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Economics

Finance PESTEL Analysis


Management
As discussed above, the PESTLE model is a method for analysing the external macro-environment that a firm Save £££s with our
Marketing finds itself in. PESTEL can also be written as PEST, SLEPT, STEEPLE, EPISTEL and a variety of other
great
Operations acronyms. The extra “E” in STEEPLE refers to ethical aspects, and the “I” in EPISTEL refers to information
aspects. However, the ultimate framework remains the same, and involves focusing on the main external factors bundle
Project Management which are generally outside the control of a single firm and are generally specific to a certain country or deals
Statistics region, and all markets within in.

Strategy The political aspect generally refers to the degree of political stability in a country, its preferred trading partners
and the influence of the government on markets. For example, France has a stable government with preferential
ties to the other EU members and a desire to maintain a social labour market. In contrast, whilst Russia also
has a stable government, it prefers to trade with its former Soviet allies, and will actively promote industries and
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companies that it perceives as being important to its strategic interests.
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Economic analysis focuses on the degree of market freedom, together with the availability and cost of labour NOW!
and resources. It also focuses on the efficiency of financial markets and the general stability of the exchange
rate and economy in general. Other factors include interest and inflation rates, whether the economy is
developed or developing, the current stage of the business cycle and the rate of economic growth.

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The key social factors tend to be the demographics and culture of the population. For example, China has a
high population, growing rapidly, with a culture focused on group success, and a large number of working
class people. In contrast, Ireland has a lower population which is not growing as strongly, a culture which
focuses on individual achievement and a larger proportion of middle class citizens. Social characteristics also
include education levels, leisure interests and attitudes to factors such as health, the environment and
marketing.

The technological side tends to be concerned with the level of technological development of a country or
region, and how this impacts on the general level of products in the market and the population’s attitude towards
technology. This can also be driven by the current rate of technological development and technological
diffusion. Finally, the impact of technology on the cost and value chain structures needs to be considered.

Legal factors are often connected to political factors, particularly if the analysis is abbreviated to PEST.
However, in many economies the legal factors are influenced by regulators and bodies which are separate
from the government of the time. They include the legal basis for contract enforcement and property rights; any
trade or product regulations; the existence of anti-trust laws and labour laws; pricing and labelling regulations;
and health and safety regulations.

Ecological, or environmental, tend to be more concerned with the natural world, and how businesses may
impact on that. For example, companies must be aware of any endangered species or habitats in locations
where they plan to construct facilities. Even if the social factors of the country where they are operating do not
support maintaining the environment, major companies can still see a backlash from consumers in other

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MBA Help | Strategy - PESTEL Analysis http://www.ukessays.com/mba/strategy/pestel-analysis.php

markets if they do not consider ecological factors in their strategies.

As can be seen from the discussion above, there are a potentially limitless number of factors in the macro-
environment. As such, most firms will tend to focus on the most important factors, particularly those which may
affect its industry. However, firms must be careful to continue to analyse the environment to predict and react
to any future changes in the critical macro-environmental factors, particularly in an uncertain and dynamic
environment.

Other strategy sections:


The Strategic Planning Process
PESTEL Analysis

SWOT Analysis

Competitor Analysis

The Experience Curve


The Value Chain

The Growth Share Matrix

Scenario Planning
Turnaround Management

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