an inTroducTion To

PESTLE anaLySiS

SMALL BUSINESS INFORMATION SERIES

February 2011 Edition

© Housing Industry Association

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February 2011 Edition > I HIA members: Have direct access to practical advice and professional assistance including the latest information on technical. access to a wide industry network and being actively promoted Australia-wide as being ‘the best in the business’ by their industry association.au or call HIA on 1300 650 620. after obtaining accountancy or other professional advice. The information provided is neither financial nor investment advice. or who have decided to commence. and participants should make their own judgment on the application of this information to their own personal circumstances. regulatory and business matters. new products and materials. a small business. For further information on the benefits of HIA membership or how you can join HIA. go to hia. . if necessary. The content of this guide as provided by Housing Industry Association Limited (HIA) is practical information of a general nature only for those who are operating. HIA will not be liable for any loss or damage arising from the actions of any individual based on or relying on any of the information provided in this guide. Receive the latest market information on consumer trends.com. and Benefit from increased business opportunities through skills development.

stand back and have a look at the bigger picture. It’s a way of checking that your business is still relevant to the market-place. a business owner should stop.” Every now and again.AN INTRODUCTION TO PESTLE ANALYSIS How this guide can help you run your building business It is easy to get bogged down in the day-to-day running of your business and end up not being able to “see the forest for the trees. The PESTLE Analysis is a technique that can help you do this in a simple and structured way. being: What is a PESTLE Analysis? How do I conduct a PESTLE Analysis? AN INTRODUCTION TO PESTLE ANALYSIS [FEBRUARY 2011] 3 © Housing Industry Association Limited ABN 99 004 631 752 . This guide explains the simple business planning technique of a PESTLE Analysis in two parts.

and > Planning those actions you may wish to take to: – minimize any threats. What is the “analysis”? AN INTRODUCTION TO PESTLE ANALYSIS [FEBRUARY 2011] The analysis phase consists of a 2 step process. being: > Evaluating the impact (both actual and likely) that each factor may have on your business. at some time in the future. affect your business. or > may. Those factors are grouped under the following headings: > Political > Economic > Socio-cultural > Technological > Legal > Environmental The factors that you would include in your list will depend on the nature and size of your business. “Macro-economic” is a fancy way of describing those external factors which will/may affect your business but over which your business has no control. and new product development.1 What is “PESTLE”? What is PESTLE Analysis? PESTLE is shorthand for a list of “macro-economic” factors that: > already. 4 © Housing Industry Association Limited ABN 99 004 631 752 . such as business planning. and – maximise any opportunities This analysis can be used for a number of purposes. marketing strategy.

write down those factors that: > already. Step 5: review it Don’t forget to regularly review your plan to see whether or not you: > need to make any changes to it. under each heading. Step 2: Think about it Now you have made your list. If possible. and > are still on the right track. you will need to work out: > which. amount to real and significant opportunities or threats to your business. or – a threat. it’s time to sit down and think about: > how each factor (or combination of factors): – will/may affect your business. – will/may affect the industry that your business is in.2 The steps to follow: How do I conduct a PESTLE Analysis? To conduct a PESTLE Analysis. of these factors. To help you with this exercise. © Housing Industry Association Limited ABN 99 004 631 752 5 . we have included a template document in Appendix A for you to use. > which item (or group of items) from your list will be: – an opportunity. Step 3: Make a plan In this step. affect your business. you will need to create an action plan. you need to take the following steps: Step 1: Make a list Write down the headings and. or > are likely to. Step 4: do it Now you have worked out what you are going to do. try to include trends. and AN INTRODUCTION TO PESTLE ANALYSIS [FEBRUARY 2011] > what you can and will do about it.

or > are likely to. > The policies and fundamental beliefs belonging to the political party (eg Liberal.Step 1: Make a list Write down the headings and. the Greens) that is in power. > Interest rate movements. > Research and development. > Employment levels. education level and income distribution. religion. age. affect your business. Examples of factors that may affect your business in the residential construction industry include: Political factors: > The likelihood of a change in government at an upcoming election. Examples include: population levels. under each heading. > Exchange rate movements. If possible. Technological factors > New products. write down those factors that: > already. > The level of government interference in the market-place. > Inflation. ethnicity. > Social mobility. > New business processes. Economic factors > Business cycles (booms and busts). Labor. gender. 6 © Housing Industry Association Limited ABN 99 004 631 752 AN INTRODUCTION TO PESTLE ANALYSIS [FEBRUARY 2011] . > Living standards. try to include trends. Socio-cultural factors > Demographics – this refers to the different attributes of a country’s population. > Lifestyle attitudes. > Consumer confidence. population growth.

