PESTEL ANALYSIS

WHAT IS PESTEL ANALYSIS?

 It is a framework or tool used by marketers to analyze and
monitor the macro environmental (external marketing
environment) factors that have an impact on an
organization. The result of which is used in a SWOT
Analysis.
 P – POLITICAL
 E – ECONOMIC
 S – SOCIAL/ SOCIO – CULTURAL
 T – TECHNOLOGICAL
 E – ENVIRONMENTAL
 L - LEGAL
 POLITICAL FACTORS
 These are all about how and to what degree a
government intervenes in the economy. This can
include;
a. Government policy
b. Political stability or instability in overseas markets
c. Foreign trade policy
d. Tax policy
e. Labor law
f. Environmental law
g. Trade restrictions
 ECONOMIC FACTORS
 Economic factors have a significant impact on
how an organization does business and also how
profitable they are. Factors include-
1. Economic growth
2. Interest rates
3. Exchange rates
4. Inflation
5. Disposable income of consumers and businesses
 Economics factors can further broken down into;
a. MACRO ECONOMICAL FACTORS – deal with
the management of demand in any given economy.
Government use interest rate control, taxation
policy and government expenditure as their main
mechanism.
b. MICRO – ECONOMIC FACTORS – are all about
the way people spend their incomes. This has large
impact on B2C organizations in particular.
 SOCIAL FACTORS
 Also knows as SOCIO-CULTURAL FACTORS, are
the areas that involve the shared belief and attitudes
of the population. This includes;
1. Population growth
2. Age distribution
3. Health consciousness
4. Career attitudes
 These factors are of particular interest as they have
direct effect on how marketers understand customers
and what drives them.
 TECHNOLOGICAL FACTORS
 We all know how fast the technological landscape
changes and how this impacts the way we market
our products. Technological factors affect
marketing and the management thereof in three
different ways;
1. New ways of producing goods and services
2. New ways of distributing goods and services
3. New ways of communicating with the target
markets
 ENVIRONMENTAL FACTORS
 These factors have only really come to the forefront
in the last fifteen years or so. They have become
important due to the increasing scarcity of raw
materials, pollution targets, doing business as an
ethical and sustainable company, carbon footprint
targets set by government (this is a good example
were one factor could be classes as political and
environmental at the same time).
 More and more consumers are demanding that the
products they buy are sourced ethically, and if
possible from a sustainable source
 LEGAL FACTORS
 Legal factors include-
1. Heath and safety
2. Equal opportunities
3. Advertising standards
4. Consumer rights and laws
5. Product labeling
6. Product safety
BCG MATRIX
What is BCG Matrix?
 The Boston Consulting Group’s Product Portfolio
Matrix (BCG matrix) is designed to help with long-
term strategic planning to help a business consider
growth opportunities by reviewing its portfolio of
products to decide where to invest, to discontinue
or develop products. It is also known as the
“growth/ share matrix”
The matrix is divided into four
quadrants;
 DOGS – these are products and/or offerings with
low growth or market share
 QUESTION MARKS / PROBLEM CHILD –
product/offerings in high growth markets with
low market share
 STARS – product/offerings in high growth
markets with high market share
 CASH COWS – products/ offerings in low
growth markets with high market share
How to use the BCG matrix?
 To apply the BCG matrix you can think of it as
showing a portfolio of products or services, so it
tends to be more relevant to larger businesses
with multiple services and markets.
 However, marketers in smaller businesses can
use similar portfolio thinking to their products or
services to boost leads and sales.
 Considering each of these quadrants, here are some
recommendations on actions for each;
 DOG products – The usual marketing advice
here is to aim to remove any dogs from your
product portfolio as they are a drain on
resources, however, this can be an over-
simplification since its possible to generate
ongoing revenue with little cost.
 for example, in the automotive sector, when a car
line ends, there is still a need for spare parts. As
SAAB ceased trading and producing new cars, a
whole business emerged providing SAAB parts.
 QUESTION MARK products – as the name suggests, it’s
not certain whether if they will become a star or drop
into the dog quadrant. These products often require
significant investment to push them into the star
quadrant. The challenge is that a lot of investment may
be required to get a return.
 For example, Rovio, creators of the very successful
Angry Birds game has developed many other games you
may not have heard of,. Computer games companies
often develop hundreds of games before gaining one
successful game. Its not always easy to spot the future
star and this can result in potentially wasted funds.
 STAR PRODUCTS – can be the market
leader through require ongoing investment
to sustain. They generate more ROI than
other product categories.
 CASH COW PRODUCTS – the simple rule here
is to ‘Milk these products as much as possible
without killing the cow”
 Often mature, well – established products. The
company Procter & Gamble which manufactures
Pampers nappies to Lynx deodorants has often
been described as a cash cow company.