What is PESTEL Analysis?
PESTEL stands for Political, Economic, Social, Technological, Economic, and Legal factors. It is a framework used by marketers to understand the macro-environmental factors that impact an organization’s activities in a country. Pestle analysis or Pestel analysis refer to the same thing.
Who created pestle analysis?
Harvard professor Francis Aguilar created pestle analysis. In 1967, he created a scanning tool called ETPS, in his book “Scanning the business environment”. Later, for convenience the acronym was changed from ETPS to PEST. In later days extensions of PEST came in existence such as PESTLE and STEEPLE.
What is pest analysis?
Pest stands for Political, Economic, Social, and Technological factors. It is the same as PESTEL analysis in a shorter form. In PESTEL, environmental and legal is included, but in PEST only four factors are considered.
What is steeple analysis?
Steeple analysis is a detailed framework for macroeconomic analysis. STEEPLE stands for Socio-cultural, Technological, Economic, Ecological, Political, Legal, and Ethical factors. In comparison to PESTEL and PEST, STEEPLE is more detailed covering macro factors in depth.
The purpose of all the above frameworks is the same, that is to analyze the macro-environment of a business. Your choice of framework depends on your needs and demands of your college professor.
How to do a PESTEL Analysis?
Doing pestle analysis is easy and tough. It actually depends on how much information you collect about any company or country. If you are submitting an assignment in your college, then you can do minimal information research and complete your assignment.
However, for any actual business, it needs thorough analysis as million dollars can be at stake. In such a situation, your research will be quite extensive taking weeks or months.
Selecting country for Pestel analysis
- The first step in doing pestle analysis is that you choose the country.
- Country about which you want to do pestle analysis.
- After that you identify the company for which you want to study the scenario of the country.
Now let us assume that you want to study the Macro environment situation of the United States of America. And the company you chose is Apple computers. Apple computers or Apple Inc manufactures laptops, smartphones iPad, and many other products.
Political factor analysis
Now what you do is first understand the political scenario of the country. Read through the newspapers and historical studies and try to understand the political scenario. Try to know if ity has been stable or it has been full of turmoil and challenges.
We all know that the situation of politics in America has been quite good for a very long time. And the reason for this has been the democracy in the country for more than 300 years. No doubt that the country places different forms of corruption but overall the political situation of The United States of America is comparatively better than other countries on the planet.
Now this understanding of the political scenario of the United States of America gives you a sense that if Apple would have decided to start its business in America then it would not have faced any external challenges from political parties or others in the form of disturbing policies and unthinkable laws and regulations.
A company can operate peacefully in the current political situation of the United States of America. So on the political ground we can recommend Apple computers to start its business in America.
Economic factor analysis
Now let us move to the second factor in pestle analysis. The second factor is the economy. Economic factors give ideas about how well the country is doing in terms of finance and trade activities.
You know that people and businesses operate in the country for various economical benefits. businesses operate to generate profit, people operate within the businesses to generate income in the form of salary and wages, and the government conducts trade activities with the other countries.
Now all the economic activities are being done successfully. Then it is likely that if any business operates there when it has chances of earning profit by selling a good number of products and services. Now that’s look at the situation in America. America has been doing quite well on the economic ground for the past several years.
No doubt that it has faced some economic challenges that shook the economy but in comparison to other countries America has been doing quite well. Therefore it is possible that if Apple computers operate in this country, Then it is possible that it will find customers for products and services.
Here the situation is hypothetical you and I know that Apple is already operating in the country and it has been doing quite well.
Social factor analysis
Now let us move to the social factor of PESTEL Analysis. Under this factor we analyse the population of the country. It can be the social structure, tastes and preferences of the people, what they do, how they do, why they do, and else. It is related to the questions that help you understand the society.
For the USA we can say that the social structure is quite open. People are individualistic in nature. They prefer to be alone and spend their time alone instead of spending their time on social networks. This cannot be true for each of the individuals living in the USA, but for the majority it is true.
Individualism is higher in the USA than in other countries. Now here if Apple computer would sell its products, then it has to take care of this aspect. It has to understand that advertisements resonate with the individuals, instead of social gathering.
You can see that what we did here is that we first tried to understand the way people in the US society interact and behave, then it led to understanding the advertisement that should be done. Here, if the company decides that the product is not suitable for individualism culture, then the company has to either redesign the product or decide not to enter into the market.
Technological factor analysis
Now let us talk about the next factor in the PESTEL analysis, which is technological factor. Under technological factors, we try to understand the technological advancements of a nation.
If the technological advancement is not that great, that is, if people, society, and businesses are not technological better, then it would be difficult for the companies that are completely technologically depend to work there.
Take the example of Amazon. This company cannot operate in a country where people do not use laptops or smartphones. It is difficult to think that even today there are countries where laptops and smartphones are difficult to find, but it is true.
Moreover, it will be difficult for Apple to push its products to the market where people are not oriented towards technology.
So here you saw how we first tried to understand the technological orientation of the target market and concluded whether the market will accept the technology based products.
Environmental factor analysis
Now let us talk about the next PESTEL factor that is environmental factor. Many developed and developing countries want to protect their environment from harmful effects such as air pollution, water pollution, and land pollution.
If Apple computer has its manufacturing unit in America, then the American government would want that the company produces goods without polluting the environment. It should not dump its technological waste anywhere and use proper disposal methods to do so.
Further, the company may have thousands of employees working for it, so it is obvious that huge wastes must be produced by the employees. Here, the company has to ensure that the waste disposal is being done strategically so that the local environment does not pollute. It can be done by joining hands with local waste disposal agencies who can take away all the wastes from the company and dump it at specified places.
Legal factor analysis
Now let us talk about the sixth factor in the PESTEL that is legal. Every country has laws and regulations as per which a company is expected to function. Laws can be related to benefits employees should get from the company, liability of a company in case of any mishappening, rights of companies and employees when something goes wrong.
United States corporate law is responsible for regulation of governance, finance and power of corporations here in the US. Employment & Labour Law are focused on handling the employee issues. So if Apple operates in the USA, then it has to abide by all its laws whether it is tax laws, employee laws, environmental laws, trade laws, and others.
This is the end of how to do pestel analysis. We hope you learned how to do it. If you still have some doubts, then you can ask for more help from us. We have the best marketing assignment help experts who can provide you all the needed assistance.
How to do a pest analysis?
Doing pest analysis is the same as pestel analysis. So if you understood how to do pestel analysis from the above section, then you can comfortably do pest analysis. In fact, you have to do less analysis in pest as like pestel you do not have to do analysis for legal and environmental factors.
Important points about PESTEL Analysis
The first thing that you must take care of when you sit down to do a pestel analysis is that you identify the country for which you are going to do PESTEL Analysis and the company for which you want to study the country. Without these two information, it will be nearly impossible to do a pestel analysis.
We have faced situations where our student customers often ask us to do pestel for a company but do not tell us the country for which we should do it. It creates confusion as you cannot do pestel for the global economy. Reason for it is that you can open or operate a company in a particular country only. And each country’s scenario varies.
So if you will go with global pestle analysis, then you will lose focus and end up collecting data and information that are nearly useless. And this is the reason our assignment help experts always ask for these two pieces of information.
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