Looking at Major Forces

Given the scale of these forces, it is vital to identify and understand them so that you can use that knowledge to create good strategy.

The macroeconomic forces that affect your organization, and your competitors, your markets, and even whole countries and the global economy can have significant implications and are beyond your control. Given the scale of these forces, it is vital to identify and understand them so that you can use that knowledge to create good strategy.

PESTLE analysis was developed to help identify and understand macroeconomic forces that may impact on an organization, such as global and national economic factors (for example, growth or recession), changes in technology, and emerging social trends, such as attitudes to climate change.

PESTLE analysis divides these forces into six factors: political, economic, social, technological, legal and environmental. It is also used in the abbreviated form PEST (or STEP).

A PESTLE analysis should be an early step in creating new strategy, because it sets out the background in with an organization has to operate and make decisions. It can be performed by an individual, but is often best undertaken by a team so that ideas can be shared and discussed.

PESTLE can be set out on flip charts or a whiteboard, especially when being done by a team, but there is also software available to do the analysis. You should be able to identify most PESTLE factors quickly, but you may need to spend time researching specific issues in more detail. This research is important, because strategic decisions must be based on the best data available at the time.

The output of your PESTLE analysis can be used in conjunction with SWOT analysis to explore further how the macroeconomic factors you have identified may impact on your organization.

ACTION POINT: Understand the political, economic, social, technological, legal and environmental factors that impact your business.