Strategic planning for business growth

nibusinessinfo.co.uk 2020

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analysis#:~:text=Business%20analysis%20models%20are%20useful,more%20strategically%20about
%20your%20business.&text=PESTLE%20(political%2C%20economic%2C%20social,Porter's%20Five
%20Forces%20framework
Business analysis models are useful tools and techniques that can help you understand your
organisational environment and think more strategically about your business

PESTLE analysis is a fundamental tool for business strategy and planning. It is a method of assessing
your business' environment and its possible impact on the performance of your company.

PESTLE is an acronym which stands for six external factors affecting your business: political, economic,
sociological, technological, legal and environmental. Each of these can have a profound effect on your
business and varying implications, for example, in terms of:

 duration of impact - short term or long term

 type of change - positive, negative or unknown

 rate of impact - increasing, decreasing, unchanged or unknown

 importance - critical, important, unimportant or unknown

Example of PESTLE analysis

The following PESTLE analysis example clarifies how the six external factors work and what type of
information you should include in your analysis. This example scenario involves overseas sale of a
product.
 Technologica
ategory Political Economic Social l Legal Environment

eg eg
emergence of legislative
eg cultural innovative issues, such
eg norms, technologies as
international attitudes to affecting the consumer eg
trading eg current UK product, production, protection sustainability,
tariffs, economic consumer marketing or laws, waste
restrictions, situation, preferences sale of health and management
visa currency , age and product, safety laws, rules and
requirements inflation, interest gender automation licensing regulations,
Possible , price rates, taxation distribution, of processes, regulations green
factors control, etc level, etc etc etc , etc; practices etc

eg - strength of
overseas eg - can eg - will the
eg - possible economies intellectual product eg - pollution
trade barriers versus UK may eg - will property comply or implications
to protect affect product be rights be be allowed of
Business domestic price/profitabilit accepted protected into the transportatio
impact suppliers y overseas? overseas? market? n

6-12 months 6-12

Time frame unknown (possibly longer) months 0-6 months 0-6 months n/a

Type of possibly
impact negative unknown unknown negative negative negative

unknown -
dependent on
the economy,
and other
Rate of countries'
impact increasing economies unknown unchanged unchanged unknown

Importanc
e unknown important critical important critical unknown

Advantages of PESTLE analysis

By helping you to understand how external factors affect your businesses, PESTLE can help you:

 determine their long-term effect on the performance and activities of your business
  review any strategies you have in place

 work out a new direction, product or plan for your business

 identify solutions to problems

 gain strategic advantage on competitors

 evaluate the risks associated with markets you're interested in

PESTLE is an extended version of PEST analysis. It is often used in collaboration with other analytical
business tools like the SWOT analysis and Porter's Five Forces to give a clear understanding of a
situation and related internal and external factors.

Environmental analysis is a strategic tool. It is a process to identify all the external and internal
elements, which can affect the organization’s performance. The analysis entails assessing the level of
threat or opportunity the factors might present. These evaluations are later translated into the decision-
making process. The analysis helps align strategies with the firm’s environment.

Our market is facing changes every day. Many new things develop over time and the whole scenario can
alter in only a few seconds. There are some factors that are beyond your control. But, you can control a
lot of these things.

Businesses are greatly influenced by their environment. All the

situational factors which determine day to day circumstances impact
firms. So, businesses must constantly analyze the trade environment
and the market.

There are many strategic analysis tools that a firm can use, but some are
more common. The most used detailed analysis of the environment is
the PESTLE analysis. This is a bird’s eye view of the business conduct.
Managers and strategy builders use this analysis to find where their
market currently.  It also helps foresee where the organization will be in
the future.
PESTLE analysis consists of various factors that affect the business
environment. Each letter in the acronym signifies a set of factors. These
factors can affect every industry directly or indirectly.

