About PESTEL
Above source: ECMS
A PESTEL analysis (sometimes PESTLE or more recently PESTELE) is a tool used by marketers to analyse and monitor the macro-environmental (external marketing environment) factors that have an impact on an organisation. The result of which is used to identify threats and weaknesses which are used in a SWOT analysis.
PESTEL and PESTLE are the same thing – simply, the ‘E’ and the ‘L’ sometimes get swapped around. Sometimes you will see a shortened form – a ‘PEST’ analysis, which is pretty self explanatory – it misses off environmental/legal.
PESTEL is an acronym for:
P – Political
E – Economic
S – Social
T – Technological
E – Environmental
L – Legal
E – Ethical (NEW)
Political
Political factors can have an influence upon strategic planning in the private sector as well as the public sector. This can be inter-industry politics (for example, the war between forestry regulatory bodies, PEFC and FSC, which also has ethical and environmental aspects) Or can be public with opposing national or international political party opinions (for example Brexit, its pros and cons, potential risks etc).
Economic
Economic factors will have a drastic effect upon organisational strategizing as some elements of a strategy may be simply out of reach financially. One strategy may be favoured over another purely on the grounds of profitability, potentially at the peril of other PESTLE factors.
Social
The public perception of an organisation will be important for consideration especially for public relation strategies. How the organisation is seen by others will have a bearing on the organisation’s actions and choices with regard to other PESTLE factors. Other social aspects of a strategy will focus on the internal work culture of an organisation. Strategies which aim to improve staff productivity will take careful consideration of social factors within a working environment.
Technological
Advancements in technology can prompt new strategies but strategies can also prompt the development of new technology. Other PESTLE factors can give rise to new technological strategies. For example political and environmental pressures have encouraged the emergence of renewable energy technology which in turn have their own economic & social considerations.
Legal
Organisations need to comply within the legal boundaries of their operations and this will influence strategic planning. A strategy to increase profitability couldn’t revolve around evading tax because this would be illegal (and would also have ethical and social impacts).
Ethical/Environmental
Businesses have a responsibility to carry out their operations in an ethical and environmental manner. Even if a business strategy plan is legal, is it also ethical to operate in a given way? For example, there is no law against the purchase of some un-certified timber but without certification and regulation, we do not know that the timber has come from sustainably managed forests that seek to reduce environmental impact.
In practise, PESTLE aspects are very much linked: for example, political decisions affect economic, social, technological, legal and ethical factors of business strategy. A prime example of this would be introduction of the General Data Protection Regulation in 2018. Under EU law, the GDPR changed the way in which organisations could handle personal data. Marketing strategies were particularly influenced by the change in legislation in terms of:
- The economy (the cost of implementing organisational GDPR policies)
- Social factors (How social media platforms reacted and revised policies to improve their public relations)
- Technological factors (how personal data is harvested and stored)
- Legal factors (passing of new legislation and the consequent regulation of GDPR law); and
- Ethical factors (questioning whether it is ethically acceptable to use personal data in advertising etc).
Above you can find some links to examples of PESTEL analyses.
You can find more strategic planning tools and techniques here.