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 much 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 policies as well?
- Legal: how will change in legislation affect the organization’s profitability, sustainability, and growth?
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