The P.E.S.T.L.E analysis helps you understand the international state of the economic climate which your business will globally exist within. You need to understand all the possible influential environments. When Trump became President the national economy drastically improved, at least that was the mindset of investors and corporations holding onto their money from the Obama era. When consumers feel excited to spend money, this may benefit your small business, and this economic influence will also run in cycles. You the business owner in the current climate need to review information like this based on its weight concerning your business revenue stream(s).
All businesses need to think of a global presence in the marketplace and not trust in a regional or national economy. You as the business owner need as many new and repeat customers as you can get for the short-term and the long-term to keep growing your business. Other than the six main headings, the questions and issues (per P.E.S.T.E.L. heading = factor = business impact) are examples and are not exhaustive. You can add your items, or amend these prompts to suit your situation, the experience and skill level of whoever is completing the analysis, and what you aim to produce from the study. If Environmental is a more relevant heading than Economic, then go ahead and substitute it. Ensure you consider the other five aspects, such as Ecological, Legislative, Social, Technologic, and Industry Analysis.
The analysis can be converted into a more scientific measurement by scoring the items in each of the six sections. Establish excellent or lousy reference points, and these reference points are for you to decide. Scoring is particularly beneficial if more than one market is being analyzed, comparing which market or opportunity holds the most potential obstacles. The analysis is instrumental when considering business development and investment options, i.e., whether to develop target market A or B; whether to concentrate on national distribution or to export; whether to acquire company X or company Y. It is beneficial when comparing more than one market analysis, and scoring can also be weighted according to the more or to the less significant factors.
P - Political factors are basically how the government intervenes in the economy. Specifically, political considerations have areas including tax policy, labor law, environmental law, trade restrictions, tariffs, and political stability. Political factors may also include goods and services which the government aims to provide or be provided (merit goods) and those that the government does not want to be delivered (demerit good or merit terrible). Furthermore, governments have a high impact on the health, education, and infrastructure of a nation.
E - Economic factors include economic growth, interest rates, exchange rates, inflation rate. These factors significantly affect how businesses operate and make decisions. For example, interest rates change a firm's cost of capital and therefore to what extent a company grows and expands. Exchange rates can affect the costs of exporting goods and the supply and price of imported goods in an economy.
S - Social factors include the cultural aspects and health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. High trends in social factors affect the demand for a company's products and how that company operates. For example, the aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor). Furthermore, companies may change various management strategies to adapt to social trends caused by this (such as recruiting older workers).
T- Technological factors include technological aspects like R&D activity, automation, technology incentives and the rate of technological change. These can determine barriers to entry, minimum efficient production level and influence the outsourcing decisions. Furthermore, technological shifts would affect costs, quality, and lead to potential innovation.
E – Environmental - These factors have come to the forefront in the last fifteen years or so. They became important due to the increasing scarcity of raw materials, pollution targets, doing business as an ethical and sustainable company. Carbon footprint targets set by governments (this is a good example were one factor could be classed as political and environmental at the same time). These are just some of the issues marketers are facing within this factor. More and more consumers are demanding that the products they buy are sourced ethically, and if possible from a sustainable source.
L – Legal - Legal factors include - health and safety, equal opportunities, advertising standards, consumer rights and laws, product labeling and product safety. It is clear that companies need to know what is and what is not legal to trade successfully. If an organization trades globally this becomes a very tricky area to get right as each country has its own set of rules and regulations.
In closing, could any of your political and economic research help with improving your online revenue or combating any potential legal or environmental issues?
How will technology affect your goals? If so, please describe how below.
Based on the information above, what are your immediate goals/next steps?
Based on the information above, what are your long-term goals/next steps?
You will not find the P.E.S.T.E.L. information in newspapers and magazines!
