PESTEL Analysis

PESTEL Analysis is a simple, useful and widely-used tool that helps us

understand the "big picture" of our Political, Economic, Socio-Cultural and
Technological, Environmental and Legal environment. As such, it is used by
business leaders worldwide to build their vision of the future.

PESTLE analysis is concerned with the environmental influences on a business.

Identifying PESTEL influences is a useful way of summarizing the external
environment in which a business operates. However, it must be followed up by
consideration of how a business should respond to these influences.

It is important for these reasons:

 First, by making effective use of PESTEL Analysis, you ensure that what
you are doing is aligned positively with the powerful forces of change
that are affecting our world. By taking advantage of change, you are
much more likely to be successful than if your activities oppose it;
 Second, good use of PESTEL Analysis helps you avoid taking action that
is doomed to failure from the outset, for reasons beyond your control; and
 Third, PESTEL is useful when you start operating in a new country or
region. Use of PESTEL helps you break free of unconscious assumptions,
and helps you quickly adapt to the realities of the new environment.

The table below lists some possible factors that could indicate important
environmental influences for a business under the PESTEL headings:
Political / Legal Economic Social Technological
- Environmental regulation - Economic growth - Income distribution - Government spending on
and protection (overall; by industry (change in distribution of research
sector) disposable income;
- Taxation (corporate; - Monetary policy - Demographics (age - Government and industry
consumer) (interest rates) structure of the population; focus on technological
gender; family size and effort
composition; changing
nature of occupations)
- International trade - Government spending - Labour / social mobility - New discoveries and
regulation (overall level; specific development
spending priorities)
- Consumer protection - Policy towards - Lifestyle changes (e.g. - Speed of technology
unemployment Home working, single transfer
(minimum wage, households)
unemployment benefits,
grants)
- Employment law - Taxation (impact on - Attitudes to work and - Rates of technological
consumer disposable leisure obsolescence
income, incentives to
invest in capital
equipment, corporation
tax rates)
- Government organisation / - Exchange rates (effects- Education - Energy use and costs
attitude on demand by overseas
customers; effect on
cost of imported
components)
- Competition regulation - Inflation (effect on - Fashions and fads - Changes in material
costs and selling prices) sciences
- Stage of the business - Health & welfare - Impact of changes in
cycle (effect on short- Information technology
term business
performance)
- Economic "mood" - - Living conditions - Internet!
consumer confidence (housing, amenities,
pollution)