PESTEL Analysis – Strategic Assessment Tool for Business Managers

Various external factors affect the marketing and strategic planning operations of an organization. PESTEL analysis can be used to identify the external forces which influence the company’s performance.

Factors in the external environment of an organization that could influence its strategies include: political, economic, social, technological, legal and environmental factors. These PESTEL factors can be demonstrated in a figure as shown below.

Political Factors: The first element of PESTEL analysis is political factors. Some of the political factors that affect a business include: Government regulations, power of trade union, relationships with foreign countries, political stability, trade restrictions, tax policy, and tariffs.

Economic Factors: Economic factors within the PESTLE analysis tool include: economic growth, interest rates, inflation and unemployment rates, availability of credit, cost of living, minimum wage, exchange rates etc.

Social Factors: social factors are issues that pertain people and society, including norms, values, culture, age, gender roles, attitudes, beliefs, health and safety, lifestyle, and population growth.

Technological Factors: technological factors refer to the new trends in technology and innovation. They include rise in artificial intelligence, robotics, genetic engineering, social media, internet technology, online collaboration tools, and big data management.

Environmental Factors: these are the factors in the natural environment that could affect business strategy. They are: global warming, ethical sourcing, environmental pollution, pandemics, natural disasters, climate change, weather patterns, and environmental sustainability.

Legal Factors: the last element of the PESTLE analysis tool is legal factors. They include issues to do with law that could affect business such as employment law, quotas, human rights issues, and company laws.

Analyzing these factors helps a business to understand the risks, costs and opportunities that exist within the organization, industry, or region. The information obtained can then be used to make strategic decisions. PESTEL analysis can be used for strategic planning, workforce management, marketing planning, and product development.

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