Pestle Analysis

A PESTLE Analysis is one of the most important frameworks of macro-environmental scanning, framework which comprises the most important factors used in environmental scanning, as part of advanced strategic management. Throughout the last few years, the acronym PESTLE has suffered a number of changes, but PESTLE seems to be the most commonly spread and almost unanimously accepted “concept”.

PESTLE stands for “Political, Economic, Sociological, Technological, Legal and Environmental” factors. The questions to ask yourself are: * What are the key political factors likely to affect the industry? * What are the important economic factors?

* What cultural aspects are most important?
* What technological innovations are likely to occur?
* What current and impending legislation may affect the industry?
* What are the environmental considerations?

Each and every category of factors is of crucial importance to advanced strategic management, and the PESTLE analysis in itself is definitely a must for any business or company, regardless of its industry. It is true that the importance of each category of factors will always vary from business to business and from company to company, but nonetheless PESTLE remains a mandatory analysis technique that is usually a part of the larger and more comprehensive SWOT analysis. PESTLE helps a company determine exactly how various types and categories of factors influence its “well-being”. As aforementioned, the same factors will influence different companies in different ways. For instance, an online business will be less concerned about environmental factors while a waste management company will have to pay extra attention to environmental factors. To further understand what PESTLE is and how it can be used, it is very important that you know a thing or two about each individual category of factors. The below descriptions should help you gain a better understanding of each factor and of just how powerful and effective a PESTLE analysis can be for a business.

– Political factors represent the way and the extent to which a government influences the economy and a certain business. Political factors are represented by specific areas, such as labour law, tax policy, tariffs,trade restrictions and even environmental law. – Economic factors refer to areas unique to economy and directly influenced by economy or comprised by economy, areas such as inflation rate, interest rate, economic growth or exchange rates. All these areas can greatly influence a business or company, which makes them an extremely important part of the PESTLE analysis. – Social factors mainly refer to demographic factors, which comprise factors like population growth rate, cultural aspects, age distribution and health consciousness.

– Technological factors refer to automation, incentives, the rate of technological change and R&D activity. These factors greatly influence other areas or aspects, including the minimum efficient production level, quality, costs and even outsourcing decisions. – Legal factors refer to all the laws directly connected to a business/company and its area of activity, including consumer law, antitrust law, discrimination law and health and safety law. – Environmental factors refer to all the factors directly related, influenced or determined by the surrounding environment. This includes, but is not limited to weather, climate, geographical position, climate change and even insurance. Environmental factors are crucial to industries such as farming or tourism and can greatly influence a company’s way to operate or even the products it offers. The PESTLE analysis consists in carefully determining all these factors and finding out exactly in what way and to what extent these factors influence a certain company. The PESTLE analysis provides the company with crucial information and this is why it is a mandatory analysis.