Scanning the Environment:

PESTEL Analysis
PESTEL Framework

 PESTEL analysis or PESTLE analysis (formerly

known as PEST analysis) is a framework or tool
used to analyse and monitor the macro-
environmental factors that may have a profound
impact on an organisation’s performance.
 This tool is especially useful when starting a new
business or entering a foreign market. It is often
used in collaboration with other analytical
business tools such as the SWOT analysis and
Porter’s Five Forces to give a clear
understanding of a situation and related internal
and external factors.
 PESTEL is an acronym that stand for Political,
Economic, Social, Technological, Environmental
and Legal factors. However, throughout the
years people have expanded the framework with
factors such as Demographics, Intercultural,
Political Factors:

 These factors are all about how and to what degree a government intervenes
in the economy or a certain industry. Basically all the influences that a
government has on your business could be classified here.
 This can include government policy, political stability or instability,
corruption, foreign trade policy, tax policy, labour law, environmental law and
trade restrictions.
 Furthermore, the government may have a profound impact on a nation’s
education system, infrastructure and health regulations.
 These are all factors that need to be taken into account when assessing the
attractiveness of a potential market.
Economic Factors:

 Economic factors are determinants of a certain economy’s performance.

 Factors include economic growth, exchange rates, inflation rates, interest
rates, disposable income of consumers and unemployment rates.
 These factors may have a direct or indirect long term impact on a company,
since it affects the purchasing power of consumers and could possibly change
demand/supply models in the economy.
 Consequently it also affects the way companies price their products and
services.
Social Factors:

 This dimension of the general environment represents the demographic

characteristics, norms, customs and values of the population within which the
organization operates.
 This inlcudes population trends such as the population growth rate, age
distribution, income distribution, career attitudes, safety emphasis, health
consciousness, lifestyle attitudes and cultural barriers.
 These factors are especially important for marketers when targeting certain
customers. In addition, it also says something about the local workforce and
its willingness to work under certain conditions.
Technological Factors:

 These factors pertain to innovations in technology that may affect the

operations of the industry and the market favorably or unfavorably.
 This refers to technology incentives, the level of innovation, automation,
research and development (R&D) activity, technological change and the
amount of technological awareness that a market possesses.
 These factors may influence decisions to enter or not enter certain industries,
to launch or not launch certain products or to outsource production activities
abroad. By knowing what is going on technology-wise, you may be able to
prevent your company from spending a lot of money on developing a
technology that would become obsolete very soon due to disruptive
technological changes elsewhere.
Legal Factors:

 Although these factors may have some overlap with the political factors, they
include more specific laws such as discrimination laws, antitrust laws,
employment laws, consumer protection laws, copyright and patent laws, and
health and safety laws.
 It is clear that companies need to know what is and what is not legal in order
to trade successfully and ethically.
 If an organisation trades globally this becomes especially tricky since each
country has its own set of rules and regulations. In addition, you want to be
aware of any potential changes in legislation and the impact it may have on
your business in the future.
 Recommended is to have a legal advisor or attorney to help you with these
kind of things.
Environmental Factors:

 Environmental factors have come to the forefront only relatively recently.

They have become important due to the increasing scarcity of raw materials,
pollution targets and carbon footprint targets set by governments.
 These factors include ecological and environmental aspects such as weather,
climate, environmental offsets and climate change which may especially
affect industries such as tourism, farming, agriculture and insurance.
 Furthermore, growing awareness of the potential impacts of climate change is
affecting how companies operate and the products they offer. This has led to
many companies getting more and more involved in practices such as
corporate social responsibility (CSR) and sustainability.
Case Study:
PESTEL for Indian Telecom Industry
Indian Telecom Sector

 Telecommunication sector is a rapidly growing industry in India.

 The telecommunication sector has made notable growth in reducing
transaction costs, increased internet speed, allowing free calls throughout
India, changing lifestyles of the societies, services, and brands.
 Telecommunication sector has entered the 4G technology in India. It has
massively changed the market structure and has increased the competition
among the operators.
 India’s mobile market is one of the fastest-growing market in the world.
Political Analysis

 Foreign Direct Investments (FDI):

 FDI has played a vital role in shaping the telecom sector in telecom infrastructure
and financial expansion over the past years. FDI’s during the financial year
2018- 2019 was US$2.67 million. However, there was a fall in FDI inflow in
2019. The reasons behind the fall in FDI is because of the reduction of the
number of telecom companies through mergers. Another reason was the
lack of certainty over telecom regulations and the absence of conducive
environment to operate.

 National Digital Communication Policy – 2018:

 The Government of India has introduced National Digital Communication
Policy (NDCP) – 2018. It fulfils the communication and information needs of
enterprises and citizens. This policy establishes resilient, secure, ubiquitous and
affordable digital communications services and infrastructure.
Economic Analysis

 Goods and Service Tax: The Goods and Service Tax rate (GST) is 18% for the
telecom services. The rate varies based on the place in which
telecommunication services are offered. (13) (PDF) PEST Analysis of Present
Indian Telecom Sector.
 Domestic and export share: TRAI had made some recommendations
on exports. It has instructed that India should target in bringing down
the import of telecom equipments to the level of net-zero within 2022.
 Revenue Growth: Fiscal owing has expected that average revenue per
user (ARPU) will increase by 11%. Due to elevated Capex and weak cash
accruals, the telecom industry has been pushing into debt since the last three years of
fiscal 2019
Social Analysis

 Education:
 By leveraging the increasing penetration of mobile value-added services and
mobile phones, significant progress can be produced towards attaining
100% literacy. (13) (PDF) PEST Analysis of Present Indian Telecom Sector.
 Digital education has opportunities to expand services to rural areas because
more of the students are in rural areas only.
 Health:
Healthcare delivery is set to change it’s course in the future.
 Telecom development and other associated techniques contribute enhanced
results of quality.
 In several instances, these interrelated technological innovations also decreased
the need for hospitalization.
Technological Analysis

 The telecommunications industry is on the verge of technological revolution and digital

transformation in order to offer its consumers a wider range of services.
 The 4G LITE services created a good platform for the exponential growth of
cloud, Internet of Things, Machine to Machine, big data and analytics which
led to huge development of voice, video, and data (13) (PDF) PEST Analysis of
Present Indian Telecom Sector.
Summary

What did we learn?

 We learnt the concept of PESTEL with the help of a case study on PESTEL of
Indian Telcom Industry