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PESTEL is a comprehensive tool or framework which stands for Political, Economic, Social, Technological, Environmental and Legal. It used in analyzing or monitoring macro environmental factors and their impacts on a company, organization or industry. It is frequently used in combination with other analytical business tool such as Porter’s Five Forces and SWOT analysis. These combinations of tools help to stamp out any loopholes in the marketing strategy as variety of fields are covered in them. There are other variants of PESTEL such as STEEPLED, SLEPIT and DESTEP which includes ecological, ethical, demographics and intercultural.
Competition is endless for every small and big businesses in today’s globalized world. While the notion of the so called ‘global village’ has its own advantages, however, there is pressure on every organization to stay ahead of the curve and to prevail in the rat race. And the business world has never remained stagnant as it undergoes rapid changes. To adapt to such changes there is a need for strategies that include smart planning, brainstorming, leveraging available tools and resources, and extensive R&D. Hence, there are several economic tools that the companies/organizations can leveraged on to come up with marketing strategies including PESTEL analysis.
New companies and businesses or those entering new or foreign markets are always cautious about the outcome of their new venture and how it will be received. PESTEL analysis gives a valuable insight on the external factors that have a sphere of influence in the business world. Business is not just about determining profit and loss anymore; there are other very important external factors now like the policies of government, the varying taxes of countries, environmental laws and varying laws on businesses, etc. PESTEL helps in meting out any situational changes or threat to the company by helping to form strategic planning and management that helps it in having an edge over others in the competition. Such analysis should be done every six months for it to remain effective.
Another reason why number three has significance is because it has distinct ends in English language, viz. 1st, 2nd, and 3rd whereas the rest like 4th, 5th, 6th, and so on do not have any significance. Even the average human brains weigh about three pounds and it is also divided into three basic units.
The primary advantage of this analysis is that it is easy to use framework and hence, is more likely to be implemented effectively. It is also cost effective as this analysis fairly takes only time and energy without spending any financial resources. Due to the nature of this analysis, it helps the company to take advantage of any new market opportunities that have opened up. It can also alert a company to cushion itself from any threat that may arise from time to time. Lastly, it increases the strategic thinking, cross- functional skills and expertise of any organization.
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