IGCSE Travel and Tourism Practice Exam

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What does PEST analysis evaluate in the context of business operations?

Internal company strengths and weaknesses
External factors influencing competitiveness
Demographics of tourism markets
Customer satisfaction levels

The correct answer is: External factors influencing competitiveness

PEST analysis evaluates external factors that can influence a business's competitiveness and overall operational environment. This analytical tool focuses on four key areas: Political, Economic, Social, and Technological factors. By assessing these external conditions, businesses can better understand the macro-environment they operate within and identify opportunities and threats that are not within their direct control. This approach helps businesses adapt to changes and trends in the external environment, allowing them to strategize effectively for success. The other options do not align with the purpose of PEST analysis. The first option relates to internal assessments commonly conducted through SWOT analysis, which looks at strengths and weaknesses. The third option, while relevant to understanding market dynamics, does not encompass the broader scope of external influences that PEST addresses. Finally, customer satisfaction levels are typically measured through specific feedback and performance metrics rather than macro-environmental analysis.