PESTEL is acronym for Political Economical Social Technological Environmental Legal. This is a business strategy tool used to analyse the macro-environment suitability. This is generally a unidirectional impact study.
Political
The political ecosystem has large influence on stability and safety. Various political factors related to business are regulatory rules, labour laws, public welfare schemes, subsidy, tax, investment regulations, copyrights, patents, trademark, grants, loans. More focus into a new sector due to special reasons can be sensitive. Healthcare and hygiene business during and post COVID scenario, business investment after Brexit are classic examples.
Economic
Cash-flows, banking system, inflation, GDP, CAGR are economic factors influencing the business. Brand presence, fragmented market segments, flexibility for new trends and models adds to the economic factors. Increasing labour cost, consumer confidence, fuel price, interest rates, forex, share market, import duties, energy tariffs, etc are also important.
Social
Various social elements are demographic, ethnic, cultural, family system, age distribution, health consciousness, career aspirations, education level, media, spending lifestyles, esteem values, corruption, wealth disparity, online buying habits,
Technological
Manufacturing methods, emerging and matured technologies, delivery and distribution, communication generation, level of digitalisation, automation, R&D ecosystem, e-commerce platform, IT resources, technological obsolescence,
Environmental / Ethical
Pollution limits, environmental activism, climate change, corruption,
Legal
Laws pertaining to contract agreements, consumer protection, copyright, IPR, landfill disposal, waste management, recycling, effluent treatment, efficiency of court system, central and provincial laws, law enforcement, IT, cyber-security ,
Significance of PESTEL
PESTEL analysis can give input for SWOT analysis. It follows a simple process for conducting an assessment in a basic framework. This macroscopic tool helps to reduce the risks for the organization on new investments. However, the political, economic factors are highly dynamic and the assessment need not be true while implementation. PESTEL is a time-consuming analysis that requires loads of data.
