Why was Walmart was so successful? What risks does Walmart face? For all those questions read this in-depth SWOT Analysis to Walmart.com
Establishing a known brand, working in a huge conglomerate or contributing to a project by a big company has their effects. Even though you might think that their impacts can only be seen for you and for the company you are working for, in fact, their impacts can be seen throughout the world. And also… the external factors of the world affect you and your company.
An ideal company might be apolitical, impartial and neutral in order to not to exclude anyone or push away anyone from their products. Due to the fact that everybody is a potential customer. However, staying away from social and political commentary and not adjusting the brand (as well as the products) according to the ever-changing developments are not possible in today’s world.
Not only your products can change the world, but your actions and decisions as a brand can impact cultures, countries, continents, citizens and your potential customers. Keep in mind that you and your company are also impacted and affected by external forces. And there is not a certain way to ensure that these impacts would be positive for your business.
The History of the PESTLE Analysis
Francis J. Aguilar was a professor for the Harvard Business School in the 1960’s and his research and studies were focused on strategic planning and management for private and public companies. In 1967, he published an ordinary novel that should have flown under the radar of scholars and analysts… but it did not.
His novel titled Scanning the Business Environment featured the first known written evidence of this type of analysis, therefore, Aguilar is considered the creator of it. The first acronym for the analysis used in the novel was not PESTLE; it was actually ETPS. Even right now, you can find various versions and variations of the analysis’ acronym. Let’s look at these changing acronyms and detailly explain what the analysis actually is.
What is the PESTLE Analysis?
This is a strategic planning tool to analyze the impact and effect of external forces to your business. Your actions and decisions can (and should be) shaped or at least adjusted by these impactful factors.
The Acronym Variations of the PESTLE Analysis:
The acronym PESTLE stands for Political, Economic, Social (or every now and then Socio-Cultural), Technological, Legal and Environmental factors of the Earth. Although the categories of these factors have not changed that much, the acronym of them changes a lot. There are PESTEL, PESTLIED, PESTELE, STEEPLE, ETPS, STEP, STEPE, SLEPT, LONGPESTLE; and also, the PEST analysis which excludes the Legal and Environmental factors entirely out of the process. You can find what all these distinct acronyms stand for and mean, below in the next chapters of this blog post.
PESTLE acronym is one of the most used and one of the ones that does not exclude any factors out of the analysis, so you are going to see this acronym used throughout this blog post.
PRO TIP: You might not always have the time or resources to conduct a comprehensive analysis. However, this is an important process which can be incredibly and gradually useful for your company’s future decisions, economic actions and steps to take as a brand. That is why if you are to conduct a PESTLE analysis, make sure that you are covering all of the factors in the PESTLE acronym. If you are given a task to do an analysis and you produce a document for a PESTLIED analysis, then the results of your analysis will not be accepted. Acronyms do matter and they can change the outcome of your analysis!
How Can the PESTLE Analysis Help Your Company?
The framework can influence a company as a whole. It can improve services and products, change the course of action of a business, develop a brand, make the brand even bigger and it can also make you see your mistakes, errors and miscommunications with your audience.
In addition to that, it is a framework for you to structure the situations you have faced and the ones you will come across. If you are managing a company or even if you are just an employee in one, you have to monitor these external effects and change your work to suit them.
Successfully going through this process and achieving correct results for the analysis is crucial, if you are one of the decision-makers for the company. The actions and decisions you make are determined by internal components of your company as well as external influences to your company.
The PESTLE analysis provides you what can be a risk to your company and in which areas. Additionally, the analysis also offers opportunities (if taken) that can further advance your company technologically, economically, socially or even in popularity.
The factors and the results of the analysis are (and should be) objective. The details of the process must not be biased or incorrect, due to the fact that the results of this ‘inaccurate’ analysis can be harmful for the future of your company. Make sure that the research is done properly and if there is some information that needs to be checked, ensure that the people in charge can provide evidence. That is why this process should be conducted by able and professional experts who do not sway the factors or the results to their biased opinions or in somebody’s favor.
