesus.hechavarriah@ug.edu.ec
3. MSc. en Administración Pública. Facultad de Jurisprudencia y Ciencias Sociales. Universidad de Guayaquil,
Guayaquil Ecuador. noelbatista1965@gmail.com
4. MSc. en Sistemas de Información Gerencial, Facultad de Ciencias Matemáticas y Físicas. Universidad de Guayaquil,
Guayaquil Ecuador. abel.alarcons@ug.edu.ec
5. PhD. En Ciencias Técnicas, Facultad de Sistemas Computacionales y Telecomunicaciones de la Universidad
Tecnológica ECOTEC, Samborondón, Guayas, Ecuador. ogomez@ecotec.edu.ec

Revista ESPACIOS. ISSN 0798 1015

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