What is a PESTEL analysis?
PESTEL is an abbreviation for six driving forces: political, economic, social, technological, environmental, and legal factors. The analysis is a framework that maps the various external drivers that can impact your company. By identifying these six drivers, your company can gain deeper insight into potential opportunities and challenges, and the analysis will be a valuable tool in any future strategy process.
Why is PESTEL analysis important?
A PESTEL analysis is important for businesses because it provides an overview of the factors that can shape the company’s external environment and reveals the external conditions that may impact both its success and its challenges. By conducting such an analysis, it can help your business make informed decisions, anticipate potential changes, and understand how these conditions may affect the company, customers, and the industry in future periods.
How to conduct a PESTEL analysis?
There are six factors analyzed in the framework:
- Political: The first step is to examine the political conditions, which can include laws, regulations, and policy.
- Economic: Next, the economic conditions are explored, such as inflation, economic growth, and business cycles.
- Social: The next step is to identify the social factors, which can include trends, consumer behavior, and demographics.
- Technological: Next, the technological factors are identified, which may include innovations, trends, and digitalization.
- Environmental: The next step is to identify environmental factors, such as climate change, sustainability, and environmental regulations.
- Legal: The final step is to assess the legal conditions, which may include laws, licenses, and regulations.
Practical example of a PESTEL analysis
Summary
A PESTEL analysis is like a roadmap to your company’s future – it can steer the business in the right direction and prepare it for potential obstacles. Every company should conduct a PESTEL analysis to maximize its chances of success.
