Social factors assess the mentality and characteristics of the individuals and consumers in a particular market. Examples of economic factors PESTELĮxamples of economic factors are among others: For example, inflation affects the way companies price their products and services.įor these reasons, companies compare inflation, unemployment and economic growth in different countries and markets before making a strategic choice. These factors have a direct or indirect influence on the performance of a company. Economic factors are for example economic growth, exchange rates, inflation, interest, etc. Other examples of political factors to consider when conducting a PESTEL analysis include:Įconomic factors often include indicators of the performance and health of a particular economy. The balance between control systems and the free market is constantly changing and businesses benefit greatly from closely monitoring developments in this area. These political factors often help determine the location of the headquarters of large organizations. These are important factors to consider when assessing a market or industry. The government also has a major influence on a country’s education system, infrastructure and health facilities. This includes government policy, economic policy, political instability, commercial law, corruption, tax law, labor law, environmental law and trade restrictions. Political factors have to do with how the government intervenes in the economy or in a specific sector. The six factors are explained below.įigure 1 – The 6 Basic Elements of the PESTEL Analysis, + Ethical addition Political factors The six PESTEL factors are: Political, Economic, Social, Technological, Environmental and Legal. What about the political situation in this country?.What about the environment in this market? Legislation and regulations that must be complied with?.Are there laws and regulations that regulate and influence the industry? What is the risk of legislative changes affecting the industry?.What are the most urgent and important economic factors in this market?.How important is culture in this market? How does culture influence the way of doing business?.While performing a PESTEL analysis, the user should always ask themselves important questions. For example, technological progress can interact with the economy and social life within a market. These factors are not all independent of each other. Dependency of the PESTEL analysis FactorsĪs mentioned before, the PESTEL framework includes 6 different factors. Aguilar was a management professor at Harvard University, where he developed this macro-analysis tool. However, it is believed that the developer of the first version of the PESTEL model, the PEST Analysis, is Francis J. Background PESTEL analysisĭue to the countless variations on the model, it is difficult to trace the exact origin of the model. It underlines the usefulness of taking into account the impact of external factors and forces on the future. The PESTLE method is a popular method, for example in HR, training and development, organizational development and marketing courses. This variant includes most of the relevant factors. This article only discusses the PESTEL model. The result is a collection of variants, including the STEEPLED, DESTEP and SLEPIT models. Over the years the framework has expanded, where it started as PEST, now several other factors have been added such as environmental, demographic, intercultural and ethical factors. It is often used in conjunction with other tools, such as Porter’s Five Forces Model and the aforementioned SWOT Analysis. The tool is particularly useful when starting a new organization or entering a new, foreign market. What is the purpose of a PESTEL analysis? Do you want unlimited ad-free access and templates? Find out more DefinitionĪ PESTEL analysis provides the data that is used in a strategic management analysis, for example for a SWOT Analysis.
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