PESTLE Analysis – All You Need to Know!

What if you could predict the challenges and opportunities your business might face in the future? Sounds impossible, right? With PESTLE analysis, you can. What is PESTLE analysis and what do you need to know and cover in a PESTLE analysis assignment? All your questions will find the right answers in this blog. 

What is a PESTLE Analysis?

A PESTLE analysis is a technique used by business analysts to understand how various external factors could influence an organization’s future. Each letter in the acronym ‘PESTLE’ represents these external factors. Political, Economic, Social, Technical, Legal and Environmental. 

What is the Importance of PESTLE Analysis?

When one starts a business, they do it with the intention to expand it further. Understanding the factors that influence the future growth prospects is essential. While it is not possible to 100% accurately predict the fate of a business, PESTLE analysis can help understand several external factors that directly or indirectly affect it. 

For instance, looking into the political factor, which is a key element in PESTLE analysis, such as the government’s tax policies, can help a business be prepared to adjust its production, marketing or expansion strategies. This way, if a new tax regime tends to impose more levies on a certain aspect of operation like importing goods from certain countries, they can prioritize collecting raw materials locally or from countries which allow lower import duties.

Difference Between SWOT and PESTLE

While both PESTLE analysis and SWOT analysis are techniques or tools used in evaluating and understanding factors that influence a business, both are different and serve unique purposes. PESTLE stands for Political, Economic, Social, Technical, Legal and Environmental Analysis. As you can see, they are all external factors. On the other hand, SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. They are mostly internal-focused. So, both analyses are essential to get a complete picture of a business’s standing to growth and scale. 

What Are the Components of the PESTLE Analysis?

The PESTLE framework consists of six components. They are Political, Economic, Social, Technological, Legal and Environmental factors. When you write your pestle analysis assignment, it is crucial to cover each of these components with relevant supporting examples. Let’s understand how they contribute to the study. 

Political Factors:

You might have noticed that some states or countries are more industrial-friendly while others are not. Why is it so? It is because of the political factors such as tariffs, trade restrictions or political stability in that place. Businesses need to keep a constant track of the political changes in the place where they operate. 

Economic Factors:

The economic factors directly influence businesses’ success or failure. Inflation, for instance, can influence people’s purchasing choices. Businesses need to strategize their marketing catering to people and at the same time ensuring that their operational costs don’t outrun the revenue. 

Social Factors:

Businesses must adapt to social changes to maintain their relevance. People’s lifestyles are constantly changing, thanks to education and growing awareness about health, new possibilities or conveniences as a result. For instance, increased health consciousness among people has led to the decline of junk foods. 

Technological Factors:

Technological advancements can create new business opportunities and leave many existing businesses redundant. The best example is Nokia. When the internet became popular, it gave rise to smartphones. Nokia was slow to adapt to this change. As a result, their market share in phone sales started to decline. 

Legal Factors:

PESTLE analysis covers legal factors. No business can operate without adhering to the rules and regulations in place in the regions where they operate. Multinational companies like Amazon or Coca-Cola or tech giants like Facebook or X ensure they comply with Indian laws when they offer their services in India. 

Environmental Factors:

These days, environmental concerns attract immediate attention owing to increasing awareness of sustainability issues. Companies are now required to be accountable for their activities in terms of waste, resources, and carbon emissions. Adopting sustainable practices has become not only a legal requirement for businesses but also consumers increasingly prefer associating with such brands. 

How To Conduct A PESTLE Analysis – Step-By-Step Procedure

To write a powerful PESTLE analysis assignment, you need to know how to conduct it and draw accurate and useful insights. The effectiveness of your PESTLE analysis depends on how you conduct it. Here is the step-by-step procedure you can follow. 

Understand the Components:

As you have already seen, PESTLE analysis consists of six components. Knowing each of these components and how they influence your business is essential to make your analysis go in the right direction. 

Set Goals and Objectives:

With a clear goal in place, the analysis can turn out to be unfocused and might not yield the desired result. Identify what you aim to achieve and set them as your objectives. 

Conduct Ample Research:

Once you have established your objectives, you are ready to initiate the research. Conduct ample research into every component. Make use of a variety of techniques for your research and data collection such as interviews, surveys, etc. 

Record and Analyze Data:

The data you get from your investigation into each one of the six factors, record them carefully. Remember that data collection is an important phase in the process and can affect the outcome. Once you have sufficient information on your record, analyse them and derive your conclusions. 

What are the Advantages and Disadvantages of PESTLE Analysis?

PESTLE analysis is comprehensive. It covers almost all possible external factors that a business might encounter and helps get a thorough overview of what to expect from them. But it is not without its share of disadvantages. Here are some of the top advantages and disadvantages of this framework. 

Advantages

• The PESTLE framework helps analyse the macro-level influences that many businesses are likely to overlook. 
• Since it is comprehensive covering almost all external-facing factors, you get a broad view of your business’s standing. 
• It helps to identify potential challenges and opportunities from the six components so businesses can work on to improve their prospects. 
• Understanding the PESTLE framework is not a big deal as it is quite straightforward and any business can do it with minimal investment. 
• After gaining predictability about the future, businesses can invest in various forms of risk management and contingency planning.

Disadvantages

• Unless the research is in-depth, the data you get from the PESTLE analysis cannot be accurate and thus can affect how you can benefit from it. 
• Although the PESTLE framework tells you what to analyse, it doesn’t clearly define what tools, strategies or techniques to use. 
• Since the PESTLE framework covers six diverse areas, you can’t conduct it and derive comprehensive results suddenly. It takes time. 
• In many scenarios of the PESTLE framework, you will be forced to rely on mere assumptions rather than empirical evidence. This can affect the data accuracy. 
• Some components of the PESTLE framework are constantly changing, such as technological or environmental factors. This might leave the analysis outdated. 

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Conclusion

Great! If you have read to this point, it simply means you are well past the first step in understanding what PESTLE Analysis is and how it can benefit business. We are certain that this blog has served its purpose. However, we would like to know if there is any area regarding this topic that still looks vague or if you have questions about PESTLE analysis assignment writing. Feel free to share your concerns with us to let us help you further!