The PEST or PESTLE analysis is one of the most common diagnostic tools used in marketing and business planning. Its six basic perspectives provide a framework for understanding external factors which may impact the organization, which is easy to follow and yet the tool is so often misunderstood.
PESTLE – Political, Economic, Sociological, Ecological, Legal, Environmental.
PESTLE provides the external perspective to a SWOT analysis…
Six simple rules for a successful PESTLE analysis
- Be realistic about what is happening in each of the six areas
- The Analysis should identify what is happening in the marketplace today, and where it could be in the future.
- Be specific. Avoid grey areas
- Always analyse in relation to your competition i.e. better than or worse than your competition
- Keep your PESTLE analysis short and simple to understand – but only as short and simple as the application or situation demands – it is about ‘fitness for purpose’
- Avoid unnecessary complexity and over analysis
The Top 5 mistakes people make:
- An unclear goal – providing the context for the PESTLE analysis
- Maintaining too narrow a focus – you need to look broadly at the market
- Neglecting input from others – inside and outside the organization
- Performing an analysis only once– this needs to happen on a regular basis (monthly for technology firms – quarterly for many others)
- Reliance on PESTLE as a holistic diagnostic strategy – it is only one tool.
A concise PESTLE Analysis
Keep your PESTLE analysis short and focused. If it becomes too long-winded, you’ll soon forget some of the more important points and it will become less effective in the long term.
The PESTLE is a valuable tool that in the right hands and with the appropriate level of effort can provide a valuable insight into current and future strategy.
Remember to consider the results of the PESTLE analysis as just one tool in a variety of analysis methods that can form together to create a more realistic analysis of your organization