Let’s examine the individual factors.
Undoubtedly, every government has a certain kind of power which can influence businesses and their fields as a whole. Other than individual companies and businesses, a government’s decisions can positively or negatively impact a sector.
These can be unexpected and newly signed regulations or laws; or they can be already in place rules or laws in regards to employment, tax or operations.
Political factors are crucial for a business because it might have the strictest rules and harshest punishments, if they are not taken into consideration. Additionally, you might miss a few factors in this field as well. Allow detailed research periods and examinations in order to go through every step of your business. You could consider the impact of political factors on you or your department; however, you could also forget to deal with the effects of political factors on other employees on other departments. And also, keep in mind that your customers and their experience with your service or product can be also affected.
Example Areas for Political Factors
- Possible change of government
- Newly elected laws and regulations
- Incoming elections
- Changes in tax law(s)
- Trade regulations, competitions and complications
- Competition laws
- Non-economic incentives to businesses
- Fiscal policy changes of industry giants
- Grants for startups
- The relationships between countries and unions
Questions to Consider
Below, you can find some helpful questions that can help you figure out the political factors more easily:
- Which industry does my company operate in?
- Which industry do my customers engage in?
- When is the next local or general election?
- What unions is my country included in?
- And what kind of benefits do those unions have in regards to my business sector?
- Is my business international? If not, can my government help me to get my business overseas?
- How is the relationship between my government and other countries’ governments?
Any economic event, decision or change in regards to the economy can be included as an economic factor. These economic factors can change the performance of a business and also, the purchasing power of their customers.
Example Areas of Economic Factors
- Changes in the interest rate
- Inflation percentage
- GDP of the country where the business is based in
- Unexpected value drops in the currency
- Exchange rates
- Purchasing power
- Investors’ confidence in the business
Questions to Consider
- How are my sales compared to the previous year?
- Does my business operate in one country or in multiple countries in several continents?
- How is my country doing economically?
- How much is the economic growth of your country?
These factors include the public’s decisions and forces, these can be trends and lifestyles. Social factors are the influences that society has over businesses.
Example Areas of Social Factors
- Cultural events and norms
- Lifestyle of the society
- Communities based in the society
- Different behaviors of different age groups
- Shifting demographics
- General public opinion
Questions to Consider
- How can the societal behaviors affect my company’s longevity?
- How my business targets coincide with the goals of individuals?
- What are the demographics of my employees as well as our customers?
- How can the societal norms change in the near and distant future?
These factors include the ever-changing developments of the technology industry. Technological factors can be considered ones that advance the quickest. They change and develop very rapidly compared to other factors.
Additionally, you do not need to be involved with a company focused on technology in order to be affected by it. Technology affects everyone, every industry and every business around the world.
Example Areas of Technological Factors
- Research and development processes
- Automation advancements
- Innovation in devices and services
- New and improved tools and gadgets
- Developments in artificial intelligence
- New transportation vehicles and methods
- Brand new manufacturing techniques
Questions to Consider
- Does my business have an adequate website?
- Does my business need a mobile app?
- How could advancements in technology change the way my business operates?
- Do I need to change my shipment or delivery methods with the current technological advancements?
- Is automation possible in my business?
Legal factors are going to differ from country to country, region to region and often city to city. They consist of quite specific laws and regulations. These justice systems can impede, hurt or help the operations of a business. There is a clear distinction for all businesses, regardless of the sector, that some actions are legal and some are illegal.
Example Areas of Legal Factors
- Health and safety laws and regulations
- Antitrust laws
- Trademark and patent laws
- Employment laws regarding minimum wage
- Data sharing laws
Questions to Consider
- Which laws do I have to consider before I hire employees?
- Will there be new laws that can affect my business in any way?
- Do I have an adequate lawyer(s) that can handle specifics?
