What is PESTEL Analysis
The PESTEL Analysis is a planning tool used by professionals to understand the external factors that affect an organization in a structured way. Here, we will tell you everything you want to know about Pestel analysis. Learn how to conduct a Pestel analysis, its purpose, and its uses. Also, check out our commonly used PESTEL model examples.
1. What Is PESTEL Analysis?
A PESTEL Analysis is a framework that decribes an organization's working state and the macro factors affecting it. Marketers use it plan out strategies to make their business more successful with it, and it also helps them understand the problems in the business structure. A PESTEL model makes it easy to find the root of any problem and solve it before it creates trouble for the business.
You can use it to analyze any business's current and future operating state. The external trends impacting an organization depend on the type of business like the environmental changes dont affect a law firm but the legal trends does. The examples below will help you determine which type of Pestel analysis is suitable for your business.
Click on the image to edit. Source: EdrawMax Online
Pestel is an acronym for political, social, economic, technological, legal, and environmental. Here are the key items of the six factors that affect a business.
P- Political Factor represents the government policies, tax policies, foreign trade policies, and any other activity that affects a business.
E- Economical Factor represents a business's economic growth by accounting for the economic aspects that impact a company, such as interest rates and disposable income.
S- Social Factor represents the cultural trends of society. It includes demographics such as living standards, culture, race, population growth and religious trends.
T- Technological Factor represents the innovation that can improve your business, such as new tech for the production of goods, new marketing techniques, and new communication methods.
E- Environmental Factor represents the impact of the environment on your business, including carbon footprints, weather and climate changes, pollution.
E- Ethical Factor represents a business's actions that affect employees' and managers' behaviour in and outside the company.
2. PESTEL Analysis Use Cases: When to Use it?
Launching a Business: To establish a new business, following the political laws and regulations is necessary. The working framework of every business is different, and the same rules don't cover all the legal activities. Using a PESTEL Analysis makes it easier to understand the external factors affecting the business start-up.
Strategic Planning: We use Pestel analysis to illustrate the current and projected growth of a business. It helps with the strategic planning for the future of the industry. It gives an insight into future markets, technological advancements, and other factors that might affect the business. But, using a Pestel analysis right before launching a new product is a bad business practice.
To Solve Problems: Facing problems in a business is common. Except for solving the problem, you can't do anything after the problem arrives. But, after solving the problem, the first thing you should do is conduct a PESTEL analysis. If there is one problem, there might be another, and the best way to solve a problem is to stop it from happening.
3. How to Conduct a PESTEL Analysis?
To conduct a PESTEL analysis, the first thing you need is a model or template that you can use to illustrate it. Describe the current status of your business and list the factors that might affect it in the future. Make sure to conduct the analysis as a team to get input from participants. It will help you understand the factors affecting your business from various perspectives. Follow these steps to conduct the analysis.
- STEP 1: The first step is to list the areas of the Pestel template and brainstorm to generate ideas. It will help you get a better insight into each factor and develop strategies to solve problems and evaluate the performance of your business.
- STEP 2: The next step is to communicate with all participants involved in the analysis to ask for their opinions and collect their ideas to develop a better business plan.
- STEP 3: After you collect the ideas, the next step is to rate them based on their importance and the factors they focus on. The factors that closely impact the current and future status of the business get a higher rating.
- STEP 4: After your diagram is complete, the next step is to download it. EdrawMax Online supports various document formats, so you can export in any format you want. You can also share and print it. Make sure to share the results of your analysis with all stakeholders to let them know what is happening before moving forward to deal with any issues that turn up.
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After you understand the PESTEL Analysis, the next step is to get started with EdrawMax and create it using free templates. EdrawMax Online is the best Pestel analysis maker because of its user-friendly interface and comprehensive collection of free templates. It also comes with a symbol library and many unique customization tools. EdrawMax lets you export your diagram in any format you want, and you can create more than 300 types of graphs with it. Here are the steps to make a PESTEL model on EdrawMax.
