To be effective, a PESTLE analysis should be conducted on an ongoing basis. If identified early, strategies can be put in place to minimize risk or enhance impact if the outcome is positive.
Just as the age distribution would impact your decision to open a toy store in a small town. The next thing to do is identify how these external factors could undermine or impact your business.įor example, if you’re in the oil and gas industry, any changes to consumer protection laws, local NGO pressure, and environmental concerns would heavily impact your business. You might find using a PESTLE analysis template like the one below useful for your brainstorming session: You’ll get value from the audit if it’s tailored to your business. The first thing to do is use the PESTLE framework to brainstorm all the external factors (from each of the 6 areas) in your industry. There’s a 4-step process for using the analysis framework and identifying specific external risks and how they affect your industry or business. Undertaking a PESTLE analysis audit is simple. The only difference is someone, somewhere, decided to swap the two last letters around causing utter chaos in business circles. They’re both acronyms for a macro-environmental business analysis framework. PESTEL and PESTLE analysis are the same things. What is the difference between PESTEL and PESTLE Analysis? Regional NGO (non-profit organization) pressure.With consumers increasingly judging brands against their CSR (corporate sustainability responsibility) and the rise of global warming, these factors are typically ecological, and can include: It’s also vital to remain abreast of any upcoming legislation changes and whether or not it impacts your business.įinally, you’ll need to look at the potential impact environmental factors could have on your business. Legal FactorsĬlearly, businesses must be aware of the “laws of the land” where they operate. However, while clearly important, development in heavy industry, manufacturing, and distribution networks shouldn’t be overlooked either. Most businesses tend to focus heavily on the impact of digital technology. Internet and communication infrastructure.Technological factors determine the level of innovation, research, and development within an industry and the potential impact it could have.
Social factors focus on the cultural norms, customs, and values of a specific demographic where a company operates.įully understanding the social environment within which you operate helps you identify both risks and opportunities perhaps missed by your competitors. These are factors that directly impact the economy’s performance (and indirectly, your business).Ĭhangs or fluctuations to any one of these factors could impact a company’s purchasing power, product pricing, and market supply and demand. Government policy also impacts areas such as healthcare, and education so will also need to be taken into consideration if related to your industry. Political factors explore to what degree a government can influence, change, and impact your industry. With that wrapped up, let’s explore each external factor in more detail. This gives businesses a thorough understanding of their position and a better ability to assess the risks specific to their industry. The framework is broken down into 6 key external factors:Īnalyzing each factor is especially useful when entering an unknown market (especially abroad) or starting a new business.Īs mentioned before, successful companies often use PESTLE analysis in conjunction with other macro-environment analysis tools such as SWOT and Porter’s Five Forces. A PESTLE analysis, or sometimes referred to as a PEST or PESTEL analysis, is a business framework used to analyze the macro-environmental factors that impact a company’s overall performance.
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