The agriculture specialization through the lens of PESTLE analysis

1 Introduction

Agriculture is a crucial sector in any nation, providing essential food and raw materials for the processing industry and playing a key role in shaping public health and quality of life. In Armenia, the significance of agriculture extends beyond just economic importance: it directly influences food security, the well-being of rural communities, and the overall socio-economic stability of the country. Armenia is strategically positioned to pursue the United Nations Sustainable Development Goals (SDGs) related to agriculture, because the country benefits from long growing seasons, favorable agro-climatic zones for early harvests, a rich agricultural heritage, and proximity between rural and urban areas. Despite these advantages, the agricultural sector faces significant challenges, including fragmented land ownership, inefficient resource use, outdated cultivation machinery and technologies, limited access to finance, and underdeveloped infrastructure. Additionally, a shortage of skilled professionals and effective agricultural solutions further hinders growth and modernization. As Armenia navigates its current socio-economic and political climate, the matter of ensuring economic security and prioritizing national interests has become more pressing than ever [1]. In this scope food security is a cornerstone of the population’s survival and welfare [2]. Given the central role of agriculture in Armenia’s economy, addressing challenges in this sector is essential for achieving long-term sustainable development.

Agricultural specialization plays a critical role in addressing these challenges. The efficient use of resources and the enhancement of commercial production are deeply tied to strategic agricultural specialization [3] and the rational combination of production branches [4]. Specialization allows farms and agricultural regions to focus on a narrower range of products based on comparative advantage, market demand, and environmental suitability. While the trend of shifting towards specialization has deep historical roots, it remains a dynamic process, shaped by technological advancements, market changes, and policy shifts. However, the lack of an in-depth understanding of the factors influencing agricultural specialization in Armenia presents a research gap that this study seeks to address.

This article aims to explore the key factors influencing agricultural specialization in Armenia and to assess the impact of these factors in promoting sustainable agricultural practices. Specifically, the article seeks to answer the following questions:

• What are the current directions of agricultural specialization in the Armenian regions?

• What are the key factors influencing agricultural specialization in Armenia?

• What is the impact of the main factors of agricultural specialization in Armenia?

• How can the significance of each factor influencing agricultural specialization be determined?

• What measures can be developed to implement the key factors that influence agricultural specialization?

What potential changes in the agricultural sector can be forecasted based on the identified factors and their impacts?

The study uses the political, economic, social, technological, legal, and environmental (PESTLE) method to identify PESTLE factors influencing agricultural specialization, and through a weighted assessment by experts, determines the most important factors and assesses the potential impact of those factors on specialization. This mixed-method approach allows for a comprehensive understanding of both the macro-level factors and their practical applications in shaping agricultural policies and practices in Armenia. This study is important because it fills the literature gap by examining the specific factors that influence agricultural specialization in Armenia, a region with unique agricultural challenges and opportunities. While previous studies have addressed agriculture in broader terms, few have delved into the specific drivers and outcomes of specialization within the Armenian context. This study provides valuable insights for policymakers, farmers, and industry stakeholders working to enhance the sustainability and efficiency of the agricultural sector.

2 Literature review

According to Grigg [5], the Industrial Revolution and subsequent urbanization created a demand for more diverse agricultural products, prompting farmers to specialize in crops that were most profitable or best suited to their land. This period marked a pivotal transition from subsistence farming to market-oriented agriculture. Several economic theories underpin the rationale for agricultural specialization. The principle of comparative advantage, articulated by David Ricardo in the early 19th century, suggests that regions should specialize in producing goods for which they have a relative efficiency advantage. Supporting this theory, empirical studies by Johnson and Mellor [6] demonstrated that specialization can lead to increased productivity and income.

