How to use PESTLE analysis as a tool to help identify the external factors that can affect your business.
What is a PESTLE Analysis?
PESTLE analysis is a framework that can be used as a tool used to help identify the external factors that may affect a business or organisation and commonly presented as a six pillar structure.
These factors are:
- Political factors including tax policy, employment laws and environmental regulations.
- Economic factors that affect spending power, such as interest rates, inflation and exchange rates.
- Social factors include health consciousness, population growth rate and age distribution.
- Technological factors include the emergence of new technologies, R&D activity and automation.
- Legal factors include consumer laws, anti-discrimination laws and employment laws.
- Environmental factors include weather conditions and climate change.
The structure of a PESTLE allows you to easily view all of the key external factors influencing your business in one diagram.
What are the advantages of PESTLE?
PESTLE as a framework, has several advantages:
- It’s simple to understand and use
- There’s an easy process to follow through (see below)
- You can do it on your own, as a team in person, or as a group remotely
- It can provide a detailed but digestible view on the external factors
- It makes people look outward at the business environment
What are some of the limitations of PESTLE?
As with every tool, PESTLE has some limitations
- It is easy to be too broad or not factual enough, which will disrupt the PESTLE
- It has high level detail on a lot of subjects, rather than in-depth analysis
- It doesn’t contain a way to weight the importance of the elements of the PESTLE
How do you make the most out of PESTLE?
A PESTLE can be one of the most insightful and detailed frameworks, helping you future proof and grow your business by being fully focused to the external environment.
There are two golden rules to follow before you begin your PESTLE:
- Prepare for the session by considering the topics listed in the below question
- Talk to your employees and get their thoughts on the business and environment
What prework should be done before a PESTLE?
Whilst no prework is required for a PESTLE, it is helpful to have knowledge of:
- Current client conditions – what trends impact your customers?
- What geography do you operate in and where are your customers?
- Find the latest news on your industry using a system like Google News
- Look at examples of recent sales wins and recent customer churns
- If possible, allocate each pillar of PESTLE to different managers to research in advance of the brainstorming session
- Any industry activity looking at tools like Crunchbase
If in a group, these can be shared via an email beforehand or presented on the day.
What's the difference between LoNGPESTLE and PESTLE?
LoNGPESTLE is the same as PESTLE with an added dimension of Local, National and Global within each pillar, allowing you to classify entries by their geographic impact. You can find out more in our guide on LoNGPESTLE.
Who invented PESTLE?
The first concept of PESTLE, initially just PEST, is commonly cited to be Francis Aguilar who published a book in 1967 referring to ETPS.
What’s the best medium for PESTLE?
PESTLE works best when put together by a cross-disciplined team either physically or virtually. You need a mix of employees with different skills and market knowledge to ensure you capture all aspects of the pillar.
What is an example PESTLE?
Many example PESTLEs can be found in the Lucidity tool such as:
How often is PESTLE updated?
It is best practise to review your PESTLE on an annual basis, this helps provide you with the ever changing landscape you operate in and keeps all employees looking outward when making their decisions.
Where can I find a guide to completing a PESTLE?
You can check out our guide to completing a PESTLE or view the video below.
Where can I find out more information on PESTLE?
You can check out the Ultimate Guide to PESTLE Analysis to find tips, examples, how-tos and more! 🙌