PESTEL ANALYSIS: WHAT IS IT FOR, FACTORS, HOW TO DO IT, EXAMPLE - DUDAS - 2025

The analysis PESTEL is an analytical tool used to identify key thrusters change in the corporate strategic environment and to support strategic decision making. PESTEL includes Political, Economic, Social, Technological, Ecological and Legal factors.

The tool allows you to evaluate the current environment, as well as possible changes. The idea is that, if the project is better located than that of the competitors, it would have the ability to respond to changes more effectively.

Source: Flickr Designed by Greg Emmerich CC by-SA 2.0

The PESTEL analysis is outlined to help identify opportunities for an organization, such as government decisions to foster a particular industry.

Likewise, to identify potential threats, such as a nationwide skills gap that could lead to problems with hiring.

Origin

The initial reference to this term dates back to Francis Aguilar's book “Exploring the corporate environment”, published in 1967, where the ETPS (Economic, Technical, Political and Social) analysis was introduced.

After this book, a work was done that altered the theory to name it STEP: “Strategic Trends Evaluation Process”. This was modified and later made known as the STEPE analysis, which contained all the PESTEL factors, except the legal one.

In the early 1980s, the acronym PESTEL was created, in addition to variants such as STEEPLE, which adds the ethical factor, STEEPLED, which adds the educational and demographic factor, or PESTLIED, which adds the international and demographic factor.

What is the PESTEL analysis for?

PESTEL analysis can be used for strategic planning, organizational planning, and marketing planning. It provides managers with factors that must be well analyzed.

Before implementing any type of marketing strategy, it is highly recommended to carry out a detailed analysis of the situation. The PESTEL analysis is an excellent tool to help build such an analysis for the organization.

As situations can change with some frequency, this process must be repeated in periodic stages to identify any changes in the macro environment.

By successfully reviewing and reacting to changes in the environment in which your business operates, you can distinguish your organization from your competition and thereby establish a competitive advantage.

Usefulness of PESTEL analysis

- Helps to highlight business opportunities or provide advance warnings of potential threats.

- It reveals the future changes that the business will face. This will help adjust what is being done so that you are ready for change rather than against it.

- Helps prevent projects from being started when entering a new country, region or market, which are likely to succumb to external pressures and fail.

- It will put real facts behind the departmental market evaluation investigation as evidence, thus facing any speculation.

Advantage

- The tool is simple and easy to understand and use.

- The tool helps to better understand the business environment.

- Promotes the development of strategic thinking.

- Helps reduce the effect of future business threats.

- The tool allows projects to detect new opportunities and exploit them effectively.

Factors

Politicians

Each project has its internal and external policies. Internal policies, such as the composition of the work team, the cohesion of the project and the personal interests, occur in all projects and must be considered and managed by the interested parties.

External policies refer to those that stakeholders do not control. These incidents include all political events such as labor laws, tax policies, trade restrictions or reforms, environmental regulations, political stability, tariffs, etc.

Economical

This factor takes into account all the facts that influence the internal and external economic environment.

The internal or microeconomic facts have to do with the feasibility and soundness of the project. During the evaluation phase, financial models and also accounting techniques should be used to guarantee the viability of the project.

External or macroeconomic events include interstate taxes, foreclosures, interest rates, economic growth, recession, inflation rate, exchange rate, minimum wage, wage rates, unemployment, cost of living, hours of work, credit availability, availability financing, etc.

Sociological

The sociological factor takes into account all the events that socially affect the market and also the community. Therefore, the advantages and disadvantages for the people of the area in which the project is developed must also be considered.

These events include cultural expectations, norms, population dynamics, health awareness, professional standards, global warming, etc.

Technological

This factor takes into account all events that affect technology. Since technology often becomes obsolete within a few months of its release, it is important to keep this in mind.

This factor could also take into account all barriers to entry in certain markets and changes in financial decisions.

Ecological

This factor takes into account environmental issues that could be economic or social in nature.

These include temperature, gales, natural calamities, rail, air and road access, soil conditions and contamination, nearby water sources, etc.

Legal

This factor refers to all legal issues, such as social security, employment quotas, payment of taxes, imports and exports, etc.

How to do the PESTEL analysis?

