Do You Know Pestel Analysis? Let Me Teach You!

PESTEL Analysis for a company is used to analyze the macro environment of a company. It stands for Political, Economical, Social, Technological, Environmental and Legal factors. It is done by a company before entering a new market so that the company doesn’t have huge problems. Macro refers to all major external factors over which marketing firms have no control off. A marketer should consider these factors to understand the threats and opportunities created by the factors to develop a strategic plan to obtain and retain a competitive advantage.

PESTEL chart

Political

It refers to the way a country is run in terms of politics. The political environment includes all law and government regulation that inflect industry or organization.

  • Government tax policies/regulations
  • Business regulation policies
  • Government laws on competition in the marketplace

Economic

It refers to the sum of all economic factors policies, trade cycles, economic resources, level of income which act as major factors of the economic environment within which business enterprises work.

  • Currency value/ exchange rates
  • National GDP
  • Public spending power

Social

It refers to the set of beliefs, customs, practices, behavior that exist within a society that describes the relationship to themselves and others.

  • Changes in style/ choices
  • Population demographics
  • Community groups and pressure groups.

Technology

It means advancements of technology which influences business by new innovation or technique to perform the business operation and product development.

  • New inventions and development.
  • Changes in information and mobile technology.
  • Rate of technology transfer.

Environmental

It is a process to identify all the external and internal elements, which can affect the organization’s performance.

  • Environmental regulations and protection.

Legal

It provides a framework on laws/regulations and government policies relating to legal or regulatory setup.

  • Tax policies.
  • Safety regulations.
  • Competition regulations.

Conclusion

PESTEL analysis is one of the most comprehensive models to study the effects of various forces present in the environment and subsequently prepare oneself to exploit the opportunities and defend against the threats.

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