PESTEL analysis, which is sometimes referred as PEST, is a concept in marketing principles. Moreover, this concept is used as a tool by companies that are planning to launch a new product or service. It includes the Political, the Econimical, the Social, the Technological, the Environmental, and the Legal factor.
It gives a view of the whole environment from many different angles that the business wants to check and keep a track of while contemplating on a certain plan.
The importance of each of the factors may be different to different kinds of industries, but it is clue to any strategy company wants to develop that they conduct the PESTEL analysis as it forms a much more completed version of the SWOT analysis.
Let’s see the factors we have mentioned:
- Political: These factors determine the extent to which a government may influence the economy or a certain industry. Specifically, political factors has areas including tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability.
- Economic: These are determinants of an economy’s performance that impacts a company and affects in a long term way. That includes the economic growth, interest rates, exchange rates, the inflation rate. These factors greatly affect how businesses operate and make decisions.
- Social: It talks about determinants like cultural trends, demographics, population analytics etc. High trends in social factors affect the demand for a company’s products and how that company operates.
- Technological: Referes to the innovations in technology that may affect the operations of the industry and the market favorably or not. This point in the industries lead to their innovation.
- Environmental: Include all those that influence or are determined by the ecological and environmental aspects such as weather, climate, and climate change.
- Legal: There are certain laws that affect the business environment in a certain country, in a way of discrimination law, consumer law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.