PESTEL Analysis

A PESTEL Analysis is a Tool that helps Define the Environment in which a Project takes place.

• Or the Environment in which a Company Operates.

 

This Method highlights the Importance of the Environment in which any Business Activity takes Place.

 

Its name is an acronym for the Factors it Proposes to Study these Environments:

• Political.
• Economical.
• Social.
• Technological.
• Environmental.
• Legal.

Political: What Policies are Important in that Market.

• What Trends can, or could Affect the Business.

 

Economical: Economic Factors that Define and Affect the Market.

• Growth, Wealth Distribution, Debt, etc.

 

Social: How People Behave in Society and what they Value.

• Traditions, Family Structure, etc.

 

Technological: The Role that Technology plays in the Market.

• How Innovative it is, its Current Status, and Future Trends.

 

Environmental: Environmental Concerns that Affect the Market.

• How important it is, The Role it Plays, Future Trends, etc.

 

Legal: Laws that Affect How you Operate in the Market.

• And what new Laws could appear.

 

PESTEL Factors.

 

* You have an Open Free Excel Template in our “Strategy Templates” Page .

 

As we usually say, the best way to Understand How to use this Method and How these Factors can be Applied is to share some examples with you:

We have chosen different examples of each PESTEL Factor to show you How important it is to Analyze the Environment in which a Company Operates.

 

You’ll see Situations that can be easily identified by a PESTEL Analysis, that could lead to a great Success, or a complete Failure.

 

Let’s begin:

 

• Protectionist policies that restrict Foreign Products.
  • Bans, Special Taxes, Limitations, etc.

 

• Nationalist movements that could lead to a greater demand for “national products”.
  • If you had a “nationally made” product, you could highlight it.

 

• Boycotts: If your Country (or another) is “unpopular” in a Global level.
  • Your Products could suffer from Boycotts.

 

• Imagine that you want to create a “Premium Handmade Jewelry” Business but, the Market you’re in enters in a deep Economic recession.
  • You should probably think about creating more “affordable” Products.

 

• Imagine that you Sell Cheap Fruit and, your Market is experiencing a great Economic Growth.
  • You probably should expand your Business to the Premium Sector.

 

• Imagine that you are Designing a new Toy for your Company.
  • You should keep in mind that many parents prefer neutral colors instead of the classic “Pink for girls and Blue for Boys”.

 

• Now, imagine that you are Developing the Marketing Campaign for a Meat Company.
  • You should be aware that the Spanish eat rabbit but the English don’t, for example.

 

You don’t probably know what Olivetti is, but in the past, Olivetti was like Apple nowadays.

• When personal computers did not yet exist, they almost had a monopoly on typewriters.

 

What happened to them?

 

They did not care about the Technological advancement of Personal Computers.

• Or at least, they didn’t care enough at the right time.

 

Therefore, they have practically disappeared.

 

You also can read about what happened to Kodak, Nokia… Or Blockbuster.

 

Blockbuster (a video rental Company) refused to buy Netflix many years ago, thinking it was a waste of money.

• Now Blockbuster doesn’t exist and Netflix is a 160 billion dollar Company.

 

The New “Streaming” Technology made Blockbuster an obsolete Business.

 

• If you Manufacture Plastic Products, you must comply with Environmental Recycling Regulations.
  • Allowing your Products to be recycled, depending on the Market in which they are sold.

 

• If you emit gases, you probably need to meet the Gas Emission Requirements.
  • Increasing your Efficiency, Reducing waste, etc.

 

• If your Project has a Positive Environmental effect, you may be able to obtain Government aid.
  • Money, Subventions, Tax cuts, etc.

 

• Imagine that you plan to Hire a few Employees in a New Market.
  • You must take into account what the Labor Laws are like in that Country.
    • Else, you could be in serious Trouble.

 

• Imagine that you are a Business Financial Consultant.
  • In this case, you need to be extremely careful with:
    • How Taxes are calculated in different Countries (Markets).
    • What is considered Expense and Investment according to the Law.
    • etc.

New Companies or Projects:

• To Prepare them for the Market they will target.

 

Companies that are expanding their Activities into New Markets:

• This Tool helps them prepare for what may come.

 

Established Companies that periodically Review the Market they’re in:

• To Find New Threats and Opportunities.

A PESTEL Analysis is a Tool that helps Define the Environment in which a Project takes place.

• It highlights the Importance of the Environment in which any Business Activity takes Place.

 

Factors it Proposes to Study these Environments:

• Political: What Policies are Important in that Market.
• Economical: Economic Factors that Define and Affect the Market.
• Social: How People Behave in Society and what they Value.
• Technological: The Role that Technology plays in the Market.
• Environmental: Environmental Concerns that Affect the Market.
• Legal: Laws that Affect How you Operate in the Market.

 

PESTEL Analysis is used for:

• New Companies or Projects.
• Companies that are expanding their Activities into New Markets.
• Established Companies that periodically Review the Market they’re in.