Pestle Analysis
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HOW TO USE A PESTLE ANALYSIS<br />
Polimoda<br />
Fabiana Vannuccini
WHAT IS PESTLE ANALYSIS?<br />
• It’s a technique used to identify and evaluate external<br />
factors affecting the performance of an organization<br />
with the aim of gathering information to guide strategic<br />
decision-making.<br />
• It gives a view of the whole environment from many<br />
different angles that one wants to check and keep a<br />
track of while contemplating on a certain idea/plan.<br />
• It helps the company to determine how these factors will<br />
affect the activities of the business in a long term.
HOW TO WRITE A PESTLE FROM SCRATCH?<br />
There are certain questions that one needs to ask while<br />
conducting this analysis, which give them an idea of what things to<br />
keep in mind. They are:<br />
• What is the political situation of the country and how can it<br />
affect the industry?<br />
• What are the prevalent economic factors?<br />
• How much importance does culture has in the market and what<br />
are its determinants? (socio-cultural)<br />
• What technological innovations are likely to pop up and affect<br />
the market structure?<br />
• Are there any current legislations that regulate the industry or<br />
can there be any change in the legislations for the industry?<br />
• What are the environmental concerns for the industry?
FRAMEWORKS FOR THE ANALYSIS<br />
To facilitate the analysis, it can be helpful to create a matrix of the<br />
factors to be analyzed and the opportunities or threats they<br />
represent, as in the table below. This provides a simple framework for<br />
the analysis, but bear in mind that there will be varying degrees of<br />
overlap and interrelation between the different factors.<br />
Opportunities<br />
Threats<br />
Political<br />
Economical<br />
Sociological<br />
Technological
What to explore?
VALUE IS CASH, MONEY, THE LIFEBLOOD OF<br />
BUT IT CAN ALSO BE ACCESS, PRESTIGE, OR<br />
ANYTHING E SEEKS IN ORDER TO GROW.
VALUE IS CASH, MONEY, THE LIFEBLOOD OF<br />
ANY BUSINESS.<br />
BUT IT CAN ALSO BE ACCESS, PRESTIGE, OR<br />
ANYTHING ELSE A COMPANY SEEKS IN ORDER<br />
TO GROW.
WHY DO WE USE IT?<br />
• More than just understanding the market, this framework<br />
represents one of the vertebras of the backbone of strategic<br />
management that not only defines what a company should<br />
do, but also accounts for an organization’s goals and the<br />
strategies related to them.<br />
• It may be so, that the importance of each of the factors may<br />
be different to different kinds of industries, but it is<br />
imperative to any strategy a company wants to develop that<br />
they conduct the PESTLE analysis as it forms a much more<br />
comprehensive version of the SWOT analysis.
THE BEST TIME TO USE A PESTLE ANALYSIS<br />
1) When launching a business<br />
It will be impossible to run a legal business without<br />
following the predetermined political laws and regulations.<br />
But some businesses have more to consider than others.<br />
For example, e-commerce businesses need to follow strict<br />
technological laws. If these e-commerce sites conduct<br />
business internationally, they’re impacted by taxation and<br />
political stability in these other locations too.<br />
Going into business unaware of the possible restrictions<br />
will only brew trouble. Perhaps not right now, but when<br />
it’s time to launch a product or expand. Prevent that<br />
happening by conducting a PESTLE analysis early on.
THE BEST TIME TO USE A PESTLE ANALYSIS CONT.<br />
2) When you are facing problems<br />
Trouble has arrived. You want to take care of it sooner<br />
than later to minimize any long-lasting damage. Many<br />
people often want to move on as quickly as possible<br />
afterwards. That’s normal. But did you know that right<br />
now is the perfect time for a PESTLE analysis? Since you’re<br />
already on alert, it’s easier to notice previously invisible<br />
cracks. To make sure all your bases are covered, it’s time to<br />
break out that trusty PESTLE analysis.
THE BEST TIME TO USE A PESTLE ANALYSIS CONT.<br />
3) When your analyst is on the case<br />
Many business owners will hire a business analyst to improve<br />
working conditions and employee communication. These<br />
people are experts in analysis and problem-solving. That may<br />
involve a PESTLE analysis. The information may solve a specific<br />
problem, but the data could be beneficial for other situations.<br />
It may even bring something to your attention, such as a need<br />
to improve eco-friendliness – not just as a means to improve<br />
customer approval – but as a vehicle promoting<br />
improvements with production and product distribution.
THE WORST TIME FOR A PESTLE ANALYSIS<br />
• just before a product launch<br />
• as a means to improve communication<br />
PESTLE analysis is not an “immediate<br />
intervention” study.
BRAINSTORM POLITICAL FACTORS<br />
This part of the analysis is concerned with how the policies<br />
and actions of government affect the conduct of business.<br />
Legislation may restrict or protect commercial operations in a<br />
number of ways. Issues to be considered include:<br />
• the level of political stability<br />
• the legislative and regulatory framework for<br />
business, employment and trade<br />
• the tax regime and fiscal policy<br />
• programs of forthcoming legislation<br />
• the dominant political ideology.
