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 the use of the PESTLE analysis tool to undertake an environmental scan of an organizations operating environment.
- Jump straight to the FREE PESTLE Template (below)
- PESTLE Analysis on an HR department or other internal function
- Download PDF versions of these templates
- History of PEST (LE)
- NEW page on PESTLE analysis for schools and education
It is important to take into account PESTLE factors for the following main reasons:
- Firstly, by making effective use of PESTLE analysis, you ensure that what you are doing is aligned positively with the powerful forces of change that are affecting our working environment. By taking advantage of change, you are much more likely to be successful than if your activities oppose it
- Secondly, good use of PESTLE analysis helps you avoid taking action that is likely to lead to failure for reasons beyond your control
- Thirdly, PESTLE is useful when you start a new product or service. Use of PESTLE helps you break free of assumptions, and helps you quickly adapt to the realities of the new environment
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, the 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 on 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 person’s 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.
Remember this is only a tool. Call it what you like – use whatever factors you feel are appropriate. Other variations include:
- PEST analysis (STEP analysis) – Political, Economic, Sociological, Technological
- PESTLE/ PESTEL analysis– Political, Economic, Sociological, Technological, Legal, Environmental; PESTEL analysis
- PESTEL analysis– Political, Economic, Sociological, Technological, Environmental, Labour (Labor) related; PESTEL analysis (rare no references available)
- PESTLIED analysis– Political, Economic, Social, Technological, Legal, International, Environmental, Demographic
- STEEPLE analysis – Social/Demographic, Technological, Economic, Environmental, Political, Legal, Ethical
- SLEPT analysis – Social, Legal, Economic, Political, Technological
- STEPE analysis – Social, Technical, Economic, Political, and Ecological
- ETPS analysis – Economic, Technical, Political and Social – Scanning the business environment
Choose the acronym that most suits you or your organization.
Next Steps after completing a PESTLE Analysis
When you have identified the factors that may impact your organization, in column 2 list HOW they would impact on your organization. When this is complete, in column 3 indicate the extent to which each factor is a risk.
As a rule of thumb, for every HIGH risk, you identify you should have at least 10 MEDIUM and 20 LOW-risk item. If you identify more high risks than low risks it may be worth re-visiting your thoughts on what may or may not impact your organization. Then look at the relative importance and implication of each factor.
When you have done this you are ready to start to populate a SWOT analysis (see below).
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.
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Based upon information from many sources. No copyright over the model or acronyms is 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