The letters in PESTLE, also called PESTEL, denote the following things:

 Political factors
 Economic factors
 Social factors
 Technological factors
 Legal factors
  Environmental factor
Often, managers choose to learn about political, economic, social and
technological factors only. In that case, they conduct the PEST
analysis.  PEST is also an environmental analysis. It is a shorter version of
PESTLE analysis. STEP, STEEP, STEEPLE, STEEPLED, STEPJE and
LEPEST: All of these are acronyms for the same set of factors. Some of
them gauge additional factors like ethical and demographical factors.
I will discuss the 6 most commonly assessed factors in environmental
analysis

P for Political factors

The political factors take the country’s current political situation. It also
reads the global political condition’s effect on the country and business.
When conducting this step, ask questions like “What kind of government
leadership is impacting decisions of the firm?”

Some political factors that you can study are:

 Government policies
 Taxes laws and tariff
 Stability of government
 Entry mode regulations
E for Economic factors
Economic factors involve all the determinants of the economy and its
state. These are factors that can conclude the direction in which the
economy might move. So, businesses analyze this factor based on the
environment. It helps to set up strategies in line with changes.

I have listed some determinants you can assess to know how economic
factors are affecting your business below:

 The inflation rate

 The interest rate
 Disposable income of buyers
 Credit accessibility
 Unemployment rates
 The monetary or fiscal policies
 The foreign exchange rate
S for Social factors
Countries vary from each other. Every country has a distinctive mindset.
These attitudes have an impact on the businesses. The social factors
might ultimately affect the sales of products and services.

Some of the social factors you should study are:

 The cultural implications

 The gender and connected demographics
 The social lifestyles
 The domestic structures
 Educational levels
 Distribution of Wealth
T for Technological factors
Technology is advancing continuously. The advancement is greatly
influencing businesses. Performing environmental analysis on these
factors will help you stay up to date with the changes. Technology alters
every minute. This is why companies must stay connected all the time.
Firms should integrate when needed. Technological factors will help you
know how the consumers react to various trends.

Firms can use these factors for their benefit:

 New discoveries
 Rate of technological obsolescence
 Rate of technological advances
 Innovative technological platforms
L for Legal factors
Legislative changes take place from time to time. Many of these changes
affect the business environment. If a regulatory body sets up a regulation
for industries, for example, that law would impact industries and
business in that economy. So, businesses should also analyze the legal
developments in respective environments.

I have mentioned some legal factors you need to be aware of:

 Product regulations
 Employment regulations
 Competitive regulations
 Patent infringements
 Health and safety regulations
E for Environmental factors
The location influences business trades. Changes in climatic changes
can affect the trade. The consumer reactions to particular offering can
also be an issue. This most often affects agri-businesses.

Some environmental factors you can study are:

 Geographical location
 The climate and weather
 Waste disposal laws
 Energy consumption regulation
 People’s attitude towards the environment
There are many external factors other than the ones mentioned above.
None of these factors are independent. They rely on each other.

If you are wondering how you can conduct environmental analysis, here
are 5 simple steps you could follow:

1. Understand all the environmental factors before moving to the next step.
2. Collect all the relevant information.
3. Identify the opportunities for your organization.
4. Recognize the threats your company faces.
5. The final step is to take action.
It is true that industry factors have an impact on the company
performance. Environmental analysis is essential to determine what role
certain factors play in your business. PEST or PESTLE analysis allows
businesses to take a look at the external factors. Many organizations use
these tools to project the growth of their company effectively.