- Are all of my dealings, purchases, shipments and deliveries legal and suit each of the related laws and regulations?
These include the changes in nature and occurrences related to nature. The climate of a region and the constant weather can be key factors to consider before you establish a business and during operating your business.
Example Areas of Environmental Factors
- Climate and the effects of climate change
- Sustainability of products and the overall business
- Availability of natural resources
- Raw material supplies
- The rising level of carbon emissions
- Commodity costs
Questions to Consider
- How does the weather affect my business?
- How does my business impact the environment?
- Are my resources and my business sustainable? If so, to what degree?
- Do my processing and manufacturing negatively impact the environment and living creatures?
PESTLE Analysis Variations
The different acronyms of the PESTLE analysis were only mentioned above in the previous chapters. Now, let’s dissect them and look at what they include on each of their analyses and what the acronyms actually stand for:
- PESTLE or PESTEL: Political, Economic, Social (or Socio-Cultural), Technological, Legal and Environmental
- PEST: Political, Economic, Social and Technological
- PESTLIED: Political, Economic, Social, Technological, Legal, International, Environmental and Demographic
- PESTELE: Political, Economic, Social, Technological, Environmental, Legal and Ethical
- STEEPLE: Social (or Demographic), Technological, Economic, Environmental, Political, Legal and Ethical
- SLEPT: Social, Legal, Economic, Political and Technological
- LONGPESTLE: Local, National and Global PESTLE
Pros and Cons of the PESTLE Analysis
As with all analysis methods and different techniques, the PESTLE method also has its pros and cons as well. The cons or disadvantages of this technique should not be considered as ‘reasons to not to conduct this analysis’. They are simply restrictions and limitations of the method, if you decide to use it on your business.
- It is a simple tool for you to conduct general and specific analysis.
- It separates the categories of factors in order to clearly understand each one of its effects.
- It shows you the potential threats that your company can face so that you can take the needed precautions.
- It develops strategic planning skills.
- It displays the opportunities you can follow in order to better your business.
- It allows you to assess and evaluate the essential features of your business.
- It is a constant process that needs to be regularly monitored and repeatedly updated.
- It takes time, effort, energy, money and additional resources to conduct a successful and comprehensive PESTLE analysis.
- It relies on accurate information. And not just ‘too much’ information or ‘oversimplified’ information, the analysis should be conducted with adequate information.
- It can be hard, complicated and often impossible to access external data.
- It can be a harmful analysis, if the people in charge did not care enough to conduct an accurate one.
- It takes into consideration forecasts, assumptions and estimations which can be biased or coincidental.
- It can be tiring to always be on the lookout for the external factors which always change in a rapid manner.
- It provides a simple framework; however, when talking about crucial external factors ‘a simple framework’ would not be the first choice for your analysis.
PESTLE Analysis vs SWOT Analysis
Even though these two analysis techniques are used together, they have different and distinct features. Both of these frameworks deal with establishing business strategies and future management plans.
While the analysis identifies the external factors that can impact your business and works better in developing long-term plans; the SWOT analysis is much more specific and detailed on the impacts of external and internal factors to your business.
PESTLE analysis deals with broader topics and the big picture in general. However, SWOT analysis is a dissection of the company with the examination of strengths, weaknesses, opportunities and threats.
Similar companies in the same sector can have nearly the same PESTLE analysis results. On the other hand, due to the fact that SWOT analyses are quite comprehensive, each and every company will have unique results. You can find detailed SWOT analyses of well-known companies such as Amazon, Tesla and Apple here in these blog posts!
When Should You Conduct a PESTLE Analysis?
A framework become quite useful when you are looking to assess or evaluate your company. It can be a general evaluation; however, you are still able to identify the risks as well as possible future opportunities for your business in their specific categories.
A PESTLE analysis can also help you when you are establishing a new business. Newly created startups or newly formed departments in a company can get helpful results by conducting a PESTLE analysis.