- STEP 1: Log in to EdrawMax Online or create a new account.
- STEP 2: You can make your diagram using a template or open a blank canvas to draw it from scratch. Go to new, and click on the analysis canvas category. Select the strategy analysis and click on the "+" button to get a new canvas, or select a template to edit it right away. STEP 3: The next step is to customize your PESTEL model. Go to the symbols library and insert icons and symbols with a simple drag and drop. Add connecters to visualize the relationship between components. Align your diagram, adjust the layout, and style it by changing fonts. Customize it using drawing tools, auto themes, and color fill.
- STEP 4: After your diagram is complete, the next step is to download it. EdrawMax Online supports various document formats, so you can export in any format you want. You can also share and print it.
4. PESTEL Analysis Examples
You can easily conduct a PESTEL Analysis with a free Pestel analysis template. The purpose of these charts is to describe the external environment of a business for strategic planning. However, making a PESTEL analysis takes time and effort, which is why professionals use editable templates to create these charts. Here are some free PESTEL template.
Example 1: Advertising Industry PESTEL Analysis
The advertising industry PESTEL analysis template in this example illustrates the external factors impacting their organization. Its layout is clean and practical, and it focuses on four aspects depicted in the diagram on the right side. The description of these factors is on the left side of the chart in plain text. Professionals use it to determine the political, environmental, technological, and social factors affecting the business from outside.
Example 2: Channel PESTEL Analysis
The channel PESTEL analysis template in this example is commonly used to illustrate the framework of environmental factors and strategic components affecting the business from outside. Conducting a PESTEL analysis before implementing tactical plans is important because it gives you a deeper insight into the factors impacting your business's current or future status. You can use various graphical representation tools in a PESTEL model.
Example 3: PESTEL Analysis Example
The template in this PESTEL Analysis example depicts the key elements and external trends you can understand with a Pestel model. The first part is the political factors representing the political activities that impact a business. Next, economic factors that tell you about consumer behaviour. The social factors represent the ethics and employee behaviour with the outside environment. Each section explains one letter from the acronym PESTEL.
5. PESTEL Analysis Advantages and Disadvantages
- It helps businesses understand the external factors that affect them in their operating environment.
- It gives a head-up for any future opportunities or threats to the business.
- It helps with business start-ups by illustrating external trends.
- The model is not comprehensive enough to cover every detail of the external environment.
- It only represents the external trends without considering the internal environment of a business.
6. FAQ About PESTEL Analysis
1.What is PESTEL in marketing?
A PESTEL analysis in marketing tells you about the external environment of your business. You can conduct a study to categorize the target audience and develop marketing strategies for your business's current and future state. Marketers use it to analyze the factors that impact an organization or industry, and you can use it to understand market trends.
2.What is the difference between SWOT and PESTEL?
A SWOT and PESTEL analysis are entirely different concepts. In a SWOT analysis, you focus on the internal environment and components of a business, such as employees' and managers' behaviour to each other. In PESTEL analysis, you focus on the external trends affecting your business, such as your employee's behaviour with clients.
3. What is PESTEL framework?
The PESTEL framework describes the six factors that impact the business from outside. These factors include political, economic, social, environmental, technological, and legal trends. It helps marketers and leaders from various organizations develop strategic plans for the development of their business. PESTEL also warns about the threats and problems that your business might face in the future.
7. Key Takeaways
A PESTEL Analysis evaluates the macro-environment facing a business that affects its current and future state. It illustrates the political, economic, social, technological, environmental, and legal factors that impact the company from outside. It provides a practical framework to evaluate the pros and cons of a business strategy. EdrawMax Online is the best PESTEL analysis maker that gives you free editable templates and a symbol library to make your chart. It also comes with many unique features and supports various document formats. Go to EdrawMax Online and get started right away. You can easily create a spider map on EdrawMax Online. It gives you free professional templates and a symbol library to make your diagram. It also comes with unique customization tools and supports various document formats. Find more PESTEL Analysis examples.