Imagine being able to anticipate the political changes that might affect the company, understanding how technological trends will affect your operations or keeping up to date with legal regulations that could impact the industry. What if I told you that you could make this a reality with the PESTEL analysis? We’re talking about a powerful tool that assesses external factors which may influence the organic growth of a business. Understanding and applying it will give you an edge when facing potential obstacles on your business journey.
In this post, we explain the five steps of the PESTEL analysis so that you can carry it out successfully. Take note!
Find out where the name ‘PESTEL analysis’ comes from
The PESTEL analysisis a tool which provides a holistic view of the company. Broadly speaking, it enables the identification of demand for products and services, the trends and changes in the market, as well as relevant contextual factors that may directly influence the company’s behaviour. Its name is no coincidence, but rather refers to the 6 factors The main elements included in the PESTEL analysis:
PPolitical factors: this refers to the political and governmental framework within which the company operates. It covers aspects such as fiscal policies, political stability, trade regulations, labour policies, government subsidies and corruption.
Eeconomic: includes variables such as interest rates, inflation, exchange rates, economic growth, unemployment, wealth distribution, the economic cycle and credit conditions.
SSocial factors: in this case, the focus is on social, demographic and cultural trends that may influence the business, such as changes in lifestyles, attitudes towards work and leisure, cultural values, consumer trends, education and public health.
TTechnology: covers technological advances, innovation, automation, digitalisation, internet access and patents.
Eenvironmental: it analyses the main concerns regarding sustainability, climate change, emissions regulation, waste management and the conservation of natural resources. The results could be useful for inclusion in the Corporate Social Responsibility of the company.
LLegal: takes into account labour laws, health and safety regulations, consumer protection, intellectual property, health regulations, tax laws and trade regulations.
The 5 steps of PESTEL analysis, illustrated with examples
Below, we explain step by step how to carry out a PESTEL analysis successfully. To do this, we will assume that we are examining the context of a retail company that is planning to expand into other parts of the world.
- What factors influence the strategy? In this case, it would be necessary to examine the trade regulations governing exports and imports in the countries you wish to enter, as well as their labour policies, the economic stability of the market in those destinations, and consumers’ purchasing power, alongside their lifestyle and purchasing trends. Are they genuinely interested in the product or service you wish to sell? Do they have the necessary technological infrastructure for e-commerce?
- What information do you have about those factors? Once you have identified the key factors that may influence the company’s expansion, it is time to gather all the relevant information. This involves researching demographic, economic, political, technological, environmental and legal data relevant to the target countries for expansion. To do this, draw on previous market research, the findings of analytical reports and even population surveys carried out by each country.
- How might they affect the company? Assess how trade policies might affect import or export costs, or how technological trends might affect marketing and sales strategies. Rate the impact of these factors on a scale to determine which should be given the highest priority. In addition, use charts to visualise these impacts more clearly, and tables or infographics to summarise the most significant aspects. If something does not turn out as expected, this is a good point at which to redirect or adapt the planned strategy.
- What opportunities and threats can be anticipated? Analysing the context can reveal opportunities that you may not have recognised as such at first. In this step, you can draw on a SWOT analysis. An opportunity might be identified in the economic growth of a target market, whilst a threat could be established local competition.
- What strategies can I put in place? The advantage of PESTEL analysis is that it enables you to understand the context in which the company will operate and to identify potential obstacles along the way. Make the most of these factors to strengthen your planning and consider how to mitigate the threats identified. We’re talking, for example, about developing specific marketing strategies to adapt to local preferences or negotiating with suppliers to ensure a stable supply.
The benefits of PESTEL analysis for businesses
If you’ve got this far, you’ve probably already realised that carrying out the PESTEL analysis It is essential for both start-ups and companies planning to make changes. Good results provide a comprehensive overview of all the factors that may influence the project’s success or, conversely, those elements that may hinder its progress.
Therefore, after implementing this tool Companies are better equipped to adapt their strategies, maximising opportunities and mitigating risks. So the PESTEL analysis can serve as the starting point for any decision It is strategic and should form part of the business plan. The key is to ask yourself the right questions to get a clear idea of what you can expect.
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