When you are changing your goals and shifting your target, conducting a PESTLE analysis can show you where you should take the company by determining the risks and opportunities.
The PESTLE method is used by marketing departments in order to create or improve their marketing strategies. Business analysts also use this technique in order to figure out the clear effects of external forces.
Example of PESTLE Analysis for Starbucks:
Let’s look at an example for one of the most popular brands around the world in order to better understand this analysis technique:
PESTLE Analysis of Starbucks
- The constant pressure and questioning of politicians in the United States about the sourcing of raw materials (coffee beans) from South America. This can be considered as a risk.
- The regional markets all around the world actually integrate each other pretty well. This can be considered as an opportunity.
- Almost all of the governments that have Starbucks shops in the country, support the infrastructure and the operations of the company. This can be considered as an opportunity.
- The increasing revenue of stores in developing countries = An opportunity
- The rising number of employees in the stores around the world = An opportunity for the company and decreasing unemployment rates for the countries
- The increasing labor costs in the countries that supply the raw materials = A risk
- The growing coffee culture amongst millennials = An opportunity
- Being a pioneer ‘green’ brand = An opportunity
- People over 35 do not buy their coffee from Starbucks and look for alternatives = A risk
- The successful integration of the mobile app for purchases = An opportunity
- The advancements in the coffee processing technology = An opportunity
- The increasing amount of advanced and efficient home coffee makers = A risk
- Allegations of racist and sexist behavior towards employees by supervisors = A risk
- The increased spending on Human Resources department = A risk
- Satisfying product safety regulations = An opportunity
- The focus which the company shows for sustainability = An opportunity
- Everyday use of an enormous amount of plastic = A risk
- The shifting to biodegradable materials = An opportunity
Conducting a PESTLE Analysis in 7 Steps
- First, do a proper and thorough research in order to get enough data about the external influences that can affect your business. Reach out to private companies, other colleagues, public records and public figures to get enough and correct information about each of the individual factors.
- While deciding on the scope of your research, make sure that your resources are respected and trustworthy. Eliminate anyone, any document or a piece of media that is biased out of your data.
- After you have collected information, separate them into their related category factors respectively. You can use a third party template in Microsoft Excel in order to easily achieve that.
- Identify which situations and factors can be considered as ‘risks’ and which ones can be considered as ‘opportunities’ for the company.
- Always keep track of each situation on each of the factors. Any change or occurrence should be monitored and updated in the factors list.
- Decide what should be done in order to remove the risks from the list and what actions should the company take to follow the opportunities.
- Repeat these steps on a regular basis to get accurate and up-to-date information and analysis results.
How to Conduct a PESTLE Analysis in Microsoft Excel (with a Someka Template)?
With Someka’s PESTLE Analysis Template, your business framework is easy to understand and easy to update! The template offers you a simple overview of the external factors your company can be affected by but also provides you a detailed analysis tool.
You can find sections for Political, Economic, Sociological, Technological, Legal and Environmental factors for you to enter the data you have researched. This colorful Excel template is a great way for you to conduct your PESTLE analysis. It is incredibly useful if you are a small business or a new startup!
It is ready to use, right now! You do not have to install or download other programs or software, if you already have Microsoft Excel in your device. It also does not take your time with adjustments and changes, if you want to print it and share with others. It is always print ready with a professional design.
And perhaps the best part about it is you do not have to spend any amount of money in order to get a quality template. Because this Excel template is completely free!
Additionally, you can also download the SWOT Analysis Excel Template and use them together to set up the best business framework possible.
If you are a business owner, a manager, an employee or even an intern, you are going to always have to deal with internal situations. But you (and as all of the world) might be going through a hard and a painful period in the middle of a pandemic, an incredibly impactful external factor. Your business might be affected as much as yourself in these tough times. You can always conduct a PESTLE analysis, even for just clearing your thoughts. Figuring out exactly how you and your business are affected and can be affected by external factors might be one of the ways you can create solutions for these situations.