The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.
Why does a PESTEL analysis matter?
Indeed, the PESTEL analysis becomes a companion framework to other tools, and frameworks, like the SWOT analysis as it allows to gain a broader perspective on the overall market and industry where the organization operates.
In too many cases marketers fall into the trap of analyzing an organization as it operated in a vacuum. Understanding macro trends, and how those are and will affect the organization is a crucial skill for marketers to gain perspective on the company’s overall marketing strategy.
And to perform a better analysis of the current and future scenario. This also allows an organization to formulate a better business strategy. This also helps organizations adapt their business models based on the changing macroeconomic landscape.
What are the critical components of a PESTEL analysis?
The PESTEL analysis comprises six macro-environmental factors that span from political to legal:
- Political: how much is the government involved in the economy or in that particular market? And how much a government policy can influence that?
- Economic: how many economic factors, such as interest rates, employment, foreign exchanged, unemployment and other factors will affect the company’s profitability?
- Social: how much emerging trends or demographics, such as population growth, age distribution, and so on affect the organization?
- Technological: how much technological innovation, development, and disruption might affect a market or the industry in which the organization operates?
- Environmental: how much the surrounding environment and the impact of a business on ecological aspects are influencing the organization’s policies as well?
- Legal: how will change in legislation affect the organization’s profitability, sustainability, and growth?
Other connected frameworks
- Porter’s Five Forces
- SWOT Analysis
- BCG Matrix
- Balanced Scorecard
- Blue Ocean Strategy
- Scenario Planning
- Successful Types of Business Models You Need to Know
- Business Strategy: Definition, Examples, And Case Studies
- What Is a Business Model Canvas? Business Model Canvas Explained
- Blitzscaling Business Model Innovation Canvas In A Nutshell
- What Is a Value Proposition? Value Proposition Canvas Explained
- What Is a Lean Startup Canvas? Lean Startup Canvas Explained
- What Is Market Segmentation? the Ultimate Guide to Market Segmentation
- Marketing Strategy: Definition, Types, And Examples