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PESTLE Analysis

A PESTLE (PESTEL, or its shorter form PEST) analysis is a framework or tool used by marketers to analyse and monitor the macro-environmental (external marketing environment) factors that have an impact on an organisation. The result of which is used to identify threats and weaknesses which is used in a SWOT analysis.

The PESTLE framework is designed to provide managers with an analytical tool to identify different macro-environmental factors that may affect business strategies, and to assess how different environmental factors may influence business performance now and in the future.

It includes six types of important environmental influences: political, economic, social, technological, environmental and legal. These factors should not be seen as independent factors. Factors such as technological advances may probably affect the social and economic conditions in different markets.

Below, some characteristics in each environmental factor are listed, which may give business managers guidance to, which factors may be of importance to a company's strategy. The list is however far from complete, and it only gives managers some preliminary inspiration to, which factors may be of relevance for handling business strategies. Many factors that are not included below, may have an effect on business success, and each company must evaluate for themselves, which key drivers of change will potentially have strategic and competitive consequences.

Political factors

· Stability of government

· Social policies

· Trade regulations

· Tax policies

· Entry mode regulations

Economic factors

· Disposable income of buyers

· Credit accessibility

· Unemployment rates

· Interest rates

· Inflation

Social Factors

· Population demographics

· Distribution of Wealth

· Changes in lifestyles and trends

· Educational levels

Technological factors

· New innovations and discoveries

· Pace of technological innovations and advances

· Pace of technological obsolescence

· New technological platforms

Legal factors

· Employment regulations

· Competitive regulations

· Health and safety regulations

· Product regulations

Environmental factors

· Environmental protection laws

· Waste disposal laws

· Energy consumption regulation

· Popular attitude towards the environment

The key for business managers is therefore to discover the main drivers of change that may affect business strategies, and to discover the factors most likely to influence the performance of the business.

In conducting a PESTLE analysis, business managers may create strategies that take several macro-environmental factors into consideration, so that the strategy formulation process will be as sensitive to current and future environmental factors as possible.

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