The analyses provide a good look at factors like revenue, profitability,

and corporate success. If you want to take the right decisions for your
firm, employ environmental analysis. The analysis you should conduct
depends on the nature of your company.
Examples of PESTLE Analysis
 PESTLEanalysis Contributor Dec 15, 2011

There are many companies the world over, that conduct PESTLE

analysis on their brands in order to ascertain strategies for the future or
else to understand the market before launching them. It is a
fundamental tool of market planning and strategizing that must be
carried out to comprehend market trends and the systematic risks
involved.
PESTLE analysis gives you an overview of the whole situation your business
might be in. Precisely, it is a bird’s eye view of the stimulus and the
scenarios that surround your trade and you business.
PESTLE, is an acronym in which each letter denotes certain factors for
the study. These factors affect the market in many ways and alter the
way strategies are thought of and made. P stands for political factors,
while E stands for economic ones. S has to do with social factors in a
country whereas T sums up all the technological aspects of the market. L
denotes legalities of the environment and E accounts for the
environmental aspects and its influence upon the nature of the trade
you’re in.
Almost every major and minor organization tries to conduct this analysis,
but with regards PESTLE analysis example, I would cite an example of a
real-life case study in which PepsiCo, a beverage giant carried out
the PESTLE analysis over its brands.
Recommended: 
PepsiCo is the largest selling beverage the world over, of course after its
arch rival Coca Cola. It accounts for a 37% share of the global beverage
market, and therefore they need to understand each and every country’s
market in order to stay in line with their PESTLE situations.
Pepsi is a big brand, currently holds the 23rd place in the Interbrands
report of the World’s Leading Brands. Their advertisements feature major
celebrities and athletes like David Beckham, Robbie Williams, Britney
Spears, and Michael Jackson etc.
Their market reach is also very diverse, as they’re present in almost every
country from the US to New Zealand. Their PESTLE analysis is given
below:

Political:
Pepsi is a non-alcoholic beverage and is therefore regulated by the FDA.
So, they’re supposed to maintain a firm standard of the laws set out by
the FDA with consistency. Also, many different markets across the world
have different set of regulations that are either relaxed or are either
stringent. There is competitive pricing by Pepsi’s competitors and that is
one factor that Pepsi has to keep in mind at all times. The political
scenario also matters greatly as there can be some civil unrest in certain
markets or due to inflation the sales of the product can fall. Most
importantly, cross border situations are starkly different therefore Pepsi
has to stay in line with all those policies and changes so that they can
adapt to all those changes accordingly.
Economic:
As the recent economic downturn has plagued the economy, companies
had to restructure their sales and marketing campaigns greatly. Also,
with diminishing profits they had to undergo downsizing internally and
re-think upon how to penetrate the market. Economic conditions have
the highest influence on a business, regardless of what trade it is in.
Though, in Pepsi’s favor, the economic downturn that started in 2008
resulted in increased sales of its beverages mainly as people were being
laid off from jobs, they were spending time with friends and family or at
home.

Social:
Social factors greatly impact Pepsi, as it’s a non-alcoholic beverage it has
to remain in line with the strict and stark differences of cultures the
world over. Also, Pepsi has to communicate its image as a global brand
so that the people can associate it with themselves as something that
connects the world together. Usually, the social implications are seen in
marketing campaigns for example certain countries have religious
festivals, so Pepsi has to keep in line with all those festivals in order to
understand the psyche of their market and how they can cash upon the
opportunity.
Technological:
With the advent of the new age in technology, companies have completely
integrated themselves with all the recent changes that have taken place.
To mention a recent trend that has greatly picked up and something that
almost every business is turning toward is Social Media. The social
media explosion has allowed for increasingly interactive engagement with
the consumers with real time results so Pepsi has to stay ahead of all the
developments that take place with keeping in view how the youth of
today utilizes technology for their benefit and how can Pepsi reach them
in order to keep on increasing brand recall and brand engagement.

Legal:
There can be many legal implications upon the beverage industry. I
would cite one very famous incident took place in India, where Pepsi was
accused of using contaminated water, given a lab test that was done
upon the water flowing into the Pepsi factory that was located nearby an
industrial estate. A massive recall was issued for the products from
shelves and then the product was tested costing the company many
billions of dollars upon the tests as India is a very major market.
Environmental:
These factors can affect Pepsi, but not immensely alter its trade and
profit generation as these factors affect agri-businesses much more
directly.