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The PEST or PESTLE Analysis

Originally designed as a business environmental scan, the PEST or PESTLE analysis is an analysis of the external macro environment (big picture) in which a business operates. These are often factors which are beyond the control or influence of a business, however are important to be aware of when doing product development, business or strategy planning.

This page has been developed to help and support anyone with activities or projects which require use of the PESTLE analysis tool to undertake an environmental scan of an organizations operating environment.

History of PEST and PESTLE

So where did the term PEST or PESTLE derive? What were the origins?

The term PESTLE has been used regularly in the last 10+ years and its true history is difficult to establish.

From our research, the earliest know reference to tools and techniques for ‘Scanning the Business Environment’ appears to be by Francis J. Aguilar (1967) who discusses ‘ETPS’ - a mnemonic for the four sectors of his taxonomy of the environment: Economic, Technical, Political, and Social.

Shortly after its publication, Arnold Brown for the Institute of Life Insurance (in the US) reorganized it as ‘STEP’ (Strategic Trend Evaluation Process) as a way to organise the results of his environmental scanning.

Thereafter, this ‘macro external environment analysis’, or ‘environmental scanning for change’, was modified yet again to become a so-called STEPE analysis (the Social, Technical, Economic, Political, and Ecological taxonomies).

In the 1980s, several other authors including Fahey, Narayanan, Morrison, Renfro, Boucher, Mecca and Porter included variations of the taxonomy classifications in a variety of orders: PEST, PESTLE, STEEPLE etc. Why the slightly negative connotations of PEST have proven to be more popular than STEP is not known. There is no implied order or priority in any of the formats.

Some purists claim that STEP or PEST still contain headings which are appropriate for all situations, other claim that the additional breakdown of some factors to help individuals and teams undertaking an environmental scan.

Quite who and when added what elements to the mnemonic is a mystery, but what we do know is that the actual order and words contained are common to certain parts of the world and streams of academic study. The term PESTLE is particularly popular on HR and introductory marketing courses in the UK. Others favour PEST, STEP or STEEPLE.
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Introduction to The PESTLE Analysis tool

PESTLE analysis is a useful tool for understanding the “big picture” of the environment in which you are operating, and the opportunities and threats that lie within it. By understanding the environment in which you operate (external to your company or department), you can take advantage of the opportunities and minimize the threats.

Specifically the PEST or PESTLE analysis is a useful tool for understanding risks associated with market growth or decline, and as such the position, potential and direction for a business or organization.

For the purposes of this page we will focus on the PESTLE variation of the acronym.

The PESTLE Analysis is often used as a generic 'orientation' tool, finding out where an organization or product is in the context of what is happening out side that will at some point effect what is happening inside an organization.

A PESTLE analysis is a business measurement tool, looking at factors external to the organization. It is often used within a strategic SWOT analysis (Strengths, Weaknesses, Opportunities and Threats analysis).

The PESTLE analysis headings are a framework for reviewing a situation, and can also be used to review a strategy or position, direction of a company, a marketing proposition, or idea. There are many variants on this model including PEST analysis and STEEPLE analysis.

Completing a PESTLE analysis can be a simple or complex process. It all depends how thorough you need to be.  It is a good subject for workshop sessions, as undertaking this activity with only one perspective (i.e. only one persons view) can be time consuming and miss critical factors.

Use PESTLE analysis for business and strategic planning, marketing planning, business and product development and research reports.

The PESTLE template below includes sample questions or prompts, whose answers are can be inserted into the relevant section of the table.

The questions are examples of discussion points, and should be altered depending on the subject of the analysis, and how you want to use it.

Make up your own PESTLE questions and prompts to suit the issue being analyzed and the situation (i.e. the people doing the work and the expectations of them).

It is important to clearly identify the subject of a PESTLE analysis (that is a clear goal or output requirement), because an analysis of this type is multi faceted in relation to a particular business unit or proposition - if you dilute the focus you will produce an unclear picture - so be clear about the situation and perspective that you use PESTLE to analyze.

A market is defined by what is addressing it, be it a product, company, organization, brand, business unit, proposition, idea, etc, so be clear about how you define the market being analyzed, particularly if you use PESTLE analysis in workshops, team exercises or as a delegated task. The PESTLE subject should be a clear definition of the market being addressed, which might be from any of the following standpoints:

• A company looking at its market
• A product looking at its market
• A brand in relation to its market
• A local business unit or function in a business
• A strategic option, such as entering a new market or launching a new product
• A potential acquisition
• A potential partnership
• An investment opportunity

Be sure to describe the subject for the PESTLE analysis clearly so that people contributing to the analysis, and those seeing the finished PESTLE analysis, properly understand the purpose of the PESTLE assessment and implications.

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On to SWOT analysis

To take the PESTLE analysis forward you can integrate the results into your SWOT.

The outputs from the BIR/ SWOT will provide you with your internal strengths and weaknesses.

Have a look at the HIGH impacts from the PESTLE.  Some will be positive in nature, others will be negative. List these on your SWOT analysis under OPPORTUNITIES and THREATS.

The PESTLE model is a useful environmental scan as part of a diagnostic process. The PESTLE analysis tool can be used in association with the Business Improvement Review (BIR) - a highly structured and holistic SWOT tool.  The PESTLE models can help to identify the context in which a business operates and provide a context for change.  A PESTLE analysis can provide a valuable agenda upon which to use a Business Improvement Review (BIR) to help identify the strengths and weaknesses (SWOT) of an organization, as apart of an organizational change process. Click here for more information. Need to write SMART objectives? Need to use Management Models

Have you found this page of value? Need more details/ ideas? Your feedback is welcomed.

Based upon information from many sources. No copyright over the model or acronyms are assumed. This page is provided for educational purposes only. RapidBI Ltd cannot accept any responsibility for the actions taken using this or any of the tools provided on this site. Please note this page is updated on a regular basis.  The more feedback we get the more we will develop this and similar pages for people studying CIPD and other HR and management programmes. CTP, CPP etc

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PEST-G or PEST-E

What is PEST-G or PEST-E?

There has been some changes to the way PEST is being used in 2009, with the addition of G for Green or E for Environment. Within the PESTLE version of course this is already catered for.

It has taken some time, but now those faithful to PEST rather than PESTLE are starting to change and add a new variant.

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