POLITICS - QUESTIONS TO ASK:<br />
• When is the country's next local, state, or national election? How<br />
could this change government policy?<br />
• Who are the most likely contenders for power? What are their views<br />
on business policy, and on other policies that affect your company?<br />
• Depending on the country, how well developed are property rights<br />
and the rule of law, and how widespread are corruption and<br />
organized crime? How are these situations likely to change, and how<br />
is this likely to affect you?<br />
• Could any pending legislation or taxation changes affect your<br />
business, either positively or negatively?<br />
• How does government approach corporate policy, corporate social<br />
responsibility, environmental issues, and customer protection<br />
legislation? What impact does this have?
BRAINSTORM ECONOMIC FACTORS<br />
This part of the analysis is concerned with overall<br />
prospects for the economy. Key measures include:<br />
• GDP/GNP<br />
• inflation<br />
• interest rates<br />
• exchange rates<br />
• unemployment figures<br />
• wage and price controls<br />
• fiscal and monetary policy.
ECONOMY - QUESTIONS TO ASK:<br />
• How stable is the current economy? Is it growing, stagnating, or<br />
declining?<br />
• Are key exchange rates stable, or do they tend to vary significantly?<br />
• Are customers' levels of disposable income rising or falling? How is<br />
this likely to change in the next few years?<br />
• What is the unemployment rate? Will it be easy to build a skilled<br />
workforce? Or will it be expensive to hire skilled labor?<br />
• Do consumers and businesses have easy access to credit? If not, how<br />
will this affect your organization?<br />
• How is globalization affecting the economic environment?<br />
• Are there any other economic factors that you should consider?
BRAINSTORM SOCIO-CULTURAL FACTORS<br />
These are probably the most difficult factors to<br />
quantify and predict, as personal attitudes, values<br />
and beliefs are involved. Factors to be included:<br />
• levels of education<br />
• employment patterns<br />
• career expectations<br />
• family relationships<br />
• lifestyle preferences<br />
• trends in fashion and taste<br />
• spending patterns<br />
• religious beliefs
CULTURE- QUESTIONS TO ASK:<br />
• What is the population's growth rate and age profile? How is this<br />
likely to change?<br />
• Are generational shifts in attitude likely to affect what you're doing?<br />
• What are your society's levels of health, education, and social<br />
mobility? How are these changing, and what impact does this have?<br />
• What employment patterns, job market trends, and attitudes toward<br />
work can you observe? Are these different for different age groups?<br />
• What social attitudes and social taboos could affect your business?<br />
Have there been recent socio-cultural changes that might affect this?<br />
• How do religious beliefs and lifestyle choices affect the population?<br />
• Are any other socio-cultural factors likely to drive change for your<br />
business?
BRAINSTORM TECHNOLOGICAL FACTORS<br />
Rapid technological change has had far-reaching<br />
effects on business in past decades. Factors to be<br />
considered include:<br />
• investment in research and development<br />
• new technologies and inventions<br />
• Internet and e-commerce developments<br />
• developments in production technology<br />
• rates of obsolescence.
TECHNOLOGY - QUESTIONS TO ASK:<br />
• Are there any new technologies that you could be using?<br />
• Do any of your competitors have access to new technologies that<br />
could redefine their products?<br />
• In which areas do governments and educational institutions focus<br />
their research? Is there anything you can take advantage of?<br />
• How have infrastructure changes affected work patterns (for<br />
example, levels of remote working)?<br />
• Are there existing technological hubs that you could work with or<br />
learn from?<br />
• Are there any other technological factors that you should consider?
PEST VARIATIONS<br />
There are variations of PEST analysis that bring other factors into<br />
consideration. These include:<br />
• PESTLE/PESTEL: Political, Economic, Socio-Cultural, Technological,<br />
Legal, Environmental.<br />
• PESTLIED: Political, Economic, Socio-Cultural, Technological,<br />
Legal, International, Environmental, Demographic.<br />
• STEEPLE: Social/Demographic, Technological, Economic,<br />
Environmental, Political, Legal, Ethical.<br />
• SLEPT: Socio-Cultural, Legal, Economic, Political, Technological.<br />
• LONGPESTLE: Local, National, and Global versions of PESTLE.<br />
• SPECTACLES: Social, Political, Economic, Cultural, Technological,<br />
Aesthetic, Customers, Legal, Environmental, Sectoral
RESOURCES<br />
Images from Google<br />
https://pestleanalysis.com/the-best-and-worst-times-to-use-pestle-analysis/<br />
https://www.mindtools.com/pages/article/newTMC_09.htm<br />
https://www.managers.org.uk/~/media/Files/Campus%20CMI/Checklists%20PD<br />
P/Carrying%20out%20a%20PEST%20analysis