AN INTRODUCTION TO PESTLE ANALYSIS [FEBRUARY 2011] 7 © Housing Industry Association Limited ABN 99 004 631 752 . > Waste Disposal. Step 2: Think about it Now you have made your list. it’s time to sit down and think about: > how each factor (or combination of factors): – will/may affect your business. Environmental factors > Climate Change – including rising sea levels. > which item (or group of items) from your list will be: – an opportunity. and – specifically to those businesses that operate in the residential construction industry. cyclones and tsunamis). > The effect of the factor or influence may change in the future (even if its behaviour hasn’t changed).Step 1: Make a list Legal factors > The different types of laws that apply: – generally to all businesses. extreme or unusual weather patterns (eg droughts. > The way in which legal disputes are handled. or – a threat. – will/may affect the industry that your business is in. > You need to look at combinations of factors as well as looking at each single factor in isolation. floods. you need to be aware of the following: > The behaviour of each factor or influence may change in the future. > Energy consumption. When carrying out this step. because the effect may be very different.

either now or at some time in the future. You will need to look at other factors to get a better idea of whether or not your business and/or the industry will need to adapt to this phenomena. This will/may affect: > your workforce. Examples of other factors you should consider: Workforce considerations > Population growth – is Australia’s future growth likely to be from natural increase or from increasing immigration levels)? > Skilled workforce – what is the trend for apprentices? What skills do those immigrants arriving in Australia have? > The mining boom – is the workforce in the residential construction industry likely to be affected by the mining boom? Future demand/design of housing > Will these people want to stay in their own homes or would they prefer to live in retirement homes? 8 © Housing Industry Association Limited ABN 99 004 631 752 AN INTRODUCTION TO PESTLE ANALYSIS [FEBRUARY 2011] . and > Using scenarios to assess the impact of those factors that are in your list. and > the future demand/design of housing. Take the ageing population as an example This is a socio-cultural factor (being a demographic of the Australian population).Step 2: Think about it The following tips may help you with this step: > Getting as many people as possible involved in this exercise from the beginning.

Step 2: Think about it We’ll concentrate on the future demand/design of housing issue aspect. > There may be more developments for retirement homes/villages/gated communities rather than for mixed use developments consisting of apartment blocks and shopping centres. AN INTRODUCTION TO PESTLE ANALYSIS [FEBRUARY 2011] Whether or not these represent opportunities or threats will depend on matters such as: > The size and type of your business. This in turn. © Housing Industry Association Limited ABN 99 004 631 752 9 . > Wealthier retirees may decide to make a sea-change and build their new home on a block of land (which they have spotted during their “grey nomad” stint around Australia). > There may be an increase in sub-divisions by those retirees who own large parcels of land (to help fund their retirement). The question here is – will retirees want to sell their existing home and move into a retirement home? if the answer is “no”: > There may be an increased demand for altering or adapting current homes to allow for wheelchair access and being able to live as independently as possible. > Your willingness to adapt the way you do business or your business activities. > There may be an increased demand for adding separate living quarters to an existing dwelling (to accommodate live-in carers). > There may be an increased demand for installing domestic security systems. if the answer is “yes”: > There may be increased demand for “knock-down/ rebuilds” or major renovation work as younger homebuyers purchase older-style housing. may result in an increased demand for new homes.

Step 4: do it Now you have worked out what you are going to do. of these factors. The object of this part of the exercise is to: > maximize opportunities. That way. you will need to work out: > which. and > what you can and will do about it. and > minimize threats to your business. Opportunities and Threats) Analysis. don’t forget to include time frames (for example.Step 3: Make a plan In this step. you’ll have more chance of success. AN INTRODUCTION TO PESTLE ANALYSIS [FEBRUARY 2011] Step 5: review it As is the case with all plans. > If your business uses SWOT (Strengths. medium-term & long-term). make sure you break them down into smaller steps. then having done this part of the PESTLE Analysis will mean that all the work on identifying the “opportunities” and “threats” of external factors to your business has already been done. you will now need to create an action plan. you need to regularly review them to see whether or not you: > need to make any changes to it. Weaknesses. remember > When drawing up your plan. short-term. and > are still on the right track. 10 © Housing Industry Association Limited ABN 99 004 631 752 . How often you do this will depend on the factor involved and the effect is has or is likely to have on your business. amount to real and significant opportunities or threats to your business. Whatever goals or objectives you set for your business.

BUSINESS NAME: REVIEW DATE INDUSTRY PURPOSE OF BUSINESS: Short/Med/Long FACTORS TO CONSIDER IMPORTANCE TIME -FRAME High/Med/Low OPP/THREAT PRIORITY ACTION TO TAKE (please circle) High/Med/Low / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / / Environmental Legal Technological SocioCultural Economic © Housing Industry Association Limited ABN 99 004 631 752 Political aPPEndiX a AN INTRODUCTION TO PESTLE ANALYSIS [FEBRUARY 2011] 11 .

com.au .SMALL BUSINESS INFORMATION SERIES: AN INTRODUCTION TO PESTLE ANALYSIS For more information. you can contact Hia by phone: 1300 650 620 or by email: enquiries@hia.

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