Pestle Analysis CA Foundation Notes | EduRev

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PESTLE ANALYSIS

The term PESTLE is used to describe a framework for analysis of macro environmental factors. PESTLE analysis involves identifying the political, economic, socio-cultural, technological, legal and environmental influences on an organization and providing a way of scanning the environmental influences that have affected or are likely to affect an organization or its policy. ‘PESTLE analysis is an increasingly used and recognized term, replacing the traditional framework for monitoring environment known as PEST analysis.

PESTLE is an acronym for:

  • P- political,
  • E- economic
  • S- socio-cultural
  • T- technological
  • L- legal
  • E- environmental

The PESTLE analysis is simple to understand and quick to implement. The advantage of this tool is that it encourages management into proactive and structured thinking in its decision making.
Pestle Analysis CA Foundation Notes | EduRev
Pestle Analysis CA Foundation Notes | EduRev
Pestle Analysis CA Foundation Notes | EduRev
The Key Factors

  • Political factors are how and to what extent the government intervenes in the economy and the activities of business firms. Political factors may also influence goods and services which the government wants to provide or be provided and those that the government does not want to be provided. Furthermore, governments have great influence on the health, education and infrastructure of a nation.
  • Economic factors have major impacts on how businesses operate and take decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy. The money supply, inflation, credit flow, per capita income, growth rates have a bearing on the business decisions.
  • Social factors affect the demand for a company's products and how that company operates.
  • Technological factors can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation.
  • Legal factors affect how a company operates, its costs, and the demand for its products.
  • Environmental factors affect industries such as tourism, farming, and insurance. Growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones.

On the basis of these, it should be possible to identify a number of key environmental influences, which are in eflect, the drivers of change. These are the factors that require to be considered in the matrix. Then transpose the final items that have been identified from your list to a PESTLE matrix as shown below:
The PESTLE Matrix

Political

 

Economic


Political stability


Economy situation and trends


Political principles and ideologies


Market and trade cycles


Current and future taxation policy


Specific industry factors


Regulatory bodies and processes


Customer/end-user drivers


Government policies


Interest and exchange rates


Government term and change


Inflation and unemployment


Thrust areas of political leaders.


Strength of consumer spending

Social

Technological


Lifestyle trends


Replacement technology/solutions


Demographics


Maturity of technology


Consumer attitudes and opinions


Manufacturing maturity and capacity


Brand, company, technology image


Innovation potential


Consumer buying patterns


Technology access, licensing, patents


Ethnic/religious factors


Intellectual property rights and copyrights


Media views and perception



Legal

Environmental


Business and Corporate Laws


Ecological/environmental issues


Employment Law


Environmental hazards


Competition Law


Environmental legislation


Health & Safety Law


Energy consumption


International Treaty and Law


Waste disposal


Regional Legislation




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