PESTEL ANALYSIS
Pestel analysis is a tool to analyze the impact of external marketing factors on an organisation. This tool is mostly used before making a decision to enter a new market and is mostly used by the marketing department. Can also be used with Swot analysis and Porter’s 5 forces model.
Political Factors:
- Is the political environment stable, or changeable?
- When is the country’s next local, state, or national elections? How does this affect success ?
- Is it accepted to follow with the rules of law? What is the crime rate?
- Could any pending legislation or tax changes affect your business positively or negatively?
- How will business regulation, along with any planned changes, affect your business? And is there a trend towards regulation or deregulation?
- How customer protection legislation is apply by the goverment?
- What is the possible timeline for the proposed legislative changes?
- Are there other political factors that could change?
Economic Factors:
· What economic factors will affect us in the future?
· How does the performance of the economy affect us right now?
· How are our prices, income, and costs affected by each economic factor?
· How stable is the current economy? Is it growing, stable, or declining?
· Are the exchange rates stable, or do they vary significantly?
· Are customers’ disposable income levels rising or falling?
· What is the unemployment rate? What is a skilled workforce rate?
· Do consumers and businesses have easy access to credit? How will this affect your organization?
· How is globalization affecting the economic environment?
· What are the other economic factors?
· Do we operate on a budget? Is it realistic? Does it give us enough flex to try things?
· Has demand for our products services grown / shrank / stayed the same?
Social Factors:
- What is the beliefs and values of their customers? How it affects their buying habits?
- How do cultural trends and human behavior play a role in our business?
- What are the population growth rate and age profile? How likely is this to change?
- What are the rate of generation change and its characteristics?
- What are the levels of health, education, and social mobility in your society?
- What social attitudes and taboos could affect the business?
- How do religious beliefs and lifestyle choices affect the population?
Technological Factors:
- What are the current technological developments and innovations
- How will this technology impact our operations?
- Is there any new technology for our business? Do competitors know this technology?
- How have infrastructure changes affected work patterns (for example, levels of remote work)?
- Are there existing tech hubs you could work with or learn from?
- Are there other technology factors I should consider?
- How well do we use technology?
- What can we learn from the data we collect?
Environment Factors:
- How are environmental policies practices?
- Are there any current environmental programs in this country?
Legal Factors:
- How are we impacted by changes to legislation and regulation?
- Do we know about data protection laws?
*Ethical Factors:
The most recent addition to PESTEL is the extra E — making it PESTELE. This factor includes ethical principles and moral or ethical problems in a business. For example; fair trade, slavery acts and child labour. And also denotes situations involving philanthropy and volunteerism.
How to do Pestel Analysis?
1. Identify political factors that could impact your business.
o Government stability/instability
o Corruption level
o Tax policies
o Freedom of press
o Government regulation and deregulation
o Special tariffs
o Political action committees
o Government involvement in trade unions and agreements
o Competition regulation
o Voter participation rates
o Amount of government protests
o Defense expenditures
o Level of government subsidies
o Bilateral relationships
o Import-export regulation/resctrictions
o Trade control
o Lobbying activities
o Size of government budgets
2. Identify economics factors that could impact your business.
o Growth rate
o Interest rate
o Inflation rate
o Exchange rate
o Availability of credit
o Level of disposible income
o Propensity of people to spend
o Federal government budget deficits
o Gross domestic product trend
o Unemployment trend
o Stock market trends
o Price fluctuations
3. Identify social factors that could impact your business.
o Population size and growth rate
o Birth rates
o Death rates
o Number of mariages
o Number of divorces
o Immigration and emigration rates
o Life expectancy rates
o Age distribution
o Wealth distribution
o Social classes
o Per capita income
o Family size and structure
o Lifestyles
o Health consciousness
o Average disposable income
o Attitude towards government
o Attitude towards work
o Buying habits
o Ethical concerns
o Cultural norms and values
o Sex roles and distribution
o Religion and beliefs
o Racial equality
o Use of birth control
o Education level
o Minorities
o Crime levels
o Attitudes towards saving, investing, retirement,leisure time, product quality, customer service, foreign people
4. Identify technological factors that could impact your business.
o Technology incentives
o Automation
o R&D activity
o Technological change
o Access to new technology
o Level of innovation
o Technological awareness
o Internet infrastructure
o Communication infrastructure
o Life cycle of technology
5. Identify environmental factors that could impact your business.
o Weather
o Climate
o Environmental policies
o Climate change
o Pressures from NGO’s
o Natural disasters
o Air and water pollution
o Recycling standards
o Attitudes towards green products
o Support for renewable energy
6. Identify legal factors that could impact your business.
o Discrimination laws
o Antitrust laws
o Employment laws
o Consumer protection laws
o Copyright and patent laws
o Health and safety laws
o Education laws
o Consumer protection laws
o Data protection laws
7. Identify ethical factors that and also denotes situations involving philanthropy and volunteerismcould impact your business.
o Bribery
o Intellectual property
o Confidentiality
o Internatioanal trade ethics
o Reputation
o Equal opportunities
8. Review the factors you’ve identified in steps 1–7 and ask yourself;
* What specific impact for your organisation ?
* What could you do for negative impacts?
* Do this analysis help you see any opportunities or threats? (SWOT analysis can also be used with this analysis)
Advantages of a PESTEL Analysis:
It can provide an advance warning of potential threats and opportunities
It enables to create a strategy by taking into account the external environment.
Disadvantages of a PESTEL Analysis:
There may be more titles to create a more detailed list.
It is only based on an assessment of the external environment
