What is a PESTLE analysis?
A PESTLE analysis is an extension of the PEST model used for environmental scanning and includes the elements of Political, Economical, Social, Technological, Legal and Environmental factors that could have a direct or long lasting impact on the organization.
This method is used as part of a strategic planning or risk management process and provides an oversight to the team about what is current in their environment and what should be considered in light of these factors.
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 is Involved in 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.
Generally speaking, PESTLE’s are conducted as part of the organisations strategic planning process and is used to help shape the future direction. Senior Managers, C-Level executive, Leaders, major stakeholders, partners, consultants and even major clients all make the invite list when it comes to a PESTLE analysis.
- Aguilar, Francis. 1967. “Scanning the Business Environment.” New York: The Macmillan Company. p239.
- Chartered Management Institute – Carrying out a PEST Analysis Checklist
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 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?
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?
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?
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?
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 ideas for each area of the PESTLE template.
Review responses, and collate ideas.
Rate the ideas according to likely impact on the organization.
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.
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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.
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