Pestle Analysis
Pestle Analysis
Pestle Analysis
Political
Legal Economical
PESTLE
Analysis
Environmen
Social
t
Technologic
al
Political Factors:
These factors are all about how and to what degree a government intervenes in the
economy or a certain industry. Basically all the influences that a government has on
your business could be classified here. This can include government policy, political
stability or instability, corruption, foreign trade policy, tax policy, labour law,
environmental law and trade restrictions. Furthermore, the government may have a
profound impact on a nation’s education system, infrastructure and health regulations.
These are all factors that need to be taken into account when assessing the attractiveness
of a potential market.
Economic Factors:
Economic factors are determinants of a certain economy’s performance. Factors include
economic growth, exchange rates, inflation rates, interest rates, disposable income of
consumers and unemployment rates. These factors may have a direct or indirect long
term impact on a company, since it affects the purchasing power of consumers and could
possibly change demand/supply models in the economy. Consequently, it also affects
the way companies price their products and services.
Social Factors:
This dimension of the general environment represents the demographic characteristics,
norms, customs and values of the population within which the organization operates.
This inlcudes population trends such as the population growth rate, age distribution,
income distribution, career attitudes, safety emphasis, health consciousness, lifestyle
attitudes and cultural barriers. These factors are especially important for marketers when
targeting certain customers. In addition, it also says something about the local workforce
and its willingness to work under certain conditions.
Technological Factors:
These factors pertain to innovations in technology that may affect the operations of the
industry and the market favorably or unfavorably. This refers to technology incentives,
the level of innovation, automation, research and development (R&D) activity,
technological change and the amount of technological awareness that a market
possesses. These factors may influence decisions to enter or not enter certain industries,
to launch or not launch certain products or to outsource production activities abroad. By
knowing what is going on technology-wise, you may be able to prevent your company
from spending a lot of money on developing a technology that would become obsolete
very soon due to disruptive technological changes elsewhere.
Environmental Factors:
Environmental factors have come to the forefront only relatively recently. They have
become important due to the increasing scarcity of raw materials, pollution targets and
carbon footprint targets set by governments. These factors include ecological and
environmental aspects such as weather, climate, environmental offsets and climate
change which may especially affect industries such as tourism, farming, agriculture and
insurance. Furthermore, growing awareness of the potential impacts of climate change is
affecting how companies operate and the products they offer. This has led to many
companies getting more and more involved in practices such as corporate social
responsibility (CSR) and sustainability
Legal Factors:
Although these factors may have some overlap with the political factors, they include
more specific laws such as discrimination laws, antitrust laws, employment laws,
consumer protection laws, copyright and patent laws, and health and safety laws. It is
clear that companies need to know what is and what is not legal in order to trade
successfully and ethically. If an organisation trades globally this becomes especially
tricky since each country has its own set of rules and regulations. In addition, you want
to be aware of any potential changes in legislation and the impact it may have on your
business in the future. Recommended is to have a legal advisor.