PESTLE analysis

Published on 2 June 2024 at 19:25

Founded by Francis J. Aguilar through his book called ' Scanning the Business Environment'.

 

The PESTLE analysis is a good way to improve decision-making concerning adapting to change. It takes into account the different external areas that could influence your business. 

 

PESTLE is an acronym for: Political, Economic, Social, Technology, Legal and Environment.

 

Political

 

  • Political stability 
  • Tax policies 
  • Trade regulations
  • Government policy

 

Economic

  • Inflation rates
  • Exchange rates
  • Interest rates
  • Income rates
  • Unemployment rates
  • Economic growth

 

Social

  • Population growth
  • Lifestyle changes
  • Demographic trends
  • Social media influence
  • Cultural barriers
  • Social values

 

 

Technology

  • Innovation level
  • Automation
  • Technological influences
  • Software ecosystem
  • R&D activity
  • Technological inc

 

Legal

  • Employment laws
  • Copyright laws
  • Intellectual property rights
  • Health and safety laws
  • Discrimination laws
  • Labor laws
  • Consumer protection laws

Environment

 

  • Sustainability 
  • Environmental regulations
  • Resource management 
  • Recycling
  • Climate and weather circumstances

 

 

 

Usecase

Now that you've got an understanding of the different area's of a PESTLE analysis, let's describe what it's actually used for.

 

1. Cope with change

 

In the world of business, change is constant.

 

By performing a PESTLE analysis, you can anticipate these changes and adapt your business accordingly.

 

PESTLE helps you take a proactive stance and makes you resilient in the ever-changing landscape of business.

 

2. Planning

 

Using the PESTLE analysis, you arm yourself with a valuable tool to execute strategic planning.

 

Getting an overview of the different areas helps you identify opportunities and anticipate potential risks.

 

 

3. Manage risk

 

The knowledge you gather from performing a PESTLE analysis enables you to develop risk management strategies.

 

By using PESTLE, you can identify the potential risks that come from the various external areas that are gathered.

 

4. Adapt & innovate

 

PESTLE analysis is a tool that can be used to gain a competitive edge.

 

By identifying all the different areas, you're one step ahead in positioning yourself as a market leader.

 

It also highlights areas that you need to adapt to or focus your innovative resources on. 

 

Tips

There are a few points of attention one must pay attention to when utilizing the PESTLE analysis.

 

The most common pitfalls:

 

1. Avoid oversimplification 

 

The PESTLE analysis should be clear and concise.

 

But when using to little data input, it's easy to create blind spots.

 

Be sure to take your time and re-evaluate every area closely. 

 

2. Paralysis by analysis

 

On the other hand, applying too much data can lead to what is called 'paralysis by analysis'.

 

Analysing too much data which leads to paralysis in taking action.

 

 

3. Continual process

 

Due to the ever changing economic landscape, the PESTLE analysis is ideally done multiple times per year.

 

Not doing so can result in difficulty anticipating developments that can have major consequences.

 

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