How to Write a PESTLE Analysis to Examine Factors That Affect Your Business
You may have heard of it before. It goes by many names: PESTLE, PESTEL, and sometimes just PEST. Despite its many aliases, every name refers to the same thing: a marketing analysis used by entrepreneurs to take a look at the external (or macro) factors that affect their business or business-to-be. An organization that takes the time to put together one of these studies knows how to plan for the future, respond to changes in the market, and differentiate themselves from the competition in order to succeed in saturated industries. The name of the study is an acronym that describes the external factors a researcher must look at. Those factors are political, economic, social, technological, legal, and environmental. Here’s how to write a PESTLE analysis:
- Start political
- Move on to economic factors
- Examine social influences
- Look at technological factors
- Understand the impacts of the legal system
- Study how environmental changes affect you
The very first section of your study begins with a topic that is best left undiscussed at a family dinner but is absolutely crucial to understand for business. That topic is politics. When learning how to write a PESTLE analysis, you must examine the extent to which a government can impact or influence the economy or specific industries. They may do this by imposing extra taxes, changing international trade agreements, or introducing new fiscal policies that affect you. When conducting your research, examine the political factors (and any predictions made regarding politics) of all the countries you do business in. By understanding the changes that may affect you, you can plan how to capitalize on positive ones or mitigate negative ones.
Move on to Economic Factors
This segment of your study will examine the economy as it functions independently of governments. Economic factors directly impact how businesses are able to price products while affecting the ability of customers to purchase goods. In a slow economy where jobs are scarce and wages are low, consumers are more diligent with how they spend and on what. But in a booming economy, sales are more likely to pick up. Economic influences to take a look at include inflation rates (both how inflation has changed over the last year and how it is expected to change in the coming year), interest rates, and currency exchange rates.
Examine Social Factors When Learning How to Write a PESTLE Analysis
Trends, demographics, and changes in population values are all social factors that may impact a business. For example, a jewelry store may see or predict a drop in diamond sales. That’s because there is a current trend of consumers preferring to buy gems that have been ethically sourced. Holiday shopping, celebrity endorsements, and population ages are just a few other social factors that affect business. By understanding the buying trends of your consumers, you can more effectively plan marketing efforts to reach your target audiences.
Look at Technological Factors
Technology changes as fast as industry does, and sometimes can be more unpredictable. However, when learning how to write a PESTLE analysis, it’s incredibly important to make a few educated guesses about what emerging technologies might affect your business, either positively or negatively. There are three main elements of this factor to study: new technologies to produce goods and services, new technologies to distribute goods and services, and new technologies to communicate with target markets. Common innovations include automation, increased funding for research and development, and technological awareness.
Understand the Impacts of the Legal System
Changes or updates to laws in all regions you do business with may affect how your organization operates. Legal factors may also be internal, in that changes to company policies could impact your business (although these changes are self-governed). These types of policy changes include updated health and safety standards, further pushes for workplace equality and equity, and consumer protection laws.
Study How Environmental Changes Affect You
Environmental factors might not affect every business (they tend to most strongly impact tourism and agriculture), but all businesses should still research ways in which the environment could impact them. For example, if there’s an increase in severe snow storms in certain regions, product deliveries to those regions could be impacted. Meanwhile, a company based in areas where earthquakes, floods, or wildfires are common may want to plan for such events. Environmental factors include but are not limited to, climate and weather, geography, natural disasters, and trends in environmental activism (like pushes for improved recycling or renewable energy).
Because industries change on a dime, once you know how to write a PESTLE analysis, you should rewrite it every six months to ensure your business always remains aware and on top of the external factors that could affect it.
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