The subject of this blog, PESTLE Analysis, is one of the planning tools used by businesses and other organisations as a guide for strategic decision making. PESTLE looks at factors that affect a company but that are generally outside its control.
What does PESTLE stand for?
PESTLE stands for:
In more detail:
Politics – the political situation or climate of the country or countries where the organisation operates can have an impact on its success. This could include government policies regarding taxation, regulation, funding and grants, and the country’s services and infrastructure.
Economy – economic factors that can impact an organisation might include inflation and interest rates, energy costs, labour costs and the strength of consumer spending.
Social/Cultural – a business should be aware of consumer attitudes and lifestyles, cultural trends, education and seasonal behaviours, along with factors such as population growth rate and income distribution.
Technological – new technology has a major influence on business development, from research and development and automation, to managing internal systems and marketing in an era of new media.
Legal – companies must be aware of and apply employment law, consumer laws, anti-discrimination laws and health and safety legislation. Legislation can also affect competition and trade barriers.
Environment – this can cover energy use, pollution, waste products and recycling initiatives, as well as climate change and ethical issues that can affect consumer choice.
Different aspects of PESTLE may be more important for different organisations. For example, a company in the financial sector may be particularly interested in the Economy of its operational area, whereas a fashion retailer might be more interested in the Social/Cultural aspects.
When is PESTLE used?
The concept is commonly used as a general tracking tool or audit to analyse the state of the environment an organisation is operating in.
It’s also useful in management structures and is often applied in qualifcations such as those developed in our Chartered Management Institute provision. This includes marketing and planning, including when a company is developing and launching a new product, service or initiative, or launching into a new country or region. Finally, it can be used for internal organisational change.
Who uses PESTLE?
Any business or organisation can apply the principles of PESTLE to what they do. PESTLE Analysis can be carried out in a brainstorming session for key decision makers or within departments.
Also known as…
PESTLE is sometimes seen as PEST and PESTEL (especially in the US). The earliest version of it is thought to have been created by Harvard Business School professor Francis J Aguilar, who talked about ETPS (Economic, Technical, Political and Social factors) in his 1967 book, Scanning the Business Environment.
Of course, there are other programmes for strategic planning that can benefit a business, such as SWOT (see our blog on Management Models: SWOT Analysis).
Ultimately, the reason for carrying out a PESTLE Analysis is to help an organisation look at the current and future state of the climate they are working within, in order to plan more effectively and gain a competitive advantage.