A PESTLE analysis is a management framework and diagnostic tool. The outcome of the analysis will help you to understand factors external to your organisation which can impact upon strategy and influence business decisions.
The PESTLE tool:
PESTLE is an acronym for:
- P = Political
- E = Economic
- S = Social
- T = Technology
- L = Legal
- E = Environmental
Let’s look at each of these factors more closely,
POLITICAL: When looking at Political factors you will need to take into account your countries government policies and political stability. Other factors will include tax implications, industry regulations and global trade agreements and restrictions.
ECONOMIC: Economic factors will include exchange rates, economic growth or decline, globalisation, inflation, interest rates and the cost of living, labour costs and consumer spending.
SOCIAL: Social factors look at trends such as lifestyle factors, cultural norm’s and expectations such as career attitudes and work-life balance. It also concerns itself with consumer tastes and buying habits as well as population demographics.
TECHNOLOGY: Technology has grown exponentially. How is your business responding to technological innovation in your products and services? Other technological advancements will impact on data storage, disruptive technologies such as smartphones, social networking, automation robotics and the increasing shift towards AI artificial intelligence?
LEGAL: Shifts in the Legal landscape are constantly changing especially here in the UK. Employment labour law and employment tribunal decisions impact upon working practices continuously. It is also important to keep up to date with all changes in legislation and of course Health and safety regulations.
ENVIRONMENTAL: Does your business have a direct impact on the environment? Political sanctions now govern carbon emissions and a move towards sustainable resources such as wind turbines and recycling. This area also covers CSR corporate social responsibility and ethical sourcing of goods and services which in turn has a direct impact on procurement and your businesses supply chain management.
NEXT STEP: Once you are clear on the main overarching factors included in a PESTLE analysis the next challenge is to relate this in real terms into the industry sector you work in.