analysis is an acronym for a tool used to identify the macro (external) forces
facing an organisation. The letters stand for Political, Economic,
Social, Technological, Environmental and Legal.
Depending on the organisation, it can be reduced to PEST or some areas can be
before any kind of strategy or tactical plan can be implemented, it is
fundamental to conduct a situational analysis. And the PESTEL forms part
of that and should be repeated at regular stages (6 months minimum) to identify
changes in the macro environment. Organisations that successfully monitor and
respond to changes in the macro-environment can differentiate from the
competition and create a competitive advantage.
Factors: These determine the extent to which government and government
policy may impact on an organisation or a specific industry. This would include
political policy and stability as well as trade, fiscal and taxation policies
Factors: These factors impact on the economy and its performance, which in
turn directly impacts on the organisation and its profitability. Factors
include interest rates, employment or unemployment rates, raw material costs
and foreign exchange rates.
Factors: These factors focus on the social environment and identify
emerging trends. This helps a marketer to further understand their customers’
needs and wants. Factors include changing family demographics, education
levels, cultural trends, attitude changes and changes in lifestyles.
Factors: These factors consider the rate of technological innovation and
development that could affect a market or industry. Factors could include
changes in digital or mobile technology, automation, research and development.
There is often a tendency to focus on developments only in digital technology,
but consideration must also be given to new methods of distribution,
manufacturing and logistics.
Factors: These factors relate to the influence of the surrounding
environment and the impact of ecological aspects. With the rise in importance
of CSR (Corporate Sustainability Responsibility), this element is becoming more
important. Factors include climate, recycling procedures, carbon footprint,
waste disposal and sustainability
Factors: An organisation must understand what is legal and allowed within
the territories they operate in. They also must be aware of any change in
legislation and the impact this may have on business operations. Factors
include employment legislation, consumer law, health and safety, international
as well as trade regulation and restrictions.
Political factors do cross over with legal factors; however, the key difference
is that political factors are led by government policy, whereas legal factors
must be complied with.