What is a PESTLE Analysis?

Why Do I Need it?

An exercise to assess your external environment.
In this guide, we will cover:

¨ What is a PESTLE Analysis?

¨ Questions to ask to conduct your own PESTLE Analysis

¨ How to define your external threats and opportunities

¨ The pros and cons of a PESTLE Analysis

¨ A canvas to build your own PESTLE analysis

 PESTLE Analysis

Introduction

What is a PESTLE Analysis?

A PESTLE analysis examines external market factors – including Political,
Economic, Social, Technological, Legal, and Environmental - and market
trends that might impact your organization’s direction, performance, and
position in the marketplace.

Used in tandem with a SWOT analysis, it helps your organization examine

external factors that could influence your organization’s opportunities and
threats.

Watch the Video Here

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Why do I need to Conduct

a PESTLE Analysis?

What is a PESTLE Analysis? Here’s a Detailed

Breakdown:
As we mentioned earlier, a PESTLE analysis looks at the external Political,
Environmental, Social, Technological, Legal, and Environmental factors that
would influence your organization’s strengths and weaknesses.

A PESTLE analysis is best used in tandem with your SWOT analysis. As

demonstrated below, a PESTLE looks at the macro-trends in your operating
environment. Using a PESTLE allows you to look ahead at challenges your
organization may encounter and create strategies to address them.

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Political Factors:

Political factors are those brought on by the government or politics. These are
the external political forces affecting your organization, including
governmental policies, government leadership, foreign trade and foreign
relations, political issues and trends, tax policy, regulations, and de-
regulation trends.

A few examples might include the influx of capital from the Paycheck
Protection Plan, the change in tariffs on imports from China, and the war and
conflict from Russia’s invasion of Ukraine.

Questions to ask:
¨ What shifts have occurred in the political climate?

¨ How might those shifts impact our organization? Are they headwinds, or
tailwinds?

¨ Are they short- or long-term plays?

¨ What are the political threats you should monitor?

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Economic Factors:

The economic factors look at the external forces that can impact the
economy your organization operates in. Examples include rising inflation
rates, changes and shifts in consumer spending, changes in the supply chain,
demand curves, and the health of the global economy.

These economic factors can look at the local economy, national economy,
and global economy.

Questions to ask:
¨ What is the current health of the economy? How might that impact our
organization?

¨ Are there headwinds or tailwinds in our supply chain?

¨ What local economic factors might impact our business?

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Sociological Factors:

Sociological factors consider the changes in the greater social environment,

such as social justice movements or other social trends like changing
opinions on your product or shifting populations and demographics. It’s
essential to consider sociological trends that are at play— not just in your
organization’s immediate environment—but also in the broader environment
that your customers are coming from.

Questions to ask:
¨ Are there changing trends in our market’s demographics or population?
How best do we serve them?

¨ How are changing social factors going to impact our organization?

¨ What shifts can be observed in consumer behavior, sentiment, or opinion?

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Technological Factors:

Changes in technology affect a business’s positioning. Some recent examples

are the rise of cryptocurrency (which can also fall into the economic
category), the emergence of popular work-from-home technology, AI
developments, and even concerns over cyber security or other technological
issues. It is important to consider how technology can prove to be both an
opportunity for your organization, or a threat to it.

Questions to ask:
¨ How has the technology in our market changed? Is that an opportunity or
threat?

¨ Are you using available technology to its full advantage?

¨ How much does emerging technology impact your organization?

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Legal Factors:

While similar to the political aspects, the legal elements look at the practical
application of the political factors into rules and regulations that may affect
your business or customers. These are the laws and regulations that impact
your organization.

This could include updated laws, new regulations, or abolishing laws.

Depending on your business, local, state, and federal laws and regulations are
worth scrutinizing.

Questions to ask:
¨ What changes in our international, national, and local legislation impact our
organization?

¨ How are these legal changes going to impact our organization positively or
negatively?

¨ What legal forces may be on the horizon?

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Environmental Factors:

Environmental factors are affected by weather, geography, climate change,

and health crises. In addition to the public health crisis caused by the COVID
pandemic, the world has also been impacted by wildfires across the globe.

Organizations should consider the short-term and long-term impacts of these

accelerating changes, e.g., rising ocean levels, drier and warmer seasons, and
yearly weather conditions such as hurricanes and typhoons.

Questions to ask:
¨ What environmental factors are impacting us right now?

¨ What environmental factors might impact us in the future?

¨ What environmental factors do we need to monitor?

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Bonus- Ethical Factors

Over the last few years, business and marketing strategy experts have added
a third ‘E’ to the PESTLE- the ethical factor. This can include things such as
fair-trade practices, child labor issues, even society’s increasing demand for
conscious business models, and corporate social responsibility.

Questions to ask:
¨ What external ethics forces are impacting the market?

¨ What changes to your business or suppliers might you consider?

¨ What kind of impact or example do you hope your company may set?

