The PESTEL analysis refers to a framework used by businesses to examine key drivers in the strategic business environment.The analysis support organisations in making effective strategic decisions, developing adequate products and services, planning appropriate marketing strategies and so on. PESTLE analysis is an abbreviation of political, economic, social, technological, environmental and legal factors.
- Political Factors – The political factors determine the extent to which government may influence an organisation or a certain industry. The influences of government on business may include tax, government and fiscal policy, corruption, trade restrictions, trade tariffs and many more. These factors focus on:
- What are various government policies that positively or negatively influence an organisation?
- How corruption or instability in the political environment affects an organisation 2.Economic Factors – These factors are considered as important determinants of the economy’s performance that directly influences the organisation and its revenue. Economic factors involve inflation rates, disposable income of an individual, interest rates, economic growth and unemployment rates. These factors affect the demand & supply of business and also affects the purchasing power of consumers. The economic factors further categorised into two parts such as micro-economic and macro-economic factors. The micro-economic factors involve income spent by people on business that largely impacts on B2C organisations. Whereas macro-economic factors include government expenditures, its taxation policy and interest rate control on business. 3.Social Factors – These factors focus on the social environment and its emerging trends. Social factors include attitude and shared beliefs of people, needs and wants of customers etcetera. Further, demographic characteristics of a population such as age, income, growth rate, lifestyle, personality and cultural barriers are involved in social factors. In order to target specific customers, these factors are significant for marketers. 4.Technological Factors – The technological factors involve the level of technological innovation and the rate of technological change. Also, the factors are comprised of research and development, technological awareness rate and automation. All these factors affect the decisions of businesses such as whether to enter or not into certain market or whether to launch or not launch products in a certain market area. These factors mainly focus on these points:
- Innovative ideas for producing products and services
- New methods for communicating with target audience
- Updated technology for distributing products and services 5.Environmental Factors – Currently, environmental factors have become essential due to shortage of raw materials, carbon footprint and pollution targets. These factors are comprised of climate change, environmental offsets and weather fluctuations that may affect tourism, insurance and agricultural industries. Thus, there is a need to build a sustainable environment by increasing recyclability, waste disposal and many more. 6.Legal Factors – Legal factors involve some laws and legislation such as consumer protection laws, employment laws, discrimination laws, employment laws and so on. The companies need to follow some rules and regulations while starting their business on a global scale. Thus, companies should be aware of laws, rules and regulations that in order to increase their revenue and profitability.