The PESTEL Analysis: A Complete Cheat Sheet

No, no, not pesto…PESTEL! It’s a marketing tool to analyze the environment and its factors surrounding your business. How is it different from a SWOT analysis? Well, the PESTEL is a more extensive and in-depth version, going into details for each factors. This tool is key to understanding the macro environment that your business operates in and to get a bigger picture. So what does it stand for?

P for Political

The political factors influencing your business are mainly the way the Government will influence the industry or economy. For example, the Government may create a new tax policy or trade tariffs on specific imported products. It may also be the shareholders and their demand that will affect your business.

E for Economic

This factor is all about $$$. The economic factors influence the overall economy, which has a direct impact on your business in both long-term or short-term. Let me explain. If the economy is undergoing a quick rise in inflation rate or a recession, this will affect the purchasing power of consumers, which may lead in a reduction of your sales potential. This section also includes change in interest rates, economic growth patterns, exchange rates, etc.

S for Social

Did you know that the most health-conscious group of consumers are the generation Z (people under the age of 20)? The social factor is about PEOPLE! The social environment, which can include demographics, cultural trends, or population analytics, has a major impact on your business. For example, the cultural trend of health consciousness will definitely affect positively a vegan ready-to-eat meal business. On the other hand, an ageing population (which in turn is generally more traditional) may not be profitable for your food innovation business.

T for Technological

Have you heard about the recent 3D food printing? It’s an example of the technological development that can surround your business and potentially affect it. How does technology and innovations affect your business? It can include everything related to automation, research and development, technological advancements. Does the creation of a new app directly affects your business’ functioning? How does the increase in app users affect you? Is there a new machine on the market that’ll help you cook, experiment or create your products? This part is all about considering the (potential) technology surrounding your business, and how it’ll impact it.

E for Environmental

Everything from climate changes, to weather, to geographical location. How do these factors influence your business? For example, a business that depends a lot on agricultural products might have climate change as an important factor influencing his business. Similarly, poor weather might be a factor to consider, as it’ll affect the sales of a food truck business.

L for Legal

This factor includes both the internal and external laws or policies that affect the business’ functioning. For example, at The FoodRoom, we require that members obtain their MAPAQ certification and food handling certificate before using our facilities. Similarly, there may be certifications that you must obtain to have certified organic food.

Now, what’s important to note is that not all components must be filled out, as it’ll depend on your business. For example, a catering business with no website will not (or barely) have to fill out the technological factors of the PESTEL analysis. Similarly, a vegan ready-to-eat meal business might not have anything in relation to the Environmental factors for its PESTEL analysis.

You’re all set! Go and research your business’ macro environmental factors now and become an expert. After, you’ll be ready for all these factors coming for your business!

How to make a template for your PESTEL analysis:http://pestleanalysis.com/how-to-create-pestle-analysis-template/

More information on the PESTEL analysis of your business:http://pestleanalysis.com/what-is-pestle-analysis/