Using PESTLE Analysis

There is a process and six factors that are part of the PESTLE analysis. The factors are:

• Political: The impact of decisions made by government(s), from new laws and policies to political goals and ideologies, such as increasing gender equality.
• Economic: Issues related to the distribution, supply, and availability of money, such as the performance f national economies and changes in currency exchange rates.
• Social: The impact of social factors, such as collective social belief of what is right or wrong, and changes in taste, fashion, attitudes and work ethics.
• Technological: The emergence of availability of new and enabling technologies--automation, for example--meaning new things are possible and old processes are obsolete.
• Legal: The impact of existing lass, proposed changes to laws, or the introduction or removal of laws These can be general laws or those specific to business.
• Environmental: The impact of consumer attitudes toward and legislation relating to environmental issues, such as pollution and climate change.

The process begins by gathering the team and brainstorming each factor in turn. Then anything that could affect your organization in the future is listed. From there the team narrows the list to the main factors that need to be considered when developing new strategy.

ACTION POINT: Consider a PESTLE analysis when developing a new strategy.

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.

Performing a SWOT Analysis

SWOT analysis is a tool that can be used to generate an overview of an organization's position within a particular market, or a team's position within an organization. Use the SWOT matrix to determine and compare the internal strengths and weaknesses of your organization or team, and to analyze the opportunities for it and threats to it within the market.

The information you collect will enable you to make decisions that could help to put your organization into a stronger position by making the most of your strengths, minimizing your weaknesses, exploiting the opportunities open to you in the market, and mitigating any threats.

ACTION POINT: If you've taken the time to analyze your situation using analysis tools, don't let the data you've collected just sit in a a file--be sure to use the information to inform your strategy.

Tracking Your Market

To to this, you must spend time "in the market"

To understand the environment in which you do business, you must dedicate time to consciously seeking out the information you require. For example, to be a successful car dealer, you must buy the right cars at the right prices.

To to this, you must spend time "in the market" --watching and listening for information abut which cars are selling well or proving difficult to sell, and which cars are increasing in price or are decreasing in value. This requires casual observations, but also real data, such as week-to-week recording and analysis of car-price data, customer numbers, and stock levels. This combined approach allows you to create the right strategy for your business.

ACTION POINT: Observe your market by being "in it" and using real data about products and customers.

Analyzing Your Environment

Analyzing the environment in which you operate is the first step to creating a strategy.

To be effective, an organization needs to achieve some degree of match between what it can offer and what the world needs. Making sense of the complex environment in which you do business, and using this information to create good strategy, is essential if your business is to survive.

Analyzing the environment in which you operate is the first step to creating a strategy. There are a number of analysis tools that can help you assess your chosen market and also the world in which you do business:

• SWOT analysis: This can help you understand your organization and its market or environment, by contrasting its "Strengths" and "Weaknesses" with the "Opportunities" and "Threats" in the market.
• PESTLE analysis: This assesses macroeconomic forces that affect all markets, including political and economic factors, social trends, and legislation.
• Porter's 5 Forces (P5F) This looks at factors that are operating within a given market, and that are of significance to all organizations within that market, but not necessarily other markets.

There may be some overlap in the information these tools generate, but it is still best to use all three, as each can generate unique information and insight.

ACTION POINT: Consider the tools above for analyzing your environment.