A PESTLE (or PEST or PESTEL) analysis is a way of looking at the macro picture of an industry or entity's environment. PESTLE stands for Political, Economic, Social, Technological, Legal and Environmental factors.
Depending on the type of analysis you are doing, such as for a company or an industry, some factors may be more or less important in your analysis. PESTLE is a tool that gives you a framework to support your research. It can also help you to identify risk factors and opportunities to inform a SWOT analysis.
There are some variations on the traditional PESTLE analysis, including the addition of E for Ethics to include demographic discussions. Depending on your purpose, these factors may or may not be relevant.
Why do a PESTLE Analysis?
A PESTLE analysis allows you to approach a business environment in a strategic and systematic way. It's a useful tool for conducting an evaluation of a business' prospects, risks and opportunities in a new or existing environment.
While a SWOT analysis concentrates on a company's internal processes, PESTLE provides information on external factors, making it useful for large or small scale projects.
Political factors can impact the way that a business or industry can operate through a range of different ways. Some of these include the way certain goods or businesses are taxed, levies or tariffs, duties, or revenue generation operations. The government's political leanings, whether those are liberal or conservative, the particular priorities of a government, fiscal policies and budgets, and tax policies are all political factors that can have an impact on the way businesses can operate.
See below for resources you can use to discover more about the political factors impacting markets.
Economic factors are among the most obvious of the PESTLE factors than can impact the way a business or industry operates.The economy's performance can have direct impact on businesses and industries operating under those conditions. These factors can influence the spending habits of consumers, the supply chain, and the cost of operating a business. Inflation can change the costs of running a business and impact costing and pricing. Interest rates can impact loans and renting for office or operating space.
Economic factors include things such as inflation rates, interest rates, foreign exchange rates, and economic growth patterns.
See below for some sources you can use to investigate the economic factors impacting your business or industry.
Social factors are those related to the social environment in which an industry or business operates. These can be harder to determine than some other PESTLE factors, but are just important. Social factors can include religious observances, holidays, common behaviours and social customs that might impact the way consumers buy and interact with businesses. This, in turn, can impact supply chains and business to business models.
Factors such as environmental consciousness or the pressure to be seen as environmentally conscious can change the way people purchase items such as decorations or disposable cups, or the businesses they choose to shop at, if a certain brand is considered less environmentally friendly. Religious beliefs can impact the way, or the times, when people do, or don't buy or consume alcohol or certain types of food. For example, a restaurant in an area with a high Muslim population may change their operating hours to stay open longer after the sun has set rather than during the day.
See below for some resources you can use to investigate social factors.
Technological factors are those related to technology or technological development, which may change or impact the way businesses operate. Technologies such as Artificial Intelligence and Large Language Models may prompt businesses to use chatbots to allow their customer service centres to be open later, or new innovations in robotics may change the way manufacturing companies operate. The rise of the use of QR codes during the Pandemic has changed the ways in which many restaurants and cafes take orders and payment, for example, allowing people to order from their tables and requiring less wait staff.
Check out some of the resources below for information on how technological factors may impact businesses.
Legal factors can be both internal and external. Legal factors can impact the reporting that a business has to do, the way an industry can operate, as well as things such as award wages, consumer safety, and safety standards. Legal factors can also be internal to a business, such as policies and procedures around hiring practices, WHS, and governance. Legal factors can include things such as consumer safety laws, safety standards, labour laws, and other legislation. These laws will be different between countries and so are an extremely important part of any PESTLE analysis.
The resources below will help you research legal factors impacting businesses and industries.
Environmental factors are those that are determined by, or influence the surrounding environment. These are particularly important for industries such as tourism, farming, agriculture, or mining. These factors can impact the time of year a business operates, the way that an industry can conduct its operations, and requirements to meet environmental legislation around endangered and protected species, or around Aboriginal or other historical sites. Environmental factors include elements such as climate, weather, geographical location, climate change, and environmental offsets.
Explore the resources below for more information on environmental factors.
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