• Category
  • >Business Analytics

What is PESTLE Analysis? Everything you need to know about it

  • Ritesh Pathak
  • Dec 06, 2020
  • Updated on: Feb 15, 2021
What is PESTLE Analysis? Everything you need to know about it title banner

In today’s world, we have so many examples of successful organizations before us. From small startups to bigger firms, every organization is focused on improving and heading ahead. Different tools are leveraged by them for this purpose. The competition has become so fierce in the market that every single decision can change the whole dynamics- either negatively or positively.

 

It becomes necessary for organizations to keep a check on each decision making which in turn aids them in sustaining through the blows of market fluctuations. 

 

Since we are living in a ‘global village’, everything happening around us leaves an impact on us. The same goes for an organization. Generally, in marketing theory, we separate a micro and macroeconomic business environment, with the micro environment primarily being the internal factors affecting a specific industry, that includes the stakeholders and competitors of a particular firm and the macro environment being the external factors influencing a firm, factors which it cannot control. 
 

 

It is not only internal matters that decide a company’s fate, but many external factors also make an equal impact. The political situation in a country, technological developments, environmental factors, the legality of actions, economics, social factors, all play an important role. Organizations are well-aware of this fact, so they leverage an economic tool- PESTLE analysis. 

 

 

In this blog, we will discuss this same tool. We will discuss everything about PESTLE analysis. What does it mean? What are those different factors? How to do a PESTLE analysis? What are its advantages and disadvantages? What is it used for? 

 

 

Read our blog 8 Most Popular Business Analysis Techniques used by Business Analyst

 

 

What is PESTLE Analysis?

 

PESTLE analysis sometimes referred to as PEST analysis, is a concept in marketing principles. This concept is used as a tool by organizations to keep a track of the external factors impacting the organization. PESTLE is a mnemonic which in its expanded form denotes P for Political, E for Economic, S for Social, T for Technological, L for Legal, and E for Environmental. On the basis of the organization, it can be reduced to PEST or additional areas can be added (such as Ethical).

 

PESTLE analysis forms a much more comprehensive version of the SWOT analysis. This form of analysis is then compared with the company’s internal strengths and weaknesses via a SWOT analysis. This aids in determining the future scope of action and in developing measures for strategic management.

 

 

Why is PESTLE analysis used? 

 

Businessmen and entrepreneurs often turn towards business analysis tools for aiding them in making suitable decisions for their firm. Before any business venture, the business owners often remain doubtful regarding its outcome and how it would be received.  Pestle analysis is adopted for determining an answer to these questions.  This analysis involves asking questions that give the analyst an idea about the things to keep in mind. These questions are: 

 

  • What is the political situation of a country and what is its effect on the markets?

  • What are the prevalent economic factors? 

  • How is culture affecting the markets and what are its determinants?

  • What are the technological inventions that are trending and what are other future possibilities in this field?

  • What are the current legislations that regulate the industry and if they need to be changed?

  • What are the environmental concerns for the industry? 

 

Analysts find answers to these questions and try to cover all the aspects through this analysis. The PESTLE analysis is more than just understanding the market. This framework represents one of the backbones of strategic management by not only defining what a company should do but also accounting for an organization’s goals and the strategies strung to them.

 

 

Factors of PESTLE Analysis

 

Each of the factors mentioned above, from Political, Economic, Social, Technological, Legal to Environmental, have an impact on an organization. Yet the significance of each of these factors may differ based on the different kinds of industries.

 

 

1. Political factors in PESTLE Analysis

 

Political factors include tax policy, environmental regulations, trade restrictions and reform, tariffs, and also political stability. These factors determine the extent to which a government may influence an industry or a company. For example, the government may bring new tax reforms that might change the whole revenue-generating system of a company.

 

Some tariff trade barriers that can prove to be a hindrance in the way we run our business operations include customs policy and export subsidies. Non-tariff trade barriers meanwhile include determining minimum import prices as well as bans and restrictions on exports.

