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PEST & PESTEL Analysis | Strategic Management Insight
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PEST & PESTEL Analysis
PEST & PESTEL Analysis Ovidijus Jurevicius | February 13, 2013
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De†nition PEST analysis is an analysis of the political, economic, social and technological factors in the external environment of an organization, which can aဠect its activities and performance.[1] PESTEL model involves the collection and portrayal of information about external factors which have, or may have, an impact on business.[2]
Understanding the tool PEST or PESTEL analysis is a simple and eဠective tool used in situation analysis to identify the key external (macro environment level) forces that might aဠect an organization. These forces can create both opportunities and threats for an organization. Therefore, the aim of doing PEST is to: †nd out the current external factors aဠecting an organization; identify the external factors that may change in the future; to exploit the changes (opportunities) or defend against them (threats) better than competitors would do. The outcome of PEST is an understanding of the overall picture surrounding the company.
https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
1/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
Macro forces Political
Economic
Legal
Social
Company Demographic
Ethical Technological
Environmental
PEST analysis is also done to assess the potential of a new market. The general rule is that the more negative forces are aဠecting that market the harder it is to do business in it. The di†culties that will have to be dealt with signi†cantly reduce pro†t potential and the †rm can simply decide not to engage in any activity in that market.
PEST variations PEST analysis is the most general version of all PEST variations created. It is a very dynamic tool as new components can be easily added to it in order to focus on one or another critical force aဠecting an organization. Although following variations are more detailed analysis than simple PEST, the additional components are just the extensions of the same PEST factors. The analysis probably has more variations than any other strategy tool: STEP = PEST in more positive approach. PESTEL = PEST + Environmental + Legal PESTELI = PESTEL + Industry analysis STEEP = PEST + Ethical SLEPT = PEST + Legal STEEPLE = PEST + Environmental + Legal + Ethical STEEPLED = STEEPLE + Demographic PESTLIED = PEST + Legal + International + Environmental + Demographic LONGPEST = Local + National + Global factors + PEST
Using the tool https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
2/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
The process of carrying out PEST analysis should involve as many managers as possible to get the best results. It includes the following steps: Step 1. Gathering information about political, economic, social and technological changes + any other factor(s). Step 2. Identifying which of the PEST factors represent opportunities or threats.
Gathering PEST, PESTEL and STEEPLED information In order to perform PEST (or any other variation of it) managers have to gather as much relevant information as possible about the †rm’s external environment. Nowadays, most information can be found on the internet relatively easy, fast and with little cost. When the analysis is done for the †rst time the process may take a little longer and as a beginner you may †nd yourself asking “What changes do I exactly look for in politics, economic, society and technology?” The following templates might be useful when gathering information for PEST, PESTEL and STEEPLED analysis. NOTE: PEST covers all macro environment forces aဠecting an organization. Therefore, when doing PESTEL or STEEPLED analysis, legal, environmental, ethical and demographic factors may overlap with PEST factors.
