Change. Not many people can adapt to it, even though most would admit they can and will. Who are we fooling? Change is an adjustment, another start to the unknown, forcing us to leave familiarity and comfort and the ease to which we live our lives by the same, often monotonous cycle. You can also like audience analysis templates.
But change, especially in an era where it is everywhere. From the internet to our personal and work lives, it is something we cannot escape, especially when it comes to business. Changes in the business environment, just like any type of change can either create opportunities or cause significant threats, depending on how you deal with them. You can also see fault tree analysis.
PESTLE Analysis is one simple and common and effective tool that can help you analyze the Political Economic, Socio-Cultural, Technological and Environmental changes in the corporate setting, specifically in the current state of your company. By using the tool, you have better chances at understanding the bigger picture regarding elements of change that affects your business and from this, make use of the opportunities that they are able to present. You may also like customer analysis templates.
In his 1967 book, “Scanning the Business Environment,” Harvard professor Francis Aguilar developed a scanning tool he called ETPS which was later improved to create the current acronym as we know it. A PESTEL analysis is an acronym for a strategy which is used in identifying the macro or external factors which an organization faces. You can also like company analysis report templates.
The letters in the acronym stand for Political, Economic, Social, Technological, Environmental and Legal. Organizations may reduce the acronym to PEST depending on what they find more applicable to their needs. Either that or they can add to some areas, such as international. You may also see behavior analysis templates.
The PESTLE is part of a situational analysis conducted before any kind of strategy takes place in marketing, which is ideally repeated regularly where 6 months is the minimum in order to expose the changes in the macro environment which is fundamental in forming strategies and plans for the business. Organizations that are following the regular monitoring and responding to changes in their external environment are able to rise above the competition thereby creating a competitive leverage.
A PESTEL analysis helps a business identify the macro-environment that could greatly affect their market, its movement, and trend, as well as analyze how such factors can directly affect their business. It is however important when conducting this analysis that the forces affecting the company aren’t only identified but also evaluated. You can also read market segmentation analysis templates.
For instance, what impact could they have on the business/ How would these factors affect sales, profit, etc? The results of a PESTEL analysis would then be very useful in filling opportunities and threats in a SWOT analysis, which brings us to this: A SWOT analysis isn’t a PESTEL analysis, although they often go hand in hand when trying to check an organization’s current position.
Variants developed on the PEST framework also include:
Just to reiterate, PEST analysis has often been associated with SWOT analysis as it should but not in the way most businessmen do. The two tools have different areas of focus. PEST analysis is conducted to look at the business situation from a bigger picture and the factors considered to have greater influence in decision-making processes, a market or a new project. Professional SWOT analysis, on the other hand, explores those factors at the base and product level although these tools are better used together in creating more effective strategies from an analysis built on a stronger foundation.
These are factors that determine the extent to which the government, the administration, and its policies may affect an organization or a certain industry. Political factors would include foreign, trade and political stability as well as fiscal and taxation. The current situation in politics impacts markets and it would impact your business too. You can also like SWOT analysis templates.
Here are the questions you can ask when considering these factors:
These are the factors affecting the economy and at the global and national stage, could, in turn, have a direct effect on the business and its profitability. Under economic factors you have to think of interest rates, unemployment, and employment rates and even inflation rates, cost of raw materials and foreign exchange rates. You can also like trend analysis templates.
This is where you need to set focus on the social environment and learn about emerging trends. These factors help a marketer to better understand the needs of their customers as well as wants. Under these factors, you should count changes in family demographics, educational attainment, cultural trends, changes in attitude and lifestyle changes. You can also like gap analysis templates.
Here are some of the questions you should ask:
Under these factors, the rate at which technology changes and develops should be a very important consideration since it could highly affect a specific market or sector. You should especially take into account changes in digital technology and communication which could affect marketing efforts and as well as the latest model of distribution and logistics. You may also see situation analysis templates.
These are the factors related to your surroundings and the impact of the environmental aspects of your business. With the growing concerns about climate change, preserving of resources and the focus given to Corporate Sustainability Responsibility, environmental factors are becoming more important. The business should, therefore, consider recycling policies and conservation procedures, waste disposal, and of course, sustainability. You can also like data analysis templates.
A business must have a good understanding of the legalities and what’s allowed in their areas of operations. You also have to be constantly updated and aware of any legislation and regulations changes that may affect your business operations one way or the other. Factors would include employment legislation, labor laws, consumer law, safety, risk management, local, state, international and trade regulations and restrictions.
To some extent, political factors can be related to legal factors but the key difference is that political factors are driven by government policy whereas legal factors are those an organization needs to comply with. You can also like functional behavioral analysis samples.
After identifying changes that are happening in your business environment, take a good look at each change and gather your team to brainstorm opportunities that such changes could offer for the business. For instance, do some of the changes help you with a new product idea or establish better and more efficient processes? Likewise, it’s also important to consider the changes that can negatively impact your business and undermine its goals for growth.
If you get this early on, you will be more than likely prepared to avoid them or reduce their impact on your business. The next step after identifying opportunities and threats would be building on the opportunities to exploit them on a plan of action to further help your business become more successful.