What is a PESTLE analysis?

A PESTLE analysis is a strategic management tool used to identify, analyze, organize, and monitor key external factors that can have an impact on an organization now and in the future. The framework examines opportunities and threats due to Political, Economic, Social, Technological, Legal and Environmental forces, to inform planning and decision-making.

The output from a PESTLE analysis is often used as an input for other business management tools such as SWOT analysis, SOAR analysis, risk assessment, or a Business Model Canvas.

There are many variations of this framework, which examine different combinations of external factors, specific to particular industries. Examples include: PEST, STEEPLE, STEER and STEEP.

Why do a PESTLE analysis?

A PESTLE analysis helps a team to understand the organization’s market and business position better, plan strategically, and conduct market research in new and existing markets. The framework:

  • Encourages strategic thinking and helps you evaluate how your strategy fits into the broader environment
  • Provides an overview of the crucial external influences on the organization
  • Allows leaders to make more decisive and knowledgeable decisions

Who should use a PESTLE analysis?

A PESTLE analysis is useful in all industries at the strategic, departmental, and project level to assess current and future markets. Use it as a key input for planning, marketing, organizational change, business and product development, project management, and research reports.

PESTLE Analysis
Tips for facilitating an effective PESTLE analysis
  • Carefully select participants to provide expert knowledge but also a fresh perspective.
  • Use technology to involve critical people in different locations rather than miss their contribution.
  • Minimize Groupthink by brainstorming ideas individually then combining issues to get the overall picture.
  • Be specific rather than broad when defining ideas.
  • Use quantitative data where possible to focus on the crux of issue.
  • Provide adequate time in the session to rank and prioritize ideas.
  • Communicate outcomes to stakeholders and regularly update progress on actions.

PESTLE template

Political

Political or politically motivated factors that could affect the business.

Examples include:

Government policy, political stability or instability, bureaucracy, corruption, foreign trade policy, tax policy, trade restrictions, labor/environmental/copyright/consumer protection laws, competition regulation, funding grants & initiatives, etc.

Questions to ask:

  • What government policies or political groups could be beneficial or detrimental to our success?
  • Is the political environment stable or likely to change?

Economic

Overall economic forces that could affect what you’re trying to do.

Examples include:

Economic trends, growth rates, industry growth, seasonal factors, taxation, inflation, interest rates, international exchange rates, International trade, labor costs, consumer disposable income, unemployment rates, availability of credit, monetary policies, raw material costs, etc.

Questions to ask:

  • What economic factors will impact on us moving forward?
  • Does the current economic performance affect us?
  • How does each economic factor impact our pricing, revenues, and costs?

Social

Social aspects, attitudes, and trends that influence your business and target market.

Examples include:

Attitudes and shared beliefs about a range of factors including health, work, leisure, money, customer service, imports, religion, cultural taboos, the environment; population growth and demographics, family size/structure, immigration/emigration, lifestyle trends, etc.

Questions to ask

  • How do our consumer’s values and beliefs impact on their buying habits?
  • How does human behavior or cultural trends play a role in our business?

Technological

Technology that can affect the way you make, distribute, and communicate your products and services.

Examples include:

Technology and communications infrastructure, consumer access to technology, emerging technologies, automation, legislation around technology, research and innovation, intellectual property regulation, competitor technology and development, technology incentives, etc.

Questions to ask:

  • What innovations and technological advancements are available or on the horizon?
  • How might they affect our operations?

Legal

Current and future legal and regulatory requirements impacting on the business.

Examples include:

Laws regarding consumer protection, labor, health & safety, antitrust, intellectual property, data protection, tax and discrimination; international and domestic trade regulations/restrictions, advertising standards, product labeling and safety standards, etc.

Questions to ask:

  • What regulations and laws apply to our business?
  • Do they help or hinder our business?
  • Do we understand the laws across all our markets?

Environmental

Environmental forces impacting your businesses and/or customer’s geographical location, the surrounding environment, and natural resources used by your organization.

Examples include:

Weather, climate change, your carbon footprint, environmental regulations, pollution laws and targets, recycling and waste management policies, endangered species, support for renewable energy, etc.

Questions to ask:

  • How does our physical environment affect us and vice versa?
  • What are the effects of climate, weather or geographical location?
  • Are we prepared for future environmental targets?

How to do a PESTLE analysis

While you can analyze the factors in the PESTLE template against the current status, you should also consider how potential changes might impact on your future.

Different industries may place more significance on one or more of the areas. For example, there is likely to be a very different emphasis for businesses involved in tourism, compared with those in the health, information technology, mining, banking, and defense industries.

The framework is most useful when you get input from participants with a range of different perspectives. Getting everyone together at the same time may be difficult in large or geographically dispersed teams. Video conferencing, online documents, and collaborative brainstorming tools such as GroupMap can solve many of these difficulties.

Brainstorm

Brainstorm ideas for each area of the PESTLE template.

Group

Review responses, and collate ideas.

Rate

Rate the ideas according to likely impact on the organization.

Share

Share the outcomes of the session to relevant stakeholders.

Gather ideas around the six PESTLE factors – Political, Economic, Social, Technological, Legal and Environmental. You can perform the initial brainstorming with the whole group or break out as smaller teams and then combine the ideas to get an overview.

Online collaboration software tools like GroupMap have an advantage over traditional brainstorming tools such as a whiteboard or post-it notes, as they significantly reduce the time and effort to combine independent lists, and make organizing and prioritizing the information much quicker and easier.

Once you have everybody’s ideas, group those that are similar and cull duplicates.

This step is more time consuming if the brainstorming was performed individually – or completed at different times and locations. Using a software tool like GroupMap to group ideas can significantly reduce the time and effort required in this step – and result in a better outcome.

Individually rate each of the ideas based on the level of impact you think they will have on your business.

Discuss any significant discrepancies in the ratings. Ask participants to explain their rationale and ideally, have them re-rate that idea based on discussions. The more aligned you can get people’s thinking around each factor, the better understanding everyone will have about challenges facing other parts of the organization, and the more focused your strategic planning will be.

The completed template gives a good overview of the status of the business. Distribute the PESTLE Analysis to relevant stakeholders. Use the report to monitor progress and as a foundation for future reviews.

Repeat the PESTLE analysis at regular intervals to stay on top of changes in the macro environment and keep your strategies and plans up to date.

GroupMap automatically generates visually appealing reports and action plans in several formats for distribution, saving time and effort after the analysis.

Save effort, time, and money with GroupMap

Getting your best people together to work on strategy is critical to the success of your business. But group activities have an opportunity cost and it’s essential to optimize your time and effort. GroupMap is the effective way to brainstorm, discuss, and decide, and solves many of the problems commonly associated with group activities.

Whether you have your best minds together in the same room, or distributed around the world, GroupMap’s unique technology allows groups of up to 2000 to submit ideas independently at separate times, from different places, in different timezones. Prevent dominant personalities swaying the group, drowning out the opinions of others – GroupMap allows everyone to brainstorm independently then effortlessly combines that information to reveal the full spectrum of ideas. GroupMap templates keep the objective front and center throughout the session, keeping everyone on task. This ensures the activity identifies actionable issues rather than becoming just a discussion on ideas. GroupMap gives you all the group decision making tools you need to prioritize, decide and take action.

Create your first map and invite people in to start sharing their thoughts right NOW. Experience the power of GroupMap with our 14-day, no risk, FREE trial. You don’t even need to provide your credit card details to access to all of our features, including the entire suite of templates, for a full 14 days.

Think better together with GroupMap