Steps to take

- List all the PESTEL factors that affect the organization and also carry out an exhaustive analysis of ideas with specialists in each area.

- Identify the implications for the company that each event noted in the analysis may have. It is important to assess their level of impact over time, by type and by dynamism.

- All events must be classified by their importance or criticality. For example, a project manager might classify them as: extremely important, very important, important, revealing, and insignificant.

- The result of these assessments can be used to identify threats and weaknesses which, in turn, can be used as part of a SWOT analysis.

Characteristics to be analyzed

In the PESTEL analysis, each characteristic identified is recorded under one of the factors belonging to this model, which are considered the most likely to affect the equity of a company.

Below are some examples of the PESTEL model showing the types of characteristics that would normally be included in each PESTEL factor

This listing can be customized as you see fit for the business and your operating environment. The list is really just a tool to help systematically analyze and monitor the factors of the macro marketing environment.

Political

- Industry regulations.

- Competition regulations.

- Commercial incentives.

- Fiscal policies.

- Elections.

- Subsidies.

Economic

- Consumer confidence.

- Interest rates.

-Gross domestic product.

- Exchange rates. For example, if the euro rises against the dollar, will it remain competitive with rival marketing agencies in the US?

- Investor confidence in related companies. For example, how would a drop in investor confidence in Facebook affect the company's marketing campaign on social media?

Social

- Impact of pressure groups. For example, will corporate social responsibility requirements be changed?

- Demographic changes. For example, how would greater longevity affect the demand for services?

- Behavior changes.

- Consumer trends.

- Changes in public opinion. For example, how has public opinion turned towards email marketing because of the high level of news around data protection regulation?)

Technological

- Use of devices and platforms. For example, is the use of mobile phones changing versus the use of desktop computers? Does the growth of active Instagram users exceed the growth of active Snapchat users?

- New or disruptive technology.

- New practices with data and information.

- New manufacturing processes and tools.

- New business processes led by technology. For example, the dynamics of prices.

Ecological

- Sustainability.

- Carbon emissions.

- Ethical sourcing.

Legal

- Health and safety standards.

- Employment law. For example, minimum wage and meritorious wage.

- Environmental regulations.

Example

Coca Cola

He is a famous soft drink producer. It offers different products to its large number of customers all over the world.

Political factor

Coca-Cola products must follow the regulations of each country. You should also provide local stores with the best drinks.

Countries can prevent their products from being distributed if they don't follow all the rules well.

The standards can be related to accounting, internal marketing, labor, or taxes.

Economic factor

Coca-Cola has a large customer base around the world. The company produces its products in various countries.

You have to take into account the tastes and preferences of customers, since most of the income comes from the sale of beverages.

Social factor

Urban areas are the main market for this company. Coca-Cola has introduced more than thirty alternate flavors in both Japan and China.

When it comes to the United States, it focuses more on offering healthy products. Water and tea are some of the products that fall into this category.

Technological factor

Coca-Cola can be very effective with the use of new technologies, assisting in the manufacture of a large number of quality products.

Coca-Cola has a technological setup in different countries, thus ensuring that customers get the best products in a short time.

He has also used social media to increase his popularity. Her promotional campaigns have been a success on different social media platforms.

Ecological factor

Accessibility to water is essential for Coca-Cola to manufacture its products. If you don't have access to water, then you can't operate.

In addition, you must ensure that the processing of the water is respectful with the environment.

Legal factor

The company has done well to secure all rights to its business. Therefore, you have the rights to all past and future products that you develop using a proprietary process.

References

1. KB Manage (2019). Pestel Analysis. Taken from: kbmanage.com.
2. Amanda Dcosta (2019). Understanding a PESTLE Analysis and Its Components. Bright Hub Project Management. Taken from: brighthubpm.com.
3. Oliver Anderson (2017). 5 Best and Practical Pestle Analysis Examples to Know. All Assignment Help. Taken from: allassignmenthelp.com.
4. How to Conduct a Pestel Analysis. Target Internet. Taken from: targetinternet.com.
5. Conceptboard (2019). How a PESTEL Analysis can help your business strategy. Taken from: conceptboard.com.
6. CFI (2019). PESTEL Analysis. Taken from: corporatefinanceinstitute.com.