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The PESTEL Analysis of An Organisation

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If you are thinking of starting a start-up company, then you must conduct this analysis to judge the overall market scenario. The framework that is used by the marketers to understand, monitor and analyse various factors that may have an impact on the company externally is known as the PESTEL analysis. The way the business performance gets affected by the macro-environmental factors is determined through this analysis and helps in achieving the goals of the company.


The full form of PESTEL stands for:

P – Political

E – Economic

S – Social

T – Technological

E – Environmental

 

L – Legal


The various threats recognised are categorised under their appropriate division but at times overlaps too. Suppose, introduction of a new government and newly imposed taxes can be grouped under political as well as economic factors. 


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What Kind of Threats Can Be Placed Under Each of The Categories in A PESTEL Analysis?

Political: This refers to the various government interventions in the country’s economy; how much do they intervene and to what extent is determined here. This poses a huge impact on the B2C companies mostly. This includes:

  • Government tax regulations and policies

  • Policies regarding global trade

  • Policies regarding business regulations

  • Laws regarding the current market competition

  • Political stability of the country

  • Tax implications

  • Regulations in the industry

Economic: The net profit and loss mostly depends on these economic factors and also has a huge effect on the B2C companies. This includes:

  • Consumer spending

  • Cost of living

  • Globalisation

  • Power of public spending

  • Exchange rates and currency values

  • Labour costs

  • Inflation

  • Economic decline or growth

  • National GDP.

Social: This category includes the attitudes and shared beliefs of the population and is also referred to as the socio-cultural factors. These factors help the marketers to understand the customer and the factors that drive them. They include:

  • Buying habits

  • Pressure groups or community groups

  • Change in choices or style

  • Cultural norms

  • Population demographics

Technological: The technological landscape changes too often and impacts the marketing of the products. This includes:

  • Response towards the technological advancements

  • Improvement in the production technologies

  • Rapid technological innovation and progress

  • Protection technology and data storage

Environmental: These factors have become important in the recent past mostly due to the increasing pollution targets, raw materials scarcity, etc. consumers are demanding to use sustainable sources to make products. This includes:

  • Corporate social responsibility

  • Carbon footprint and emissions

  • Regulations regarding environmental protection.

Legal: In order to trade properly, a company must know what is legally right and wrong. This includes:

  • Safety and health regulations

  • Laws regarding employment labour

  • Taxation changes in employment

  • Laws related to employment and wages

  • Legislatorial changes

  • Regulations regarding working practices.

The Advantages and Disadvantages of This Type of Analysis

The advantages of PESTEL analysis are:

  1. Provides an easy and simple framework for business analysis.

  2. It involves the use of cross-functional expertise and skills

  3. Helps a lot in reducing the effects and impact of the various external factors that may be potential threats to your company.

The disadvantages of PESTEL analysis are:

  1. The various assumptions for this analysis are made liberally.

  2. This analysis has to be conducted on regular intervals to be updated with the new threat for the company. But most of the companies fail to do so as they do not want to spend the money on such analysis.

  3. The data and information may be oversimplified by the people who are carrying out the PESTEL analysis. This information is used in turn for making the important decisions for the company.


To analyse the marketing positioning of a company, you need to carry SWOT analysis along with this one. An expert from a
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