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What is pestle or pest analysis?

by Muhammad Sikandar Basharat
pest analysis

Introduction of Pest Analysis

PESTLE analysis is the tools of marketing methodology and a framework of principles to evaluate and for scanning the environmental atmosphere conditions and factors of any market to before launching the new business at macro levels that could be influenced on business survival ratio in future in the market and to in competition as well. It is also knowing with the name of PEST analysis too (B2U Business-to-you, 2016).

PESTLE stand “P” for Political factors, “E” for Economic factors; “S” for Social factors; “T” for Technological factors; “L” for Legal factors, and “E” for the Environmental factors respectively (see also figure 1). This framework sometime used with porter’s five forces and with a SWOT analysis as well as in collaboration.

All these factors help to avoid and in overcoming the directly and indirectly (internal & external) effects on the new or upcoming business in the market. These analyses give foresight and high above the basic points or angles views to get to know, how to survive and compete in others in the market, and those are who are already existing in the market and have much knowledge and market experience as compare to new ones?

What is pestle or pest analysis? 1
figure 1

Political factors:  

This factor of PESTLE analysis helps to identify the political or government influence in the market and towards the specific or certain industry. It helps to evaluate obstacles, restrictions, polices challenges, and limitations from the government, of trade policy with the foreign, tax rate, corruption, labor law, environment law for the new businesses.

This factor can be used in analyzing government or political stability in the country, its infrastructure, and the education system of polices as well.   

Economic factors:

Economic factors can be and are used to evaluate the country or market economic growth condition and performance. This can help a new business or investment to analyses that, whether the business should start/do or not? And do investment or not? It includes economic growth, interest rates, per capita income, exchange and inflation rates, poverty ratio, and employment percentage.

These economic factors findings also enable the new business or investor to evaluate the purchasing power of the focused market consumer or industry, demand/supply of the product that to be launched.

These factors have long term direct and indirect effects on business. By this business can know the pros and corns of the new business and evaluated that is the business will be profitable or not?

Micro-economic factors are all about the way people spend their incomes. This has a large impact on B2C organizations in particular. (Professional Academy, n.d.)

Social factors:

These factors have an abundance impact on designing new business concerns and also known as socio-culture factors. These factors help the new business through social media or platforms like Facebook, YouTube, etc., to do an analysis of new business all social opportunities and obstacles that it may face now or in the future.

These factors include the consumer characteristics, behavior towards the new or foreign products, preference, taste, attitude, demand, religious views, culture, norms, tenets, soft and hard issues, living standard and temperament.

These all can help the new business to survive in any country or market and competing well. As a new enterer in the market, it must be followed to get the desired goal of the company.

Technological factors:

Technological factors also can help and have a vital role in today’s industrial tech revolution era concerning the new business. In this 21st century within a minute everything is changing.

Because everything is changing every minute. So, as the new business, it is very important to keep doing market research and avail or keep training the employees of the business according to the new technology and machinery.

This is can be called an obstacle as well because it takes a huge amount to keep updated the worker force and this can be caused by the failure of the business and full of risk.

A new business cannot be survived for a long time. It includes automation processing, IT skills development, R&D, new ways of product packaging or making, and distributing channels, etc. These are the indirect factors concerning new business decision making.      

Legal factors:

Legal factors are the most important and highlighted factors in PESTLE analysis. These have the macro and micro both level impact on business starting. This is a globalized world and every country has its own and different laws to each other and these have a major impact on new business and its boarding to new markets.

It includes copyright, consumer, employment, antitrust discrimination, health and safety laws. After you have completed a PESTEL analysis you should be able to use this to help you identify the strengths and weaknesses for a SWOT analysis. (Professional Academy, n.d.)

Environmental factors:

The last one of the PESTLE analysis framework is the environmental factor, this factor influence on the new business starting decision making. It is very necessary for the enterer in the target market or industry.

It includes the geological structure, ecological aspect, such as weather, climate, temperature, etc. these factors can be called as an obstacle of the new business, because of the native government polices about the environment, for example, carbon footprint target by the native authorities, prohibition on new factories installation, etc.

References

B2U Business-to-you. (2016, 9 18). Scanning the Environment: PESTEL Analysis. Retrieved from https://www.business-to-you.com/scanning-the-environment-pestel-analysis/

Professional Academy. (n.d.). MARKETING THEORIES – PESTEL ANALYSIS. Retrieved from https://www.professionalacademy.com/blogs-and-advice/marketing-theories—pestel-analysis

Professional Academy. (n.d.). MARKETING THEORIES – PESTEL ANALYSIS. Retrieved from https://www.professionalacademy.com/blogs-and-advice/marketing-theories—pestel-analysis

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