PEST analysis template Political factors
Economic factors
Government stability and likely changes Bureaucracy Corruption level Tax policy (rates and incentives)
Growth rates In‡ation rate Interest rates Exchange rates Unemployment trends
Freedom of press Regulation/de-regulation Trade control Import restrictions (quality and
Labor costs Stage of business cycle Credit availability Trade ‡ows and patterns
quantity) Tariဠs Competition regulation Government involvement in trade
Level of consumers’ disposable income Monetary policies Fiscal policies
https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
3/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
unions and agreements Environmental Law
Price ‡uctuations Stock market trends
Education Law Anti-trust law Discrimination law Copyright, patents / Intellectual
Weather Climate change
property law Consumer protection and ecommerce Employment law Health and safety law Data protection law Laws regulating environment pollution
Socio-cultural factors
Technological factors
Health consciousness Education level
Basic infrastructure level Rate of technological change
Attitudes toward imported goods and services Attitudes toward work, leisure, career and retirement
Spending on research & development Technology incentives Legislation regarding technology
Attitudes toward product quality and customer service Attitudes toward saving and investing
Technology level in your industry Communication infrastructure Access to newest technology Internet infrastructure and
Emphasis on safety Lifestyles Buying habits Religion and beliefs
penetration
Attitudes toward “green” or ecological products Attitudes toward and for renewable energy Population growth rate Immigration and emigration rates Age distribution and life expectancy rates Sex distribution https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
4/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
Average disposable income level Social classes Family size and structure Minorities
PESTEL analysis template Political
Economic
Socio-cultural
Technological
+ Environmental (ecological)
Legal
Weather
Anti-trust law
Climate change Laws regulating environment pollution Air and water pollution
Discrimination law Copyright, patents / Intellectual property law Consumer protection and e-
Recycling Waste management Attitudes toward “green” or ecological products
commerce Employment law Health and safety law Data Protection
Endangered species Attitudes toward and for renewable energy
STEEPLED analysis template Political
Economic
Socio-cultural
Technological
Environmental (ecological)
Legal
https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
5/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
+
Ethical
Demographic
Ethical advertising and sales practices Accepted ing, management and marketing standards Attitude towards counterfeiting
Population growth rate Immigration and emigration rates Age distribution and life expectancy rates Sex distribution Average disposable income level
and breaking patents Ethical recruiting practices and employment standards (not using children to produce goods)
Social classes Family size and structure Minorities
Identifying opportunities and threats Gathering information is just a †rst important step in doing PEST analysis. Once it is done, the information has to be evaluated. There are many factors changing in the external environment but not all of them are aဠecting or might aဠect an organization. Therefore, it is essential to identify which PEST factors represent the opportunities or threats for an organization and list only those factors in PEST analysis. This allows focusing on the most important changes that might have an impact on the company.
PEST analysis example The following table shows PEST analysis example. It lists opportunities and threats that are aဠecting a †rm in its macro environment.
PEST analysis example Political Government has ed legislation which requires further https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
Economic GDP will grow by 3% in 2013 Availability of credit for businesses 6/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
reductions of CO2, HC and NC emissions for vehicles until 2015 New political forces, which are against tax reductions, may be elected in the next years’ elections
will slightly grow or remain unchanged in 2013. The same applies for the cost of credit in the 1 half of the year Unemployment is expected to
Import restrictions will increase in 2013 Government is increasing its funding to ‘speci†c’ industry Government is easing regulations for employment Increasing tensions between our government and our major export
decrease to 7% In‡ation will fall to 3% or 2% in 2013 Corporate tax rate will decrease by 2% next year to 23% Dollar exchange rates are expected to decrease compared to euro
partner’s government
Disposable income level will decrease Metal and oil prices will increase by 5% and 6% respectively in 2013
Socio-cultural
Technological
Positive attitude towards “green”
New machinery that could reduce
vehicles Number of individuals and companies buying through the Internet is 67% and 45% respectively and is expected to grow Immigration is increasing Increasing attitude toward jobs
production costs by 20% is in development Country’s major telecom company announced its plans to expand its internet infrastructure and install new optic †ber cables Driverless cars may be introduced in the near future
with shorter work hours People tend to buy more domestic rather than foreign products People change their eating habits and now tend to eat healthier food
“New” type of table will be introduced into the market next year
Sources 1. Thompson, J. and Martin, F. (2010). Strategic Management: Awareness & Change. 6th ed. Cengage Learning EMEA, p. 86-88, 816 https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
7/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
2. Rothaermel, F. T. (2012). Strategic Management: Concepts and Cases. McGrawHill/Irwin, p. 56-61 3. David, F.R. (2009). Strategic Management: Concepts and Cases. 12th ed. FT Prentice Hall, p. 104-114 4. Johnson, G, Scholes, K. Whittington, R. (2008). Exploring Corporate Strategy. 8th ed. FT Prentice Hall, p. 55-57 5. Oxford Learning Lab (2012). PESTLE - Macro Environmental Analysis. Available at: http://www.oxlearn.com/arg_Marketing-Resources-PESTLE---MacroEnvironmental-Analysis_11_31 6. Wikipedia (2013). PEST analysis. Available at: http://en.wikipedia.org/wiki/ PEST_analysis
Related Articles
© 2013-2016 Strategic Management Insight. All rights reserved.
