What is PESTLE analysis explain briefly?

• A PESTLE analysis studies the key external factors

(Political, Economic, Sociological, Technological,
Legal and Environmental) that influence an
organization. It can be used in a range of
different scenarios, and can guide people
professionals and senior managers in strategic
decision-making.
 PESTLE (Political, Economic, Social, Technological, Legal,
Environmental) analysis template and prompts

PESTLE TEMPLATE FACTOR OPPORTUNITY THREAT

POLITICAL

ECONOMIC

SOCIAL

TECHNOLOGICAL

LEGAL

ENVIRONMENTAL

Integrity, Trust
Service & Accountability
 PESTLE (Political, Economic, Social, Technological, Legal,
Environmental) analysis template and prompts

Political Considerations Economic Considerations

• How could a change of government impact policy impact or • How stable is the current economy? Is it growing,
change the trend towards re-regulation/deregulation? stagnating, or declining?
• Could any pending legislation affect the agency, either • Is disposable income rising or falling and will this change?
positively or negatively? What is the likely timescale of • What is the unemployment rate? Will it be expensive or
proposed legislative changes? difficult to hire skilled labour?
• How will government regulation, along with any planned • How is globalisation affecting the economic environment?
changes to it, affect the agency? Are governmental controls more difficult to enforce in a
• Are there any other political factors that are likely to global world?
change? • Are there any other economic factors that you should
consider?

Social Considerations
• What is the population's growth rate and age profile? How is this likely to change?
• Are generational shifts in attitude likely to affect what the agency is currently doing?
• What are the levels of health, education, and social mobility? How are these changing, and what impact does this have?
• What employment patterns, job market trends, and attitudes toward work can you observe? Are these different for different age
groups? Are people more or less likely to want to work in the public sector or in your agency? Is the public sector experiencing
difficulty in attracting the same level of talent as the private sector?
• How will you address
• What social attitudes could impact the agency?
• How do religious beliefs and lifestyle choices affect the population?
• Are any other social factors likely to drive change for the agency?

Integrity, Trust
Service & Accountability
 PESTLE (Political, Economic, Social, Technological, Legal,
Environmental) analysis template and prompts

Technological Considerations Legal Considerations

• Are there any new technological or digital themes, trends or • Is there enabling legislation requiring the agency to carry out
products available or on the horizon that could radically specific functions? If so, what does the legislation require? Is
affect the agency or its market? there scope to add value in another way?
• Can this themes above redefine their offerings? • Is there future legislation that will affect the agency?
• Is there anything the agency can do to take advantage of • How do regulatory bodies or processes impact the agency?
research being undertaken by other agencies or jurisdictions • Are there legal regulations relevant to the agency? Do they
or tech hubs/research bodies? limit what the agency can offer or do they create
• How have infrastructure changes affected work patterns (for Opportunities for the agency?
example, levels of remote working)? • Does employment law affect how the agency recruits staff?
• Are there any other technological factors that the agency • Does the agency need to comply with industry-specific
should consider? regulations?

Environmental Considerations
• Do changes in weather and climate have a direct impact on the agency or its role?
• Is the agency required to assist in the achievement of environmental outcomes for the community alongside other social,
economic or community outcomes? How will the agency do this?
• Do laws regarding pollution and recycling have specific relevance to the agency?
• Does waste management raise Threats or Opportunities for the agency?
• Does the agency have significant policies or practices regarding use or supply of green/eco-friendly products and services?
• Is the agency in a geographical location which merits giving special attention to environmental impacts?
• Does the agency’s work need to comply with any specific environmental regulations?

Integrity, Trust
Service & Accountability
 PORTER’S MODEL
It was developed by Michael E. Porter to help
companies assess industries competitiveness and
build strategies.

Its simple but very powerful tool to analyze and

understand the business situation and industry
dynamics.
 Michael E. Porter, “How Competitive Forces Shape
Strategy,” Harvard Business Review, May 1979 (Vol 57, No.
2), pp. 137-145
• The model of the Five Competitive Forces was
developed by Michael E. Porter. Since that time it
has become an important tool for analyzing an
organizations industry structure in strategic
processes.
• Porter’s model is based on the insight that a
business/corporate strategy should meet the
opportunities and threats in the organizations
external environment especially the competitive
strategy should base on the understanding of
industry structures and the way they change.
 Threat of New
Entrants

Bargaining
Competitive Threat of
Power of
Rivalry Substitutes
Suppliers

Bargaining
Power of Buyers
 Threat of New Entrants
• Profitable industries, especially with high yields will perpetually
attract new entrants
• Any entrant will reduce profitability, effective entry can decimate
profits
• A competitor defence strategy will be to make market entry more
difficult
• There are a range of activities an incumbent firm may take to protect
from threat of New Entrants
• Some industry has naturally low, or high barriers to entry
• Attractive segments have
– High entry barriers
– Low exit barriers
• Ideally firms wish to be able to leave a market with little
difficulty, but to create environments that mean its difficult to
enter
– Think Mobile Phone operating systems
• iOS, Android, Windows, BBS (Blackberry), ColorOS, EMUI
• Harmony OS (Huawei)
 • Threats of new entry.

