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A PESTLE analysis is a framework to analyse the key factors influencing an organisation from the outside. HR practitioners and senior managers can use the results of this analysis to guide strategic decision-making.
This factsheet provides a PESTLE analysis example (of the retail sector) as well as a ready-to-use PESTLE analysis template. It explores the six elements of PESTLE and outlines what PESTLE analysis is used for, focusing on the scenarios where it’s most valuable: business planning and marketing, workforce planning, product development, organisational change and HR strategy. The factsheet concludes by providing PESTLE analysis tips and looking at the advantages and disadvantages of a PESTLE analysis.
- There are six elements to a PESTLE analysis: Political, Economic, Sociological, Technological, Legal, and Environmental.
- PESTLE analysis gives HR practitioners insight into the external factors impacting their organisation.
- The analysis is flexible, so organisations can use it in a range of different scenarios.
- You can use our PESTLE template for your own PESTLE analysis.
PESTLE is referred to widely in many of the CIPD entry-level qualifications in HR and L&D because of its value in helping to ensure organisations are ready for change. A PESTLE analysis is one of the most effective frameworks available for understanding the ‘big picture’ and external environment in which an organisation operates. It’s essential for HR practitioners to have a clear understanding of these external factors, as it better informs strategic planning decisions. Carrying out an analysis, such as a PESTLE, will help organisations to fully understand the broader environment and its challenges.
Video: What does PESTLE stand for?
Ally Weeks: HR Consultant
Ally is a highly experienced HR practitioner with a 20-year successful track record of working with a range of small to medium and blue chip businesses. In that time, she has led many HR initiatives to meet business objectives, both as a manager and consultant.
Since joining the CIPD in 2011, Ally has been a lead tutor and trainer on workshops for the CIPD’s qualifications at levels 3, 5 and 7. She now uses the breadth of her knowledge to scope, design and develop new content and assets for the CIPD’s digital and face-to-face short courses and learning platforms. Identifying and using insights from contemporary learning techniques, trends and academic research, Ally is proactive in keeping others aware of key HR developments and opportunities.
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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.