Scanning the Environment: PESTEL Analysis

A framework or methodology called a PESTEL analysis or PESTLE analysis (formerly known as a PEST analysis) is used to analyse and track the macro-environmental elements that might have a significant influence on the performance of an organization. When launching a new firm or expanding into a foreign market, this tool is extremely helpful. In order to provide a thorough knowledge of a scenario and associated internal and external aspects, it is often used in conjunction with other analytical business tools like the SWOT analysis and Porter’s Five Forces. Political, Economic, Social, Technological, Environmental, and Legal elements are referred to by the abbreviation PESTEL. However, throughout time, individuals have modified the framework to include elements like demographics, interculturality, ethics, and the environment, leading to versions like STEEPLED, DESTEP, and SLEPIT. We shall just discuss PESTEL in this post since it covers the majority of the important aspects of general business. Below, each aspect will be further explained:

 

Political Factors:

All of these variables have to do with how and to what extent the government interferes with the economy or a particular sector. Essentially, this category might include all of the effects that a government may have on your firm. Government policy, political stability or instability, corruption, tax policy, labour legislation, environmental law, and trade restrictions are a few examples of these. The government may also have a significant influence on a country’s infrastructure, health laws, and educational system. When determining if a prospective market is appealing, all of these considerations must be considered.

Economic Factors:

The performance of a particular economy is determined by economic considerations. Economic growth, currency rates, inflation rates, interest rates, consumer disposable income, and unemployment rates are among the variables. Since these variables influence consumer buying power and may alter demand and supply patterns in the economy, they may have a long-term direct or indirect effect on a firm. As a result, it has an impact on how much businesses charge for their goods and services.

Social Factors:

The demographic traits, norms, practises, and values of the community in which the organisation works are represented by this aspect of the general environment. This includes demographic trends including the pace of population growth, age and income distributions, attitudes toward careers, a focus on safety, a concern for health, a lifestyle focused on convenience, and cultural obstacles. When marketing to specific clients, these criteria are very crucial. It also reveals something about the local workforce’s readiness to labour under certain circumstances.

Technological Factors:

These elements relate to technological advancements that might have a positive or negative impact on how the market and industry operate. The level of innovation, automation, research and development (R&D) activity, technical change, and the degree of technological awareness that a market has are all mentioned here. These elements might have an impact on choices on whether to join specific sectors, introduce certain goods, or outsource manufacturing to other countries. You may be able to save your business from spending a lot of money on a technology that would be quickly rendered outdated due to disruptive technological advancements elsewhere if you are aware of what is happening in the world of technology.

Environmental Factors:

Only very lately have environmental variables gained prominence. They have gained significance as a result of rising raw material shortages, government-set pollution objectives, and carbon footprint targets. The ecological and environmental components of these variables, such as weather, climate, environmental offsets, and climate change, may have a particular impact on certain businesses, including tourism, farming, agriculture, and insurance. In addition, the way businesses run and the goods they sell are changing as more people become aware of the possible effects of climate change. As a result, many businesses are becoming more interested in concepts like corporate social responsibility (CSR) and sustainability.

Legal Factors:

These considerations include more specific laws including discrimination laws, antitrust laws, employment laws, consumer protection laws, copyright and patent laws, and health and safety regulations, however there may be some overlap with the political considerations. It is obvious that for businesses to conduct profitable and moral business, they must understand what is and is not lawful. Since every nation has its own set of laws and regulations, this becomes particularly challenging for businesses that do international business. You should also be informed of any prospective legislative changes and how they can affect your company in the future. It is advised that you seek the assistance of a lawyer or legal counsel for this kind of activity.

Also Read: Porter’s Diamond Model: Why Some Nations Are Competitive and Others Are Not 

PESTEL Analysis in Sum

Only a few instances of common external issues that businesses may wish to consider are included in this article. Undoubtedly, there are a lot more variables that might affect a certain firm. Additionally, the importance of certain elements varies greatly across nations and industries. For instance, compared to the oil or automobile industries, the software sector may have less to do with environmental and ecological concerns. Several websites, like tradingeconomics.com, theglobaleconomy.com, data.oecd.org, and data.worldbank.org, include a wealth of information on the aforementioned topics.

Performing a PESTEL Analysis in PowerPoint

Using a PowerPoint framework in which the six PESTEL categories and associated variables are displayed graphically is a wonderful method to present a PESTEL Analysis for a school project or job assignment. An example of a format that may be utilized in a PowerPoint presentation is shown below. There is space to highlight one or more PESTEL elements for each PESTEL category and state whether they have a favourable or unfavourable impact on the focus firm (and to what degree). If you want to use this PowerPoint template for your project and would want to help out our website a little, you can buy it from our shop by clicking here. I wish you success on your task!

Resources for a PESTEL Analysis

Websites of open companies. Do a Google search for “investor relations” and the firm name. Links to annual reports, financial reports like 10-K, 10-Q, and 8-K, and corporate social responsibility reports are often included in this.

Business Source Complete (EBSCO)

The right side toolbar’s Country Publications section contains links to in-depth, recent reports that detail the PESTEL factors in various nations. Additionally, look for articles in magazines and journals on certain PESTEL variables in the nation as well as pieces about a firm and the sector it serves.

Nexis Uni

Lexis Nexis Academic has been replaced. Information on PESTEL factors is given for various nations. Select Publication on the landing page and, for instance, type “United States” and the date > 07/01/2016 into the search box. Start entering PRS Group Political in the Publication box, then click the Search button after selecting PRS Group Political Risk Service from the list that appears below the box.

When looking for articles on certain PESTEL variables, choose News rather than Publication.

To look for information on a particular firm, open the Business section and choose Company Dossier. The firm report will contain links to recent news items, court cases, and intellectual property as well as information about its brands and rivals.

IBISWorld

Reports on relevant industries; locate the one in which your business is active. The Products & Market – Demand Determinants section contains economic data. The Operating Conditions section contains information about technology and regulations.

Wall Street Journal

Available in ProQuest Global Newsstream from 1984 to the present.

New York Times

Available in ProQuest Global Newsstream from 1980 to the present.

US Newsstream

ProQuest. 300+ U.S. and worldwide news sources in their entirety.

Pew Research Center

a neutral fact-checking organization that looks at “US politics and policy, journalism and media, internet, science, and technology, religion, and public life, Hispanic trends, worldwide attitudes and trends, and US social and demographic trends.”

Pew Research Center Global Indicators Database

Pew Research Center conducts public opinion polls all around the globe on a variety of topics, including people’s opinions on their personal lives, the status of the world today, and significant problems of the day.

iPOLL (Roper Center)

500,000+ questions and responses on a broad variety of issues were compiled in a public opinion/polling database by the Roper Center for Public Opinion Research; the data spans the year’s 1935–present.

CQ Researcher Online (CQ Press)

A collection of articles addressing political and social concerns, including regular articles from 1991 to the present on the U.S. economy, health, foreign affairs, education, the environment, and technology.

data.census.gov

Data on the population, education, business, employment, health, housing, income and poverty, economy, families and living arrangements, and international commerce are available on the U.S. Census Bureau’s website.

Full list of PESTEL factors:

Political factors

• Government stability/instability
• Corruption level
• Tax policies
• Freedom of press
• Government regulation and deregulation
• Special tariffs
• Political action committees
• Government involvement in trade unions and agreements
• Competition regulation
• Voter participation rates
• Amount of government protests
• Defense expenditures
• Level of government subsidies
• Bilateral relationships
• Import-export regulation/resctrictions
• Trade control
• Lobbying activities
• Size of government budgets

Economic factors

• Growth rate
• Interest rate
• Inflation rate
• Exchange rate
• Availability of credit
• Level of disposible income
• Propensity of people to spend
• Federal government budget deficits
• Gross domestic product trend
• Unemployment trend
• Stock market trends
• Price fluctuations

Social factors

• Population size and growth rate
• Birth rates
• Death rates
• Number of mariages
• Number of divorces
• Immigration and emigration rates
• Life expectancy rates
• Age distribution
• Wealth distribution
• Social classes
• Per capita income
• Family size and structure
• Lifestyles
• Health consciousness
• Average disposable income
• Attitude towards government
• Attitude towards work
• Buying habits
• Ethical concerns
• Cultural norms and values
• Sex roles and distribution
• Religion and beliefs
• Racial equality
• Use of birth control
• Education level
• Minorities
• Crime levels
• Attitudes towards saving
• Attitude towards investing
• Attitudes towards retirement
• Attitudes towards leisure time
• Attitudes towards product quality
• Attitudes towards customer service
• Attitudes towards foreign people

Technological factors

• Technology incentives
• Automation
• R&D activity
• Technological change
• Access to new technology
• Level of innovation
• Technological awareness
• Internet infrastructure
• Communication infrastructure
• Life cycle of technology

Environmental factors

• Weather
• Climate
• Environmental policies
• Climate change
• Pressures from NGO’s
• Natural disasters
• Air and water pollution
• Recycling standards
• Attitudes towards green products
• Support for renewable energy

Legal factors

• Discrimination laws
• Antitrust laws
• Employment laws
• Consumer protection laws
• Copyright and patent laws
• Health and safety laws
• Education laws
• Consumer protection laws
• Data protection laws