What is PESTLE Analysis? PESTLE Analysis is the study of macro-environmental factors and those factors comprised of political, economic, social, technological, legal, and environmental issues. The word pestle comes from the initials of those factors.
Pestle analysis is a very famous marketing analysis tool. Companies and businesses use it for the analysis of the market before or after launching the product. It gives the management an idea about the condition of the environment of a certain market. The management would make their decision and plan strategies based on the pestle analysis.
The marketing gurus and experts have made some alterations in the definition of its letters. They said that the last word “E” should stand for ethics because it would tell us the values of demography.
Some Questions to Ask
Here are some of the following questions that you should ask before conducting the pestle analysis because it would give you an idea of what things you should keep in mind. They are as follows;
- The political condition of the country and how would it impact your business?
- What is the prevailing condition of the economy?
- The culture and values of society and how important are they in the market?
- What’s the upcoming technology? How would it impact the market structure?
- What is the pending legislation for the regulation of the market?
- What are the environmental issues that would impact the market?
All of these questions are important for the business because they would help you more than just understand the market. They would help the management to decide, plan strategies, and set organizational goals.
Different businesses would focus on different factors depending on the nature of their business. Companies use pestle analysis in combination with swot analysis because it gives the management a complete picture of the internal and external factors.
Here’s the in-depth study of each of the factors of pestle analysis and they’re as follows;
Political Factors of the Pestle Analysis
Political factors would tell you that how the government and the political parties would influence the business industry with their policies. For instance, if the government and empowered political party impose some new tax reforms. Such policies would badly crash the revenue stream of the company.
The government can also hurt the business industry indirectly because it has a strong influence over the health, education, and infrastructure of the country. Here are some of the following issues that fall under the category of political factors;
- Stable Government
- Freedom of Speech/Press
- Tax Reforms/Policies
- Political Corruption
- Regulation system of Government
- Government Tariffs
- Government Budget
- Lobbyist
- Trade Policies/Control
- Bilateral Relationship
- Export/Import Policies
- Expenditure on Defense
- Government Subsidy
- Democracy/Participation Level of Voters
- Political Protest
- Competing Regulation
- Trade Union & Agreement and Government Interest
- Action Committee of Political parties
Economical factors of Pestle Analysis
Economical factors would tell you the performance of the country’s economy because it would directly impact your business/company.
For instance, if the inflation rate of the country increases, then a local manufacturer has no other choice but to set the prices accordingly. A country’s economy would also tell you the buying power of customers. Some of the main issues fall under the category of economical factors are as follows;
- Trends in the Stock Market
- Price Fluctuation
- Country’s growth
- Inflation rate
- Exchange rate
- Employment rate
- GDP
- Budget Deficits & Federal Government
- Disposable income
- People’s ability to spend
- Credit Availability
Social factors of the Pestle Analysis
Social factors would tell you the socio-cultural environment, population trends, and demography of the country.
For instance, people in Western countries, like the US, go out shopping on the holidays. As marketers and businesses, if you know these trends, then you can plan strategies accordingly. Here are some of the main concerns that fall under the category of social factors are as follows;
- Birth and Death Rate
- Growth & Population Size
- Marriage & Divorce Rate
- Life expectancy
- Wealth Distribution Rate
- Immigration Rate
- Age Distribution
- People attitude towards Investment
- People attitude towards saving
- The People attitude towards Leisure time
- People attitude towards retirement
- People attitude towards foreign people
- The People attitude towards Quality products
- People attitude towards Customer Service
- Family system
- Minorities
- Crime rate
- Education rate
- Religious beliefs
- Birth control rate
- Racial equality
- Role distribution among gender
- Cultural & Ethical values
- Lifestyle
- Shopping Habits
- Diet & Health consciousness
- People attitude towards Word & Government
- Disposable income
- Social classes in society
Technological factors of the Pestle Analysis
Technological factors would tell you the research and development and the latest innovative tech that would affect various operations of your business industry.
If you’re familiar with current development in technology, then you would be able to know what projects invest in and what projects to avoid. Here some of the main areas fall under the category of technological factors are as follows;
- Tech Life Cycle
- Research & Development
- Tech Incentives
- Infrastructure for communication
- Tech Awareness among public
- Infrastructure for Internet
- Creativity & Innovation
- Easy accessibility to Technology
- Tech Changes
- Automation
Legal factors of the Pestle Analysis
Legal factors would work in combination with political factors and they would tell you about the country’s labor laws, patent, copyrights, health & safety laws, discrimination laws, employment, and consumer protection laws.
If you’re getting your business at a global level, then you should know what is legal and illegal in different countries. It’s because countries have different definitions of the same laws in different regions. Here are some of the main issues that fall under the category of legal factors are as follows;
- Data protection laws
- Anti-trust laws
- Copyrights laws
- Patent laws
- Consumer protection laws
- Education laws
- Health & Safety laws
- Discrimination laws
- Employment laws
Environmental factors of the Pestle Analysis
Environmental factors would tell you the scarcity of natural resources, pollution, and emission of greenhouse gasses like CO2. The environmental concerns have been increasing among the public, and people want companies to run their business operations in an environmentally friendly manner.
Now companies are accepting and following the ideology of corporate social responsibility (CSR). Some of the main concerns fall under the category of environmental factors are as follows;
- Weather & Climate Changes
- Renewable energy sources
- Green products
- Recycling
- Water & Air Pollution
- Natural Disasters
- Country’s environmental policies
- NGO’s pressure
Conclusion: PESTLE Analysis
In this article on Pestle/Pestel analysis, we have discussed what is pestle analysis? But when we talk about external factors that affect the decision-making process of businesses and companies; they are many and they vary from business to business and country to country. A software company has to face different challenges than any public manufacturing company.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.