Agricultural specialization has distinct characteristics due to the unique nature of agriculture as an economic sector. Key influencing elements include climatic conditions, the biological aspects of production, seasonality in output and income, and challenges in transporting and storing agricultural products. Unlike other industries, specialization in agriculture cannot be overly narrow or homogeneous. It is often shaped by the rational use of land, labor, and resources, the presence of processing facilities, intra-farm demands for food and fodder, and spatial distribution. For example, narrow specialization in horticulture is considered agronomically unsound, as continuous cultivation of the same crop in a single area reduces soil fertility and yields, thus requiring crop rotation [7]. Studies have shown that diversified farms tend to offer greater environmental sustainability, albeit sometimes at the cost of lower economic efficiency compared to specialized farms [8].

Factors influencing agricultural specialization can be grouped according to:

• The diversity of climatic conditions and spatial distribution of farms,

• Availability of technical and labor resources,

• The necessity of sustainable land use and soil fertility maintenance through crop rotation,

• The development level of transportation infrastructure [9],

• The capacity for adopting innovations, and

• The self-sufficiency level of the population.

Incorporating a more modern approach, smart specialization in farms is increasingly seen as a means to enhance management efficiency. It involves reorienting agricultural enterprises toward strategically innovative diversification, focusing on niche markets, and achieving a balance between efficiency and sensitivity to market demands [10].

One of the leading scholars in agricultural specialization, Professor A. Antoine of René University in Western France, explored the evolution of specialization in European countries in his influential work, agricultural specialization and rural development patterns [11]. This research analyzed the historical shifts in production orientation, market dynamics, and rural management strategies, from early periods to the modern era. The study also highlighted the environmental and social implications of specialization. Monoculture practices, often associated with specialization, can lead to soil degradation, reduced biodiversity, and increased vulnerability to pests and diseases [12]. However, if managed sustainably, specialization can increase resource use efficiency and improve rural livelihoods.

The recent literature underscores the importance of strategic agricultural specialization that combines different production branches to enhance the efficiency and sustainability of land use [4]. Optimal specialization must balance productivity and profitability with factors such as labor security and effective management practices [13]. Rational choices in commodity specialization, particularly when aimed at maximizing output and the efficient use of labor and capital, are critical for improving overall production efficiency [3]. Various studies on farm efficiency across different countries and agricultural sub-sectors affirm that the degree and direction of specialization significantly impact productivity. For example, specialization in Ethiopia’s coffee sector has enhanced export revenues but simultaneously increased vulnerability to price fluctuations and climate variability [14]. New Zealand’s dairy industry illustrates successful specialization bolstered by supportive policies and innovation [15]. Research in potato farming demonstrates a strong correlation between specialization and technical efficiency, with geographic factors such as farm size, elevation, and location playing key roles [16]. Yet, recent micro-level studies suggest that specialization now exerts a stronger influence on production efficiency than geographic variables. Specializing in particular grape varieties [17] or specific production routes in pig breeding [18] has improved technical and operational efficiency. At the micro (farm) level, specialization yields multiple benefits that boost farm efficiency, including:

• Lower unit costs due to production scale increases and added value generation,

• Labor economization through repetitive task specialization, enhancing productivity, and reducing costs,

• Enhanced competitiveness by leveraging comparative advantages,

• Simpler organization and reduced material consumption from improved control over technological processes, and

• Lower transaction costs and improved marketing effectiveness for agricultural products [8].

It is essential to recognize the broader political, ecological, and socio-economic influences on specialization. Government policies (through subsidies, trade frameworks, and innovation support) can either promote or hinder agricultural specialization. As Anderson [19] noted, reforms that facilitate market access and the adoption of technology are essential for effective specialization. State policies should aim not only to boost farm profitability but also to ensure food security and preserve ecosystem services [20,21,22].

This literature review highlights that agricultural specialization, when guided by knowledge-based strategies and smart specialization principles, can significantly enhance the productivity, efficiency, and sustainability of farming systems. By aligning specialization with innovation, ecological stewardship, and market responsiveness, farms can achieve more than just economic efficiency: they can contribute to broader development goals such as food security, poverty reduction, and environmental protection. This integrated approach is essential for advancing the sustainable development of agriculture, particularly in the context of the SDGs, where responsible production, climate resilience, and inclusive growth remain central priorities.