 

 

2. Economic factors in PESTLE Analysis 

 

Economic factors include economic growth/decline, interest, exchange, inflation and wage rates, minimum wage, working hours, unemployment (local and national), credit availability, and cost of living. These factors are determinants to an economy’s performance that directly impacts a company and also have resonating long term effects.

 

For example, a rise in the inflation rate of any economy would affect the way companies price their products and services. Besides, it would also affect the purchasing power of a consumer and may result in a change in demand/supply models for that economy.

 

You can also take a look at our blog on 4 Ps of Marketing.

 

 

3. Social factors in PESTLE Analysis

 

Social factors include cultural norms and expectations, health consciousness, population growth rates, age distribution, career attitudes, health, and safety. These factors are helpful for companies to better plan their marketing analytics and strategy. For example, the Indian market generally witnesses a surge in demands for vehicles during the last months of the year, due to marriage and the festive season. 

 

These factors are particularly significant for marketers as they target certain customers. Additionally, they also highlight the local workforce and its zeal to operate under certain circumstances.

 


From Political factors, economic factors, social factors, technological factors, legal factors to environmental factors, the PESTLE analysis comprises each of these factors.

The factors of PESTLE Analysis


 

4. Technological factors in PESTLE Analysis

 

Technological factors mean the innovations and developments in technologies. These factors impact an organization’s operations. Several new developments like Artificial Intelligence, IoT, Machine Learning, Deep Learning, are being made in the technology field and if a company fails to match up the trend it may lose its position in the market.  

 

A few of the technological factors which are included in the PESTLE analysis include the rate of technological change, the evolution of infrastructure, and any government or institutional research. 

 

 

5. Legal factors in PESTLE Analysis

 

Legal factors include changes to legislation impacting employment, access to materials, quotas, resources, imports/exports, and taxation. These factors have both external and internal sides. Certain laws have an impact on the business environment in a country.

 

Apart from these laws/rules, companies maintain their own set of rules and regulations by which an employee is expected to abide by. So, the legal analysis takes accounts of both these angles and forms strategies keeping them in mind.

Recommended blog - AI in the law industry.

 

 

6. Environmental factors in PESTLE Analysis

 

These factors are mainly concerned with the effect of the surrounding environment and the influence of ecological aspects. These include waste disposal laws, environmental protection laws, energy consumption regulation.

 

This aspect of the PESTLE is crucial for certain industries particularly example tourism, farming, agriculture, etc. However, Global warming and the increased need to switch to sustainable resources; ethical sourcing (both locally and nationally, including supply chain intelligence) have compelled every organization to consider the environmental factors. Corporate Social Responsibility (CSR) has been made compulsory for organizations. 

 

Also Read: Dark side of Information Technology (IT) industry

 

 

How to do a PESTLE Analysis

 

Conducting a PESTLE Analysis involves some steps which we have mentioned below:

 

  • Identify the scope of the research. It should cover the present and the future scenarios. It should apply to the areas of the business world where the particular organization operates. 

  • Form a good team and assign responsibilities accordingly. Involving diverse people helps in collecting content-rich data. 

  • Identify appropriate sources of information. These may include people seeking professional help regarding an issue or a change/update in current policy. 

  • Gather and assemble the information. Better create a template as the basis for recording the information. 

  • Analyzing the collected information is a significant step. 

  • Create an order of the issues to be addressed. Try to resolve the issue, that can create a big impact, at the earliest.

  • Identify the business-specific options to address the issues.

  • Create a well-informing document for all the stakeholders

  • Disseminate and discuss the findings with stakeholders and decision-makers

  • Decide on the actions to be taken and trends that need to be monitored on an ongoing basis

 

To be effective, organizations must perform PESTLE analysis on an ongoing or regular basis. Organizations that do so enjoy a competitive advantage as they spot trends before others. 

 


 

What is a PESTLE Analysis used for?

 

A PESTLE analysis is often used as a broad fact-finding activity. It helps an organization establish the external factors that could impact decisions made inside the organization. By understanding the impact these external factors can have on an organization, it becomes handy for organizations to plan better. They can form strategies to minimize the threats and maximize opportunities for themselves. 

 


Uses of PESTLE Analysis


 

A PESTLE analysis is an appropriate framework that fulfills these purposes. Apart from that, it also helps organizations in a range of business planning situations. These include:

 

1. Strategic business planning

 

A PESTLE analysis report is a useful document to have by your side when starting a business planning process. It provides the senior management team with loads of contextual information about the company like the direction in which the business is heading, brand positioning, growth targets, and the areas of concern that may lead to a decline in growth and productivity.

 

 

2. Workforce Planning

 

Workforce planning is a business process that aligns business and people strategies. A PESTLE analysis helps businesses to identify disruptive changes to business models that may have a profound impact on the future employment landscape. Organizations are facing huge changes in their workforce from increased skills gaps, the creation of job roles that did not exist 10 years ago like the IT department, and job reductions or displacement. 

 

 

3. Marketing Planning

 

As PESTLE analysis brings a lot of information on external factors, it also brings crucial market insights. So, it can help prioritize business activities to accomplish specific marketing objectives within a set timeframe. 

You can also sneak a peek at our blog on Marketing Analytics tools

 

4. Product development

 

As mentioned above, a PESTLE analysis also has crucial market insights that tell about the response from customers about a product or service. This helps businesses to decide on whether to enter or leave a route, modify an existing product, and when and what to launch as a new product. 

 

 

5. Organizational Change

 

A PESTLE analysis is a powerful tool for understanding the context for change, and focusing on the areas to make that change successful. In this situation, PESTLE analysis works best with a SWOT analysis. This helps an organization to identify the potential opportunities and threats around labor changes, for example, skill shortage and workforce capabilities. 

 

 

Advantages and Disadvantages of a PESTLE Analysis

 

Everything has both aspects and so does a PESTLE Analysis. Let us look at the advantages as well as the disadvantages of it. 

 

Advantages

 

  • It is a simple framework- easy to understand and conduct

  • It facilitates a better and broader understanding of the business environment.

  • It encourages organizations to develop external and strategic thinking

  • The most talked advantage- it enables an organization to anticipate future business threats and allows it to minimize or nullify the impact

  • It also allows organizations to spot an opportunity and to capitalize on them

 

Disadvantages

 

  • Some PESTLE analysis users oversimplify the amount of data used for decisions – it’s easy to use insufficient data.

  • It’s easy to get lost in the enormous amount of data. So, there always remains a risk of capturing too much data and undertaking too much data analytics that may lead to ‘paralysis by analysis’

  • As a PESTLE analysis works on assumptions, there remains a risk of being wrong

  • Once in a while an attitude doesn’t work with PESTLE analysis. So, it must be a regular practice.

  • The pace of change makes it difficult to anticipate the developments and this may affect the organization in future

 

 

Conclusion

 

It can be stated that PESTLE analysis is a great tool for businesses that can be leveraged for several purposes. It brings information about the possible impact of the six external factors on an organization. This makes it easier for organizations to prepare for any sort of problems caused by these PESTLE factors.

Latest Comments

  • cindybyrd547

    Dec 05, 2022

    I just wanted to thank you for casting the love spell from the bottom of your heart. My husband who left me for a young girl of 21 years old is back begging me to accept him back, he left me and our 2 kids to go be with this young flirt. well I love my husband so much that I couldn´t handle him leave me and our kids. So i used a psychic love spell to bring him back..Thanks to Dr.Excellent. If you are recently broken, don’t feel lost. You can win him or her back again, and this is relatively easier than what you think. contact Dr.Excellent for help now..Here his contact. Write him on Whats-app: +2348084273514 , Email him at: Excellentspellcaster@gmail.com Here his Website:https://drexcellentspellcaster.godaddysites.com

