PESTEL analysis: evaluate your business environment

Imagine being able to anticipate political changes that could affect the company, understand how technological trends will impact its operations, or be aware of legal regulations that could affect the industry. What if I told you that you can turn it into a reality with the PESTEL analysis? We are talking about a powerful tool that evaluates external factors that can influence the organic development of the company. Knowing and applying it will give you an advantage against possible obstacles on the business path. 

In this post, we explain the 5 steps of the PESTEL analysis so that you can carry it out successfully. Take note!  

Learn where the name of the PESTEL analysis comes from

The PESTEL analysis is a tool that offers a holistic view of the company. Generally, it allows identifying the demand for products and services, market trends and changes, as well as relevant contextual elements that can directly influence the company's behavior. Its name is no coincidence; it refers to the 6 main factors that the PESTEL analysis includes:   

Political: refers to the political and governmental framework in which the company operates. It covers elements such as fiscal policies, political stability, trade regulations, labor policies, government subsidies, and corruption. 

Economic: includes variables such as interest rates, inflation, exchange rate, economic growth, unemployment, wealth distribution, economic cycle, and credit conditions. 

Social: in this case, social, demographic, and cultural trends that can influence the company are studied, such as changes in lifestyles, attitudes towards work and leisure, cultural values, consumption trends, education, and public health. 

Technological: covers technological advances, innovation, automation, digitalization, internet access, and patents. 

Ecological: analyzes the main concerns about sustainability, climate change, emission regulation, waste management, and the conservation of natural resources. The results could be useful to include in the company's Corporate Social Responsibility. 

Legal: takes into account labor laws, safety regulations, consumer protection, intellectual property, health regulations, taxes, and trade regulations. 

The 5 steps of the PESTEL analysis exemplified

Next, we explain step by step how to successfully perform the PESTEL analysis. For this, we are going to assume that we are studying the context of a retail company that plans to expand to other parts of the world. 

1. What factors influence the strategy? In this case, it would be necessary to study the export and import trade regulations of the countries you want to reach and their labor policies, the economic stability of the market in the destination locations, and the purchasing power of consumers, as well as their lifestyle and purchasing trends. Are they really interested in the product or service you want to sell? Do they have the necessary technological infrastructure for e-commerce?  

2. What information do you have about these factors? Once you have identified the factors of interest that may influence the company's expansion, it is time to gather all the important information. This involves looking for relevant demographic, economic, political, technological, environmental, and legal data for the target expansion countries. For this, rely on previous market research, results from analytical reports, and even population studies carried out by each country.  

3. How could they impact the company? Evaluate how trade policies could affect import or export costs or how technological trends could affect marketing and sales strategies. Score the impact of the factors on a scale to know which would have higher priority. Also, use graphs to better visualize these impacts, and tables or infographics to summarize the most significant aspects. If something does not turn out the way you expect, this is a good point to redirect or adapt the planned strategy. 

4. What opportunities and threats can be foreseen? The study of the context can offer you opportunities that you may not have seen as such initially. In this step, you can use a SWOT analysis for support. An opportunity could be identified in the economic growth of a target market, while a threat could be established local competition. 

5. What strategies can I implement? The advantage of the PESTEL analysis is that it allows you to know the context where the company will operate and you can identify possible barriers along the way. Take advantage of these elements to strengthen your planning and consider how to mitigate the detected threats. We are 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 the company

If you have reached this point, you probably already noticed that performing the PESTEL analysis is essential for both new companies and those that are planning to make changes. Good results allow for a complete view of all the factors that can influence the success of the project or, conversely, those elements that can slow down its development.  

Therefore, after implementing this tool, companies are better prepared to adapt their strategies, maximizing opportunities and mitigating risks. So the PESTEL analysis can be the starting point for any strategic decision and should be part of the business plan. The key is to ask the right questions to get a clear idea of what you can expect.  

Did you find this post about the PESTEL analysis interesting? Subscribe to Educa.Pro for more business news content!