3 Methodology

In economic research, when analyzing entities such as a country, sector, branch, or company, qualitative assessment methods are frequently used to evaluate internal and external environments. Widely recognized analytical tools in this regard include SWOT, PEST, STEP, SLEPT, STEEPLE, and PESTLE. In this study, considering the multifaceted and cross-sectoral nature of agricultural specialization, we employed the PESTLE analysis. This approach provides a structured framework to capture the broad spectrum of external macro-environmental factors influencing agricultural specialization in Armenia.

The selection of the PESTLE method was not arbitrary. It enables the identification of critical factors shaping specialization patterns and supports the development of policies aligned with these influential elements [23]. For instance, Mihailova of the Institute of Agricultural Economics of the Sofia Agricultural Academy has applied this method in her study “The State of Agriculture in Bulgaria” highlighting its relevance in evaluating external strengths and weaknesses [24]. Likewise, PESTLE analysis is also utilized in crisis management studies, offering a systematic yet flexible way of analyzing complex dynamics, especially when traditional approaches struggle to bridge abstract research with real-world implications [25].

In this study within PESTLE analysis number of strategic policy measures were selected as influencing factors that shape specialization decisions at the farm level, such as choices related to the production direction or resource distribution. The selection of factors and policy measures aligns with the “2020–2030 Strategy of the Main Directions Ensuring the Economic Development of the Agricultural Sector of the Republic of Armenia” [26]. The six groups of PESTLE factors were compiled from policy initiatives, legal regulations, and strategic development plans (see Table 1). These measures were selected based on their anticipated impact on the agricultural sector and their ability to influence production trends and specialization over time. Table 1 provides a comprehensive categorization of relevant PESTLE factors, all drawn from national strategies and legislative initiatives.

The core methodology framework of this study is illustrated in Figure 1 and follows these successive stages:

1. Determination of regional specialization trends: the study began by identifying patterns of agricultural specialization across Armenian regions based on gross output data from two main branches (horticulture and animal husbandry) over the period 2018–2022. This provided a factual basis for analyzing how macro factors align with or influence existing specialization trends.

2. Identification and prioritization of external factors via PESTLE: a wide array of PESTLE factors was identified. From this broader set, priority factors were selected through detailed PESTLE analysis. These factors reflect those policy directions and macro-level measures that have the potential to significantly shape agricultural decision-making and resource allocation.

3. Initial impact assessment: each identified factor was initially evaluated by the authors using a simple 1–3 scale:

   1. 1 point was assigned to factors corresponding to measures not yet implemented.

   2. 2 points were given for moderate-impact or partially implemented initiatives.

   3. 3 points were attributed to those having strong, observable influence or full-scale implementation.

4. Expert evaluation of PESTLE factors: To enhance objectivity and depth, a panel of six experts was assembled to assess the same set of factors. These experts were selected to represent a broad spectrum of the agricultural sector (ranging from academia to field practitioners):

   1. Expert 1: Vice-Rector for Science, Armenian National Agrarian University (ANAU), Doctor of Sciences (Economics).

   2. Expert 2: Director of the Agrarian Policy and Economics Research Center (ANAU), PhD in Economics.

   3. Expert 3: President of “Ekoradar” NGO, environmental expert, PhD in Economics.

   4. Expert 4: Scientific Secretary of the Institute of Economics, NAS RA, PhD in Economics.

   5. Expert 5: Leading farmer trained in the “Smart Farm” program.

   6. Expert 6: Chief agronomist and consultant, PhD in Agricultural Sciences.

   The evaluation process was conducted through face-to-face interviews. Each expert received an evaluation form and assessed the potential impact of each factor.

5. Use of Likert scale for expert evaluation: the experts’ assessments were performed using a Likert scale (1–5), a tool widely accepted in social science research for capturing subjective judgments [27]. Here, 1 indicated strong disagreement with the factor’s potential impact and 5 reflected strong agreement. This approach allowed for a nuanced, flexible assessment of each factor’s perceived influence.

6. Calculation of weighted coefficients: the results of expert evaluations were then used to calculate weighted coefficients for each factor. This allowed for a composite score reflecting both expert opinion and policy relevance. The calculation followed these formulas:

   (1) x ̅ = 1 n ∑ i = 1 n ( x i ) ,

   (2) y ̅ = y i ∑ i = 1 n ( y i ) × 1 n ∑ i = 1 n ( x i ) ,

   where x i represents individual expert scores, x ̅ is the mean expert evaluation, y i is the policy impact rating (1–3 scale), and y ̅ is the final weighted coefficient.

7. Ranking the factors and strategic recommendations: based on the calculated coefficients, each factor was ranked in terms of its influence on specialization. Higher weighted values indicated greater strategic importance. This ranking was then used to formulate specific recommendations for the development of agricultural specialization strategies in Armenia.

8. Forecasting and policy planning: the outcomes of the PESTLE evaluation were applied in a forward-looking context. For each key factor, targeted policy and implementation measures were proposed. The anticipated effects of these measures were then projected in terms of their potential to reshape agricultural specialization dynamics at the regional level.

Figure 1

Methodology framework of the study.

The proposed approach integrates several research methods and analytical techniques to model agricultural specialization in Armenia and to forecast potential changes in the sector. Each stage of the methodological framework contributes to shaping a comprehensive view of agricultural specialization through the lens of PESTLE analysis. This approach is versatile and can be effectively applied to other countries and regions where specialization and agricultural policymaking are of strategic importance.

1. Informed consent: Permission to conduct the interviews for this research was obtained by all experts, who were fully informed about the purposes of the research and how their responses would be used and stored. Before participation, all experts gave their written consent.

4 The state of agriculture specialization in Armenia

Agriculture has a crucial role in the economic stability and food security of Armenia [28]. As of 2022, agriculture provides 10.4% of the GDP, the share of food products in the export volume is 23.9%, about 317 thousand farms operate in this sector, and 2042.4 thousand ha or 68.7% of the total area of Armenia are agricultural lands [29,30,31]. Despite these circumstances, the Global Food Safety Index of Armenia was 57.1, including 51.7 in terms of food availability, 66.2 in terms of accessibility, and 45.4 in terms of quality and safety [32]. In 2020, the Global Food Safety Index of Armenia was 59.4, including 64.9 for food availability, 55.4 for accessibility, and 65.1 for quality and safety. Even though the value of the Index has risen, the accessibility has dropped significantly, and the studies show that the overall state of food security in post-COVID Armenia has worsened [33,34,35]. The state of the agriculture specialization can be summarized in the following main points:

• The dynamics of gross product per unit of land and per unit of labor are positive (with 65 and 193%, respectively). However, during the same period, the cultivated area of arable lands and the number of employed in agriculture were reduced by 25 and 45%, respectively.

• According to data from the RA Statistical Committee, food products with high self-sufficiency are potatoes, fruits and vegetables, eggs, sheep, and goat meat (averaged data for 2017–2022). Conversely, the self-sufficiency level of wheat, vegetable oils, poultry, and legumes has decreased and is below average. However, it is noteworthy, that according to studies, Armenia has certain potential in regards to increasing the self-sufficiency of wheat, legumes, milk and dairy products, beef, pork, and poultry and that can be ensured through the implementation of sound state policy [35].

• Despite low self-sufficiency in food products, the state of arable land use in Armenia is inadmissible. According to the RA Statistical Committee data, in 2022, the percent of cultivated arable land was 48.1% (212.4 thousand ha). In other words, 52.0% of the arable land is not utilized despite low self-sufficiency of strategic food products.

• Due to Armenia’s climatic conditions and geographic characteristics, the agricultural distribution by regions is highly uneven. Studies reveal that, in 2022, 79.5% of the grain and legume production is concentrated in 5 regions (occupying 67.8% of the total arable land of the country): Shirak region – 26.0%, Aragatsotn and Syunik regions – 13.8% each, Lori region – 13.5%, and Gegharkunik region – 12.3%. The remaining five regions produced only 20.5% of the total grain. There is a big difference in the specialization of other food products between regions. For example, the Gegharkunik region is the undisputed leader in potato production, where 36.2% of the total potato was produced. The production of fruits, grapes, and vegetables is concentrated in Ararat and Armavir regions: 59.2, 88.5, and 85.9% of the total production, respectively (in 2022). As can be seen from Figure 2, the horticulture is mainly concentrated in the Armavir and Ararat regions.

  It must be noted that compared to horticulture, animal husbandry has more even distribution (Figure 3), considering the production requirements of animal husbandry are more easily manageable. However, Figure 3 makes it apparent that mountainous regions (Syunik, Gegharkunik, Aragatsotn, and Shirak are frontrunners with animal husbandry output).

• The availability of fodder crop cultivation, fodder production, grasslands, and pastures directly determines the distribution and specialization of animal husbandry subsectors in the Armenian regions. Studies revealed that beef livestock had had the following distribution: Gegharkunik region – 16.0%, Shirak region – 13.3%, Armavir region – 12.2%, Lori region – 12.1%, and Aragatsotn region – 10.6 %. These five regions account for 56.3% of the total pastures of Armenia. The Gegharkunik, Shirak, and Lori regions are the leaders in milk production, with 45.5% of the gross product (623.1 thousand tons in 2022). Armavir and Kotayk regions are specialized in egg production, and they account for 44.2% of the gross egg product (749.1 million units in 2022).

Figure 2

Gross product dynamics of horticulture according to individual regions of RA, at current prices, AMD. Source: The publications of RA Statistical Committee.

Figure 3

Gross product dynamics of animal husbandry according to individual regions of RA, at current prices, AMD. Source: The publications of RA Statistical Committee.

Climate change [36,37], the adverse effects of COVID-19, and the recent Russian–Ukrainian war [38] have exacerbated the issues of food security in Armenia. By possessing huge land, labor, material, and natural resources, the management of intensive agriculture becomes the primary force in the path of food security and sustainable development. The practicing of intensive agriculture, the effective use of resources, and the increase in production efficiency are largely determined by the choice of economically justified specialization of organizations and the rational spatial distribution of agriculture subsectors. The diversity of subsectors and agriproducts, the large set of applied production means and technologies, the consequences, and effects of climatic conditions, low profitability, and constantly changing market supply and demand make agricultural specialization difficult to model in Armenia. Under the impact of various socio-economic factors, the specialization of agricultural zones has changed noticeably [39]. The Government has put the problem of the rational combination of agricultural subsectors and the directions of specialization in regions as the basis of the long-term planning of agriculture and food security (the preferred directions of specialization of regions are outlined in the Government’s Decision No. 1476-N, dated 04.11.2010) [40]. In addition, the Government developed “the 2020–2030 strategy of the main directions for the economic development of the agricultural sector,” where a complex of measures is presented to solve the proposed problems and issues of increasing exports, human and institutional capacity development, transition to digital agriculture, and rural community development. The planned actions and measures will directly affect every economic activity of the agro-industrial complex. Studies show that agri-food products’ export is a driving force for further development and extended production [41]. Nevertheless, digitalization is another objective reality affecting rural development [42,43], structural changes in labor [44], etc. According to the implementation schedule, some of the measures have already been implemented and have a particular impact on the production activities of those engaged in agriculture, and others are in progress [45].

5 Results of expert evaluation of PESTLE factors

The evaluation and rating of PESTLE factors are presented in detail in Table 2.