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Advantages and
Disadvantages of a
PESTLE Analysis

Advantages of using a PESTLE Analysis

There are several advantages to conducting a PESTLE analysis for your
business. Here’s a breakdown:

¨ It is a simple framework that is easy to implement into your strategic plan.

¨ It also allows you and your team to facilitate a great understanding of the
wider business environment and how current events can potentially affect
your business.

¨ Additionally, it helps organizations anticipate business threats and figure

out how to mitigate the risks, and it helps organizations spot business
opportunities on which they can capitalize.

Disadvantages of using a PESTLE Analysis

While it’s a great tool, here are a few of the disadvantages of using a PESTLE
analysis:

¨ One of the disadvantages of a PESTLE analysis is that it can be as light or

as heavy as one wants to make it.

¨ It is easy to oversimplify the data or collect insufficient data.

¨ It is also easy to make it too heavy by collecting too much data and
becoming so overwhelmed that you don’t know where to start. This is a
phenomenon called ‘analysis paralysis.’

¨ It’s a great tool, but it doesn’t analyze your organization's internal

strengths and weaknesses. That’s why we recommend using it in
conjunction with your SWOT analysis.

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Best Practices- When and

How to Use a PESTLE Analysis

You should conduct your PESTLE analysis in the pre-planning stages of your
business or strategic plan with a SWOT analysis. A SWOT analysis looks at
your organization’s internal strengths and weaknesses and the external
opportunities and threats the market presents.

This will be an excellent companion piece to your SWOT as it informs your

SWOT by looking at all aspects of the external market environment.

Watch the Video Here

So, when conducting your analysis, break down each factor and look at both
the positive aspects you can leverage (the opportunities) and the pitfalls to
avoid (the threats) within the political, economic, social, technological, legal,
and environmental spheres.

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While a PESTLE analysis is typically conducted in the beginning stages of a

strategic plan, it is best to set a regular cycle to check in and revisit it. With the
speed at which things are constantly shifting and changing, the analysis you
conducted five years ago may need to be revised today. It is best to update it
at a minimum every three years.

Or, when you update your SWOT. It can be helpful to look at these trends
annually, too. Make it a habit to keep a pulse on current events and market
changes so you always know what is going on in your market and how it will
affect your organization.

A PESTLE Analysis is The Best Guide to Determine

Your Strategic Position
Leveraging your PESTLE analysis as the first step to your business and
strategic planning process is the ultimate way to ensure that you know all the
areas your business can capitalize on and which pitfalls you can work on to
mitigate. This will help you get the complete picture of where your
organization is playing and just what you need to ensure that you will win.

👍 Pro Tip
We covered using this tool a few years back during the start of the COVID
pandemic. This article has some helpful tips on using this analysis to
examine the market megatrends.

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PESTLE Analysis Canvas Org Name:

Key Issues You Face How it Impacts Your Organization Opportunity or Threat? Urgency to Act?

Political Factors
1 What trading policies or international
legislation will impact your
Opp. Threat N/A Yes No

organization?
What shifts have occurred in the Opp. Threat N/A Yes No
political climate?
Has proposed legislation passed that
impacts your organization? Opp. Threat N/A Yes No

Key Issues You Face How it Impacts Your Organization Opportunity or Threat? Urgency to Act?

Economic Factors
2 What is the current domestic economic
status? How will that impact you?
Opp. Threat N/A Yes No

How does the current economic

climate impact consumer spending? Opp. Threat N/A Yes No

How easy or difficult is it for your

organization to find qualified labor?
Opp. Threat N/A Yes No

Key Issues You Face How it Impacts Your Organization Opportunity or Threat? Urgency to Act?

Sociological Factors
3 Are consuming opinions about your
product/service changing?
Opp. Threat N/A Yes No

Has your organization’s target

demographic shifted in any way? Opp. Threat N/A Yes No

How is the changing population

demographic impacting your org?
Opp. Threat N/A Yes No

Key Issues You Face How it Impacts Your Organization Opportunity or Threat? Urgency to Act

Technological
4 Factors Opp. Threat N/A Yes No

Is there new technology you should

be using?
Opp. Threat N/A Yes No
1 How has technology changed your
work environment?
How is innovative technology affecting Opp. Threat N/A Yes No
your organization?
Key Issues You Face How it Impacts Your Organization Opportunity or Threat? Urgency to Act?

Legal Factors
5 What changes in our international,
national, and local legislation impact
Opp. Threat N/A Yes No

our organization?
How are these legal changes going to Opp. Threat N/A Yes No
impact our organization positively or
negatively?
What legal forces may be on the Opp. Threat N/A Yes No
horizon? Key Issues You Face How it Impacts Your Organization Opportunity or Threat? Urgency to Act?

Environmental
6 Factors Opp. Threat N/A Yes No
What environmental factors are
impacting us right now?
Opp. Threat N/A Yes No
How will climate change impact our
organization?
How will natural disasters impact our Opp. Threat N/A Yes No
organization?

[Link] PESTLE Canvas