https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
8/8
PEST & PESTEL Analysis | Strategic Management Insight
Home
Strategy Tools
PEST & PESTEL Analysis
PEST & PESTEL Analysis Ovidijus Jurevicius | February 13, 2013
De†nition PEST analysis is an analysis of the political, economic, social and technological factors in the external environment of an organization, which can aဠect its activities and performance.[1] PESTEL model involves the collection and portrayal of information about external factors which have, or may have, an impact on business.[2]
Understanding the tool PEST or PESTEL analysis is a simple and eဠective tool used in situation analysis to identify the key external (macro environment level) forces that might aဠect an organization. These forces can create both opportunities and threats for an organization. Therefore, the aim of doing PEST is to: †nd out the current external factors aဠecting an organization; identify the external factors that may change in the future; to exploit the changes (opportunities) or defend against them (threats) better than competitors would do. The outcome of PEST is an understanding of the overall picture surrounding the company.
https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
1/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
Macro forces Political
Economic
Legal
Social
Company Demographic
Ethical Technological
Environmental
PEST analysis is also done to assess the potential of a new market. The general rule is that the more negative forces are aဠecting that market the harder it is to do business in it. The di†culties that will have to be dealt with signi†cantly reduce pro†t potential and the †rm can simply decide not to engage in any activity in that market.
PEST variations PEST analysis is the most general version of all PEST variations created. It is a very dynamic tool as new components can be easily added to it in order to focus on one or another critical force aဠecting an organization. Although following variations are more detailed analysis than simple PEST, the additional components are just the extensions of the same PEST factors. The analysis probably has more variations than any other strategy tool: STEP = PEST in more positive approach. PESTEL = PEST + Environmental + Legal PESTELI = PESTEL + Industry analysis STEEP = PEST + Ethical SLEPT = PEST + Legal STEEPLE = PEST + Environmental + Legal + Ethical STEEPLED = STEEPLE + Demographic PESTLIED = PEST + Legal + International + Environmental + Demographic LONGPEST = Local + National + Global factors + PEST
Using the tool https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
2/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
The process of carrying out PEST analysis should involve as many managers as possible to get the best results. It includes the following steps: Step 1. Gathering information about political, economic, social and technological changes + any other factor(s). Step 2. Identifying which of the PEST factors represent opportunities or threats.
Gathering PEST, PESTEL and STEEPLED information In order to perform PEST (or any other variation of it) managers have to gather as much relevant information as possible about the †rm’s external environment. Nowadays, most information can be found on the internet relatively easy, fast and with little cost. When the analysis is done for the †rst time the process may take a little longer and as a beginner you may †nd yourself asking “What changes do I exactly look for in politics, economic, society and technology?” The following templates might be useful when gathering information for PEST, PESTEL and STEEPLED analysis. NOTE: PEST covers all macro environment forces aဠecting an organization. Therefore, when doing PESTEL or STEEPLED analysis, legal, environmental, ethical and demographic factors may overlap with PEST factors.
PEST analysis template Political factors
Economic factors
Government stability and likely changes Bureaucracy Corruption level Tax policy (rates and incentives)
Growth rates In‡ation rate Interest rates Exchange rates Unemployment trends
Freedom of press Regulation/de-regulation Trade control Import restrictions (quality and
Labor costs Stage of business cycle Credit availability Trade ‡ows and patterns
quantity) Tariဠs Competition regulation Government involvement in trade
Level of consumers’ disposable income Monetary policies Fiscal policies
https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
3/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
unions and agreements Environmental Law
Price ‡uctuations Stock market trends
Education Law Anti-trust law Discrimination law Copyright, patents / Intellectual
Weather Climate change
property law Consumer protection and ecommerce Employment law Health and safety law Data protection law Laws regulating environment pollution
Socio-cultural factors
Technological factors
Health consciousness Education level
Basic infrastructure level Rate of technological change
Attitudes toward imported goods and services Attitudes toward work, leisure, career and retirement
Spending on research & development Technology incentives Legislation regarding technology
Attitudes toward product quality and customer service Attitudes toward saving and investing