• Consider how easily others could enter your

market and threaten your company's
position.
 Factors impacting market entry
• Government Policy
– The supplier of Cable and Fibre to BT has “One” customer,
and ”No” competitors
– A sanctioned monopoly (a non-government example is
DeBeers and diamonds)
• Capital Requirements
– Tata Steel is still open in Port Talbot because if it were
closed the capital requirement to build a steel works
would be enormous
– New entrants to Steel are few and government sponsored
 Threat of Substitutes
• Substitutes may use a different technology
– Think Tesla vs VAG
– Ryanair vs British Rail
– iTunes vs Spotify

• Monster Energy is a substitute for Coke, Water

is a substitute for Monster Energy…
– Single Use Plastic issues?
 Threat of Substitutes
• Is substitute product from different industry
may be used for the purpose the larger the
substitutes available the lower profit. Buyers
will switch to alternatives in case of price
increases
 Bargaining Power of Customers
• Can the customer put the firm under
pressure?
– Have you noted that most coffee chains charge
the same of their coffees?
– Reduces the markets ”sensitivity” to price
changes/variance
• BOPIS and BOWIS – web comparison
• Do you have the Costa App? The Starbucks or
Café Nero App? – they are a response to
“reduce” your bargaining power…
 Bargaining Power of Buyers
• In some industries buyers may have tremendous
bargain power, if they are small in number.
• However we need to check how powerful the
buyers are and can they get cost down. The
buyer power is an evaluation of how easy it is
for buyer to control prices.
 Bargaining Power of Suppliers
• Labour, raw materials, components, services are all
needed
– Machine Learning (AI) and Mobile Development are
currently most in demand, thus human resources for this
input are more expensive
– You want to sell UK sourced Quinoa
• iPhones legally must now use Qualcomm modems…a
result of apple unsuccessfully suing for “illegal patent
licensing practices”
• Sometimes impacted by PESTEL
– E.g. HDD, Thailand, and flooding
 Bargaining Power of Suppliers
• We can identify suppliers have strong bargaining power, if they
are able to increase cost without affecting their sales

• Supplier may enjoy greater power if they are small in number

difficult for buyers to switch.

• The Supplier Power is an evaluation of how easy it is for

suppliers to drive up prices.
 Competitive Rivalry
• Most Business Degree’s spend a great deal of
time (00’s of hours) in this realm
• The intensity of competitive rivalry is the
major determinant
– When you open your student bank account there
will be dozen’s of choices, however, some are
differentiated to better meet your needs
• Positioning is important here, you want to
position to the biggest market and best meet
their needs…tricky
 Competitive Rivalries
• Continuous innovation (think iPhones, but innovation has been
minimal for 3 years)
• Blue ocean thinkers (Halo Top ice cream)
• Level of advertising expenditure (Sky spent £23 million in print
in 2018; Virgin spent £4.3 million)
• Can you reduce costs or differentiate in other ways (Porters
Competitive Advantage model)
 Competitive Rivalries
•  Gauging the competition between the existing companies in
the specified industry.  If there is stiff competition with quality
products then rivalry companies may take the profit share and
reduce revenues.  The number of Competitors in the market
will also impact on the attractiveness of the market.
 Criticisms
• Porter uses inconsistent logical argument
• Porter does not have sufficient empirical support and used
selective case studies
• Others have argued Porter's firm-level analysis is widely
misunderstood and mis-taught
 Criticisms/Summary
• Porter’s model is useful for diagnostics, or
understanding how a business seeks to profit in its
chosen marketplace, and for prescriptions, or
building new opportunities for advantage
• Porter’s model was developed at a time where the
rate of change in any given industry was relatively
slow and manageable
• Newer models were developed to take into account
the increasing turbulence and velocity of the
marketplace
 Conduct a PESTLE analysis of any industry in
your community using the format below.
Name of Company: