Pestel analysis is an assessment of economic, political, social, and technological developments in a country or region. A pestel framework shows the interactions between these variables through their associations with environmental forces that influence international competition. TheSwot Analysis of Jollibeeunveils how different factors affect the performance and activities of the company.
The term pestle was coined by Professor Lawrence E. Grinter in his book International Marketing: An Analytical Approach. The framework was developed by Grinter and Stephen C. Young in their book International Business: Environments and Operations.
In general, pestel analysis is a logical, systematic method of analyzing the environment of a country or region to determine how it might affect business operations within that market.
It can be used to identify the strengths and weaknesses of a country or region in relation to the business sector being studied. This type of analysis can be used for "bottom-up" or "top-down" strategy formulation.
Pestel analysis stands for Political, Economic, Social, Technological, Environmental, and Legal Analysis. The first letter of each word spells out the name "PESTEL". Each of these elements has a significant impact on the success or failure of an organization.
The Political Factor
The political factor in pestel analysis is concerned with how the actions and decisions of governments will affect your business. For example, if a new environmental law was passed then your business may be forced to purchase new equipment.
The Economic Factor
The economic factor in pestel analysis is concerned with the changes that happen within an economy. This would include new inventions, inflation rates, and trade tariffs.
The Social Factor
The social factor in pestel analysis looks at how society will view your business. For example, if you implement a green initiative then this may cause people to be more likely to choose your business because you are eco-friendly.
The Technological Factor
Technological factors in pestel analysis look at how new technologies could affect your business, either positively or negatively. For example, if a new type of faster internet connection was released then it would be beneficial for businesses who need to transfer large files quickly and efficiently.
The Environmental Factor
The environmental factor in pestel analysis is concerned with how your business can be more environmentally friendly. This may mean that you have less waste, causing a positive impact on the environment and a possible negative impact on some of your costs.
The Legal Factor
Legal factors in pestel analysis deal with how laws and legal rights could affect your business. For example, if a law was passed that allowed employees to work overtime for free then this would have a positive impact on the company because it is not costing them any money.
To successfully implement pestel analysis in your business you must take into consideration these five factors when making decisions. It is suggested that the factors are assessed every month and at the beginning of each new financial year so that your business can use them as a guide for future decisions. Although this sounds very helpful, there are some limitations to pestel analysis that you should also take into consideration.
The first limitation is that it's only a forecasting tool and not a decision tool. This means that it is used to predict possible future outcomes, however, it can't be used as a guide on whether or not you should implement different decisions.
Another limitation is that this forecasting tool doesn't take into account any marketing issues, such as brand awareness and customer loyalty.