Technology level in your industry Communication infrastructure Access to newest technology Internet infrastructure and
Emphasis on safety Lifestyles Buying habits Religion and beliefs
penetration
Attitudes toward “green” or ecological products Attitudes toward and for renewable energy Population growth rate Immigration and emigration rates Age distribution and life expectancy rates Sex distribution https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
4/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
Average disposable income level Social classes Family size and structure Minorities
PESTEL analysis template Political
Economic
Socio-cultural
Technological
+ Environmental (ecological)
Legal
Weather
Anti-trust law
Climate change Laws regulating environment pollution Air and water pollution
Discrimination law Copyright, patents / Intellectual property law Consumer protection and e-
Recycling Waste management Attitudes toward “green” or ecological products
commerce Employment law Health and safety law Data Protection
Endangered species Attitudes toward and for renewable energy
STEEPLED analysis template Political
Economic
Socio-cultural
Technological
Environmental (ecological)
Legal
https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
5/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
+
Ethical
Demographic
Ethical advertising and sales practices Accepted ing, management and marketing standards Attitude towards counterfeiting
Population growth rate Immigration and emigration rates Age distribution and life expectancy rates Sex distribution Average disposable income level
and breaking patents Ethical recruiting practices and employment standards (not using children to produce goods)
Social classes Family size and structure Minorities
Identifying opportunities and threats Gathering information is just a †rst important step in doing PEST analysis. Once it is done, the information has to be evaluated. There are many factors changing in the external environment but not all of them are aဠecting or might aဠect an organization. Therefore, it is essential to identify which PEST factors represent the opportunities or threats for an organization and list only those factors in PEST analysis. This allows focusing on the most important changes that might have an impact on the company.
PEST analysis example The following table shows PEST analysis example. It lists opportunities and threats that are aဠecting a †rm in its macro environment.
PEST analysis example Political Government has ed legislation which requires further https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
Economic GDP will grow by 3% in 2013 Availability of credit for businesses 6/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
reductions of CO2, HC and NC emissions for vehicles until 2015 New political forces, which are against tax reductions, may be elected in the next years’ elections
will slightly grow or remain unchanged in 2013. The same applies for the cost of credit in the 1 half of the year Unemployment is expected to
Import restrictions will increase in 2013 Government is increasing its funding to ‘speci†c’ industry Government is easing regulations for employment Increasing tensions between our government and our major export
decrease to 7% In‡ation will fall to 3% or 2% in 2013 Corporate tax rate will decrease by 2% next year to 23% Dollar exchange rates are expected to decrease compared to euro
partner’s government
Disposable income level will decrease Metal and oil prices will increase by 5% and 6% respectively in 2013
Socio-cultural
Technological
Positive attitude towards “green”
New machinery that could reduce
vehicles Number of individuals and companies buying through the Internet is 67% and 45% respectively and is expected to grow Immigration is increasing Increasing attitude toward jobs
production costs by 20% is in development Country’s major telecom company announced its plans to expand its internet infrastructure and install new optic †ber cables Driverless cars may be introduced in the near future
with shorter work hours People tend to buy more domestic rather than foreign products People change their eating habits and now tend to eat healthier food
“New” type of table will be introduced into the market next year
Sources 1. Thompson, J. and Martin, F. (2010). Strategic Management: Awareness & Change. 6th ed. Cengage Learning EMEA, p. 86-88, 816 https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
7/8
18.5.2016
PEST & PESTEL Analysis | Strategic Management Insight
2. Rothaermel, F. T. (2012). Strategic Management: Concepts and Cases. McGrawHill/Irwin, p. 56-61 3. David, F.R. (2009). Strategic Management: Concepts and Cases. 12th ed. FT Prentice Hall, p. 104-114 4. Johnson, G, Scholes, K. Whittington, R. (2008). Exploring Corporate Strategy. 8th ed. FT Prentice Hall, p. 55-57 5. Oxford Learning Lab (2012). PESTLE - Macro Environmental Analysis. Available at: http://www.oxlearn.com/arg_Marketing-Resources-PESTLE---MacroEnvironmental-Analysis_11_31 6. Wikipedia (2013). PEST analysis. Available at: http://en.wikipedia.org/wiki/ PEST_analysis
Related Articles
© 2013-2016 Strategic Management Insight. All rights reserved.
https://www.strategicmanagementinsight.com/tools/pestpestelanalysis.html
8/8
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