Imagine being able to anticipate political changes that could affect the company, understand how technological trends will impact the operations you carry out, or be aware of legal regulations that could impact the industry. What if I told you that you can make it a reality with PESTEL analysis? We are talking about a powerful tool that evaluates external factors that can influence the organic development of the company. Knowing it and applying it will give you an advantage in the face of possible obstacles on the business path.
In this post, we explain the 5 steps of the PESTEL analysis so that you can carry it out successfully. Take note!
Know where the name PESTEL analysis comes from
PESTEL analysis is a tool that offers a holistic view of the company. In general, it allows us to identify the demand for products and services, trends and changes in the market, as well as relevant elements of the context that can directly influence the behaviour of the company. Its name is not a coincidence, but refers to the 6 main factors included in the PESTEL analysis:
Political: refers to the political and governmental framework in which the company operates. It covers elements such as fiscal policies, political stability, business regulations, labour policies, government subsidies and corruption.
Economics: includes variables such as interest rates, inflation, exchange rate, economic growth, unemployment, wealth distribution, business cycle and credit conditions.
Social: in this case, the social, demographic and cultural trends that can influence the company are studied, such as changes in lifestyles, attitudes towards work and leisure, cultural values, consumer trends, education and public health.
Technological: covers technological advances, innovation, automation, digitalization, internet access and patents.
Ecological: analyzes the main concerns about sustainability, climate change, emissions regulation, waste management, conservation of natural resources. The results could be useful to include in the company’s Corporate Social Responsibility.
Legal: takes into account labour laws, safety regulations, consumer protection, intellectual property, health regulations, taxes and trade regulations.
The 5 steps of PESTEL analysis exemplified
Below, we explain step by step how to perform the PESTEL analysis successfully. To do this, let’s assume that we are studying the context of a retail company that plans to expand to other parts of the world.
- What factors influence the strategy? In this case, it would be necessary to study the export and import trade regulations of the countries where you want to go and their labour policies, the economic stability of the market in the destination places and the purchasing power of consumers, as well as their lifestyle and purchasing trends. Are they really interested in the product or service you want to sell? Do they have the necessary technological infrastructure for electronic commerce?
- What information do you have about those factors? Once you have identified the factors of interest that can influence the expansion of the company, it is time to gather all the important information. This involves searching for demographic, economic, political, technological, environmental and legal data relevant to the countries targeted for expansion. To do this, rely on previous market research, results of analytical reports and even population studies carried out by each country.
- How could they impact the company? Evaluate how trade policies could affect import or export costs or how technological trends could affect marketing and sales strategies. Rate the impact of the factors on a scale to see which would have the highest priority. In addition, it uses graphs to better visualize these impacts, and tables or infographics to summarize the most significant aspects. If something doesn’t turn out the way you expect, this is a good point to redirect or adapt the planned strategy.
- What opportunities and threats can be foreseen? Studying the context can offer you opportunities that you may not have seen as such at first. In this step, you can rely on a SWOT analysis. An opportunity could be identified in the economic growth of a target market, while a threat could be established local competition.
- What strategies can I implement? The advantage of PESTEL analysis is that it allows you to know the context where the company is going to operate and you can identify possible barriers along the way. Take advantage of these elements to strengthen your planning and consider how to mitigate the threats detected. We are talking, for example, about developing specific marketing strategies to adapt to local preferences or negotiating with suppliers to ensure a stable supply.
The benefits of PESTEL analysis for the company
If you’ve made it this far, you’ve probably already noticed that performing PESTEL analysis is essential for both new businesses and those planning to make changes. Good results allow us to have a complete vision of all the factors that can influence the success of the project or, on the contrary, those elements that can slow down its development.
Therefore, after implementing this tool, companies are better prepared to adapt their strategies, maximizing opportunities and mitigating risks. So the PESTEL analysis can be the starting point of any strategic decision and should be part of the business plan. The key is to ask yourself the right questions to get a clear idea of what to expect.
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