  • cindybyrd547

    Dec 05, 2022

    I just wanted to thank you for casting the love spell from the bottom of your heart. My husband who left me for a young girl of 21 years old is back begging me to accept him back, he left me and our 2 kids to go be with this young flirt. well I love my husband so much that I couldn´t handle him leave me and our kids. So i used a psychic love spell to bring him back..Thanks to Dr.Excellent. If you are recently broken, don’t feel lost. You can win him or her back again, and this is relatively easier than what you think. contact Dr.Excellent for help now..Here his contact. Write him on Whats-app: +2348084273514 , Email him at: Excellentspellcaster@gmail.com Here his Website:https://drexcellentspellcaster.godaddysites.com

  • Natasha Thompson

    Dec 05, 2022

    My name is Natasha Thompson from the USA/Texas.. Am so overwhelmed with gratitude to let the world know how Dr Kachi, the great spell caster changed my life for good. It all started when I lost my job and I was down financially and emotionally because I couldn’t be able provide for my two kids and staying home all day Jobless it’s not easy until I was checking on the internet when I saw a series of testimonies hearing people winning the Powerball lottery, I didn’t believed, but being poor no job you have no option. I gave it a try and I contacted Dr Kachi who told me what i have to do before I can become a big lottery winner and I accepted. He made special prayers for me in his temple and gave me the required numbers to play the lottery game and when I used the numbers to play it, I won a massive $344.6 million Powerball jackpot. I was so happy and I choose to review my winning in any platform, I would love other people to seek help from Dr Kachi through Text and Call: +1 (209) 893-8075 or email drkachispellcast@gmail.com by his website: https://drkachispellcast.wixsite.com/my-site

  • Natasha Thompson

    Dec 05, 2022

    My name is Natasha Thompson from the USA/Texas.. Am so overwhelmed with gratitude to let the world know how Dr Kachi, the great spell caster changed my life for good. It all started when I lost my job and I was down financially and emotionally because I couldn’t be able provide for my two kids and staying home all day Jobless it’s not easy until I was checking on the internet when I saw a series of testimonies hearing people winning the Powerball lottery, I didn’t believed, but being poor no job you have no option. I gave it a try and I contacted Dr Kachi who told me what i have to do before I can become a big lottery winner and I accepted. He made special prayers for me in his temple and gave me the required numbers to play the lottery game and when I used the numbers to play it, I won a massive $344.6 million Powerball jackpot. I was so happy and I choose to review my winning in any platform, I would love other people to seek help from Dr Kachi through Text and Call: +1 (209) 893-8075 or email drkachispellcast@gmail.com by his website: https://drkachispellcast.wixsite.com/my-site

  • cindybyrd547

    Dec 06, 2022

    I just wanted to thank you for casting the love spell from the bottom of your heart. My husband who left me for a young girl of 21 years old is back begging me to accept him back, he left me and our 2 kids to go be with this young flirt. well I love my husband so much that I couldn´t handle him leave me and our kids. So i used a psychic love spell to bring him back..Thanks to Dr.Excellent. If you are recently broken, don’t feel lost. You can win him or her back again, and this is relatively easier than what you think. contact Dr.Excellent for help now..Here his contact. Write him on Whats-app: +2348084273514 , Email him at: Excellentspellcaster@gmail.com Here his Website:https://drexcellentspellcaster.godaddysites.com

  • cindybyrd547

    Dec 06, 2022

    Fix your marriages or relationships problems now and I suggest you contact Dr.Excellent He brought back my Ex-boyfriend. My boyfriend left me and I was devastated. The most painful thing is that I was pregnant for him. I wanted him back. I did everything within my reach to bring him back but all was in vain, I wanted him back so badly because of the love I had for him, I begged him with everything, I made promises but he refused. I explained my problem to my sister and she suggested that I should rather contact a spell caster that could help me cast a spell to bring him back , I had no choice than to try it. I messaged the spell caster called Dr.Excellent, and he assured me there was no problem and that everything will be okay before 28hours. He cast the spell and surprisingly 28 hours later my boyfriend called me. It was so surprising, I answered the call and all he said was that he was so sorry for everything that had happened He wanted us to come back together. He also said he loved me so much. I was so happy and went to him that was how we started living together happily again.thanks to Dr.Excellent . if you are here and your Lover is turning you down, or your boyfriend moved to another girl, do not cry anymore, contact Dr.Excellent for help now..Here his contact. WhatsApp: +2348084273514 ,Email: Excellentspellcaster@gmail.com Website:https://drexcellentspellcaster.godaddysites.com

  • evelynryan2022

    Dec 06, 2022

    GET RICH WITH BLANK ATM CARD, Whatsapp: +18033921735 I want to testify about Dark Web blank atm cards which can withdraw money from any atm machines around the world. I was very poor before and have no job. I saw so many testimony about how Dark Web Cyber hackers send them the atm blank card and use it to collect money in any atm machine and become rich. {DARKWEBONLINEHACKERS@GMAIL.COM} I email them also and they sent me the blank atm card. I have use it to get 500,000 dollars. withdraw the maximum of 5,000 USD daily. Dark Web is giving out the card just to help the poor. Hack and take money directly from any atm machine vault with the use of atm programmed card which runs in automatic mode. You can also contact them for the service below * Western Union/MoneyGram Transfer * Bank Transfer * PayPal / Skrill Transfer * Crypto Mining * CashApp Transfer * Bitcoin Loans * Recover Stolen/Missing Crypto/Funds/Assets Email: darkwebonlinehackers@gmail.com Text & Call or WhatsApp: +18033921735 Website: https://darkwebonlinehackers.com

  • evelynryan2022

    Dec 06, 2022

    GET RICH WITH BLANK ATM CARD, Whatsapp: +18033921735 I want to testify about Dark Web blank atm cards which can withdraw money from any atm machines around the world. I was very poor before and have no job. I saw so many testimony about how Dark Web Cyber hackers send them the atm blank card and use it to collect money in any atm machine and become rich. {DARKWEBONLINEHACKERS@GMAIL.COM} I email them also and they sent me the blank atm card. I have use it to get 500,000 dollars. withdraw the maximum of 5,000 USD daily. Dark Web is giving out the card just to help the poor. Hack and take money directly from any atm machine vault with the use of atm programmed card which runs in automatic mode. You can also contact them for the service below * Western Union/MoneyGram Transfer * Bank Transfer * PayPal / Skrill Transfer * Crypto Mining * CashApp Transfer * Bitcoin Loans * Recover Stolen/Missing Crypto/Funds/Assets Email: darkwebonlinehackers@gmail.com Text & Call or WhatsApp: +18033921735 Website: https://darkwebonlinehackers.com

  • melissa levy

    Dec 06, 2022

    I lost my Job few months ago,my wife left me ,could not get income for my family, things was so tough and I couldn't get anything for my children, not until a met a recommendation on a page writing how Mr Bernie Wilfred helped a lady in getting a huge amount of profit every 6 working days on trading with his management on the cryptocurrency Market, to be honest I never believe it but I took the risk to take a loan of $1000. and I contacted him unbelievable and I was so happy I earn $12,500 in 6 working days, the most joy is that I can now take care of my family I don't know how to appreciate your good work Mr. Bernie Doran God will continue to bless you for being a life saver I have no way to appreciate you than to tell people about your good services.
For a perfect investment and good strategies contact Mr Bernie Doran via WhatsApp :+1(424)285-0682 or Telegram : @Bernie_fx or Gmail : Bernie.doranfx01@gmail.com

  • alima22jane

    Dec 07, 2022

    I have hard read many testimonies about DR WINNER spell caster how he has help many people of relationships issues, power-ball, Mega millions and I contacted him and it doesn't take much time that he help me cast his spell and gave me the winning numbers to play and assure me that I will win the powerball jackpot and all that he said came to pass and today I'm rich through his spell he used to help me win the jackpot. If you have ever spent money on any spell caster and couldn't see any results.... EMAIL him now: (Winnersspellcast@gmail.com) this is the only way to win the lottery and the best way via his website:https://winnersspellcast.blogspot.com Call or text him: +2348138289852 or via his Facebook Page 👇👇 https://www.facebook.com/drwinnerspelltemple/