The PESTLE model is used for the analysis of external, contextual factors and their impact on a business or organisation. You can use this model to aid you in the identification of new risks and potential opportunities, especially when there are changes in some of those factors. Carrying out this exercise frequently can help you make informed, strategic business decisions, mitigating risks before they cause problems and grasping opportunities as soon as they come up.
Originally the model was introduced as ETPS in 1967 by Harvard Business School professor Francis J. Aguilar, however it was quickly expanded to the acronym PESTLE that we use today, allowing for a fuller picture of the context with many other variations of this acronym existing today.
Below are some specific questions that can guide you to seek detailed answers about the factors that affect your industry while you work your way through the model:
Assessing the political environment
- What are the legal constraints of your industry? Are there any new legal notices? When will these come into effect? How will these affect you?
- Are there any changes to the authoritative bodies or governmental agencies that watch over your industry (such as the MFSA, MFHEA, CCAA, MGA)?
- Is there a political push for more regulations, or can a flexible approach be adopted?
- When is the next national election? To what extent will this affect your industry?
- And what about the local council elections?
- Are you expecting new, or changes to, taxation policies, fiscal policy, or trade tariffs? Will such changes be positive or negative for you?
- Should you consider any other political factors?
Assessing the economic environment
- Would you say that the economy is stable? Is there growth or a decline? Is it stagnant?
- Can you easily find employees whether you are looking at skilled or unskilled personnel?
- What is the unemployment rate?
- What is the inflation rate?
- Are there any new trends in supply and demand? Do customers have disposable income? How likely is this to change (for better or worst) in the next few years?
- Would you say that organisations and customers have easy access to credit?
- Do major exchange rates vary considerably, or are they stable?
- Is there a push for FDI (foreign direct investment)?
- Should you consider any other economic factors?
Assessing the socio-cultural factors
- What is the demographic profile of the country? Is the population young or ageing? What is the population’s growth rate?
- Are there major differences between different age groups in terms of attitude to work, employment history, behaviour at work? Would you say that this is a generational shift or a trend that will die out?
- Are there any cultural trends you might want to consider?
- What about religious beliefs, social taboos, or new customs?
- What is the society’s level of education and health? Are these changing (for better or worse)? Does this affect your organisation?
- Should you consider any other socio-cultural factors?
Assessing technological factors
- Are there any new developments in technologies, automation, AI (artificial intelligence) or R&D (research and development) in your industry? Do these developments affect your operation positively or negatively?
- Do you need your target market to be technologically aware? To what extent? Does this match your current and/or future proposed situation?
- Can you assess how technological changes will affect the market and your industry?
- Are there any other technological factors that you should consider?
Assessing the legal factors
- How are the laws, specific to your industry, affecting the business environment?
- What about generic laws such as health & safety standards, consumer laws, and labour laws?
- Is the interpretation of new legislations clear?
- How is the implementation of new legislation affecting the industry?
- Are there any other legal factors that you need to consider?
Assessing ecological (or environmental) factors
- Are the changes in climate and/or the weather affecting your industry?
- What about your geographic location? How does this affect your industry?
- Is your industry heavily criticised or favourably looked upon by environmental lobby groups?
- What is the industry doing to avoid environmental disasters?
- Are there any environmental concerns for your industry?
- What is your organisation doing to reduce its carbon footprint? Is climate responsibility taken seriously?
- Should you consider any other environmental factors that affect your industry?
Now that you have set up this information, take a step back, and look at the whole picture. Carry out a review of the information that you have gathered till now. Can you identify any soon-to-happen changes within the industry, any threats to the industry, or any opportunities for your organisation? And what can you do about these challenges so that you stay on top of your game?
This model is discussed further in the following programmes that we offer: