Effective marketing analysis is critical for estimating the profitability of company endeavors and understanding how suitable the environment is for a business venture.
The PESTEL Analysis is an essential model that can be used as a scale to assess such aspects to determine a business’s course of action.
What is a PESTEL analysis?
A PESTLE analysis is a method for analyzing external macro-environmental change elements in a business setting. It is an essential component of any strategic planning process that will assist you in examining and preparing for any external issues that may influence your company, including political, economic, social, technological, environmental, and legal aspects.
Analyzing your business based on these six factors will set you apart from the competition and future-proof your operations, providing your company the competitive advantage it requires as it expands and grows. It’s a valuable tool for any organization looking to join a new or changing market when combined with the product-specific SWOT Analysis and BCG matrix for portfolio management.
How to Conduct PESTEL Analysis?
The Pestel framework is divided into six sections, each of which gives information about the feasibility of a market. Fill in the fields to create a strategic perspective.
Governments have a significant impact on a wide range of sectors and enterprises. Consider the Political pillar by listing any influence the government may have on your practical day-to-day operation, such as employment regulations or taxation.
After you’ve brainstormed, evaluate what’s happening in the industries you operate in – for example, if you’re a healthcare technology provider, how will healthcare regulations affect you?
Finally, assess the larger political context. What characteristics of stability, foreign relations, or elections may influence your company?
Add as many as you can because you’ll be fine-tuning them afterward. Check that you’ve gone through your entire business. It might be beneficial to consider your customer journey, all touchpoints, and sales messaging during this stage.
After you’ve created your Political list, it’s time to fine-tune it. This includes deleting duplicates, being as descriptive as possible, and verifying that they are correct.
A solid political pillar will have a precise list, enough to cover the areas that genuinely need to be examined but not so long as to include every possible scenario. Take a step back and consider each one. Is this a political issue that will affect you?
Economic refers to any financial aspect that may influence your company. Recession, interest rates, currency value changes, and other factors can affect you favorably and negatively.
Once you have your list, like with the Political pillar, it is time to improve it. The same guidelines apply; you want to end up with a manageable, unambiguous list of economic considerations to consider while developing your strategy.
The Social pillar examines concerns linked to your customers’ demographics. It might be one of the most significant pillars to consider, especially if you’re a marketing-focused company or target a particular sector of society.
Age, growth rate, lifestyle, and culture are a few examples. Consider population and societal trends, as well as the many ways society has evolved, and you’ll be able to offer examples of how this has influenced the company, not just in marketing but also in areas such as litigation and employment.
Once completed, the refining process must be repeated, as with the Political and Economic pillars.
This is usually the most accessible pillar to discover because it examines how technology might benefit your company. Compared to others, this domain moves the fastest and includes areas that can touch all aspects of your company, from innovation to operations. This crucial pillar does not require you to be a technology firm; instead, consider how you utilize technology daily.
Then it’s time to start the refining process all over again! It might be challenging to stay focused with so much going on in the digital world, so keep it simple. Some people stop here, resulting in a PEST analysis, but if you want to keep on, we’ll go on to the next pillar.
Legal is highly specific; otherwise, there would be a lot of overlap with the other pillars. This is about the legislation that may affect your organization; for example, GDPR requires substantial work for many companies, costing millions of dollars. This isn’t about policy or aim; instead, it’s about the specific laws of running your business.
Much attention is paid to climate change, the environment in which we live and work, and its influence on our businesses.
Weather, climate, green taxes, and other factors can affect your potential to trade profitably if you do not plan ahead of time. Furthermore, many businesses are openly responding to the concern of climate change by ensuring that green policies and sustainability are addressed in their CSP.
In this pillar, consider all the environmental variables that may need adjustments to your company.
After one more refinement, you’ll have your entire set of pillars.
You now have a complete PESTLE analysis, which provides a picture of all the external influences affecting your firm. Take a step back and go over all of the pillars together. Is anything missing, or do you have a complete picture?
Wrapping It Up
Every company operates in a complex, dynamic environment influenced by various parallel and shifting factors, trends, and influences. A simple “list” of characteristics or categories cannot capture this reality.
PESTLE analysis can be one of the most valuable techniques for strategic analysis, but it must be approached with a systems-oriented mindset. Remember that each PESTLE component is linked to the others. Make a diagram of PESTLE elements that account for your operational environment’s complexity and interwoven fabric rather than merely a list.
By thinking extensively and thoroughly about the systemic nature of PESTLE elements, your business will have a more comprehensive awareness of its problems and possibilities. You will be prepared to go forward with better-informed, more focused strategic planning.