As a result of the evaluation by experts and authors, weighted coefficients were calculated and the state measures were classified according to their impact and priority of implementation (Table 3).

6 Policy implications and recommendations

The practical policy implications of the results and agriculture specialization modeling for Armenia are summed up in Table 4, a sequence of measures was proposed for the factors according to their assessed priority, the implementation of which will ensure the results planned by the agricultural development strategy.

7 Conclusion

This study investigates the key drivers of agricultural specialization in Armenia using the PESTLE framework combined with a weighted scoring approach. This methodology provides a systematic analysis of macro-environmental influences on regional specialization trends. The expert assessment adds depth to the analysis by incorporating sector-specific insights, enhancing both the credibility and policy relevance of the findings. The results show the strong influence of technological and economic factors, particularly in relation to pedigree farm support programs, agricultural insurance schemes, and quality seed certification. Beyond these dominant drivers, the study identifies legal and environmental elements, such as land registration, organic farming development, and the regulation of unused lands as areas with untapped potential to boost productivity and long-term sustainability. Although underutilized in Armenia, these factors could significantly contribute to more resilient agricultural systems. The study underscores the close link between agricultural specialization, national food balance, and economic security. Farm production structures are a key determinant of both.

While Armenia has introduced various support programs benefiting households and agribusinesses alike, specialization decisions are largely driven by market profitability. This often leads to the neglect of less profitable, yet strategically important, crops or livestock that are vital for national self-sufficiency. In this context, state policy must intervene to align market-driven specialization with broader food security and sustainability goals. A substantial amount of literature [46,47,48,49,50] affirms the critical role of public policy in guiding sustainable agricultural practices.

To address the discussed issues, the study proposes launching a “Support Program for Agricultural Zonal Specialization.” This initiative would provide targeted subsidies to promote production activities adapted to regional climatic conditions, as defined by Armenia’s Ministry of Economy. By encouraging the production of food products with low self-sufficiency and supporting underrepresented crops, the program would contribute to a more balanced national food portfolio. Tailoring specialization models to specific regions and ensuring implementation through state support would improve planning accuracy, forecasting, and overall food security. This model aims to enhance the diversity, quality, and quantity of agricultural outputs, improving Armenia’s competitiveness both locally and internationally. Aligning production with local environmental conditions ensures more efficient resource use, supports traditional farming branches, and contributes to the achievement of the SDGs.

The study also highlights the potential risks and trade-offs of specialization. While it can improve productivity, reduce costs, and boost competitiveness, it also introduces ecological and socio-economic vulnerabilities. Monocultures increase the risk of pest outbreaks, disease spread [51], and climate-related shocks [52]. Overdependence on a narrow range of outputs can undermine biodiversity, degrade soil quality [12], and expose producers to global market volatility. Specialization may also favor large-scale, capital-intensive farming, marginalizing smallholders [53] and deepening regional disparities [54]. Additionally, it can reduce farming system adaptability, making it harder to respond to shifting demands or environmental stressors [20,55]. Armenia’s susceptibility to external shocks, such as regional conflicts and disrupted trade routes, adds to these concerns. Therefore, while specialization offers significant benefits, it must be accompanied by robust risk management. Recommended strategies include crop rotation, diversification, and capacity-building at both farm and policy levels. Policymakers should strive for a balanced approach that encourages efficient specialization without compromising sectoral resilience, equity, or sustainability.

Several limitations of this study must be noted. First, the expert sample was limited to six individuals due to time and availability constraints. A broader pool would enhance the reliability of the results. Second, the analysis assumes full implementation of proposed policies, which may not reflect real-world institutional, financial, or administrative barriers. Third, the study does not model future disruptions such as climate shocks, geopolitical tensions, or global price volatility all of which could reshape specialization dynamics. Despite these constraints, the study provides a solid foundation for further research and policy formulation. Future research could build on this framework by incorporating community-level data or using simulation models to explore adaptive responses under different policy and uncertainty scenarios.