Scan, plan, manage, achieve!
Scan, plan, manage, achieve!
What is a PESTLE analysis? Organisations don’t exist in a vacuum. They are intricately connected to an outside world with a constantly changing landscape. If you can analyse this landscape, and the features that impact on your organisation’s performance, then you can begin to make decisions and plans. Regardless of the uncertainties of the future.
A PESTLE analysis is a tool to help you do this. Each letter stands for an element of the organisation’s external operating environment. They stand for Political, Economic, Socio-cultural, Technological, Legal and Ecological. These are often referred to by the acronym PESTLE (or similar variations on the theme, such as PEST or SLEPT).
Most models and tools provide a structure to help you think about context. They are valuable to the extent that they help you structure your thoughts, but remember – they don’t replace the need for you to get the right people together to do that thinking!
To gain a “big” picture view of the environment you need to analyse both the external and the internal context. A PESTLE analysis will provide the external perspective, leading to an assessment of opportunities and threats. The internal perspective can be determined by a review of strengths and weaknesses.
The combination of an external focus with the internal perspective enables you to assess the opportunities and threats from outside the organization and the strengths and weaknesses from inside the organization. This is commonly referred to as a SWOT analysis (strengths, weaknesses, opportunities and threats). For more on SWOT see our article: SWOT analysis: combining internal and external views.
Examples of these influences, and the way in which they can be categorized using a PESTLE analysis, are given below. Think about how your organisation might be affected by:
Using the PESTLE headings, think about the following questions:
A list of PESTLE influences on its own is of limited value. Each must be considered but not in isolation. What’s important is that you understand what they all mean for your organisation, and that you can identify the key drivers of structural change for your industry or sector. For example: public services are more likely to be impacted by changes in government policy, public spending levels, a declining birth rate, and the need to manage a culturally diverse society.
Whereas a software company may be more immediately concerned with changes in the technical environment which lead to product innovation and obsolescence. Of course this shouldn’t be over-simplified. Software companies will also be affected by changes in political or economic influences as these may affect market conditions. All organizations should be concerned about social and ecological influences as these relate to people and the physical world we inhabit.
Remember, a PESTLE analysis is only one of several management tools. For example it allows you to focus more specifically on the opportunities and threats part of a SWOT analysis.
Developing an understanding of your environment is a crucial step towards developing your strategy, and providing the information and intelligence to inform your Business Goal Setting process.
Organizations don’t exist in a vacuum. The business industry environment is constantly changing and being aware of those changes is crucial. A PESTLE analysis is one of the best known tools to help assess that environment.
You can find out more about business planning by reading our series on the subject, starting with business goal setting.
You can find our more about the benefits of goal setting in our e-guide: SMART Goals, SHARP Goals. The guide contains 30 pages and 5 tools to help you to set SMART goals, then take SHARP action to achieve them. It includes: