PESTLE Analysis

  WHAT

PESTLE Analysis, which is sometimes referred to as PEST Analysis or DESTEP Analysis, is a framework for identifying the Political, Economic, Social, Technological, Legal, and Environmental factors in the macro-environment an organization operates in. The PESTLE model helps organizations scan the environment to evaluate their position, potential, and direction (Downey, 2007).

Our PESTLE model follows these steps:

  1. Identify the external Political, Economic, Social, Technological, Legal, and Environmental factors that might affect the organization and categorize each as an Opportunity or Threat.
  2. Consolidate duplicate and similar ideas.
  3. Rate the impact of each factor on the organization.
  4. Identify potential actions to be taken for each opportunity/threat.
  5. Develop an overall strategy to address the six areas.

  WHO

This model is intended for strategy managers, marketing managers, product managers, and project managers.

  WHY

PESTLE is a simple tool for reviewing external factors that could impact an organization and the level of success it can achieve (Chartered Management Institute, 2013). This analysis raises awareness of threats to ongoing profitability and alerts organizations to promising business opportunities in the future (Chartered Management Institute, 2013).

A wide scan of the context ensures that the organization’s strategy is aligned with the forces of change affecting the environment and avoids taking actions that are likely to fail (Morrison, 2016). In the context of risk management, PESTLE is a useful framework for identifying an organization’s risks, especially those that are outside its control (Sadgrove, 2016).

PESTLE is complemented by SWOT/TOWS Analysis and provides context for the latter. A SWOT Analysis can be used to interpret the outcomes of PESTLE and determine the organization’s strengths, weaknesses, opportunities, and threats (Gray, 2016).

  HOW

Environment Scan:

  1. NOODLE and TAG: What are the political, economic, social, technological, legal, and environmental factors that could impact your organization? Identify them, then categorize as threats or opportunities.
  2. COMBINE to eliminate similar and duplicate ideas.
  3. RATE each factor based on its positive or negative impact to your organization.
  • 0 = No positive or negative impact
  • 1 = Minimal positive or negative impact
  • 2 = Moderate positive or negative impact
  • 3 = Major positive or negative impact
  • 4 = Massive positive or negative impact

    4. ACTION PLAN: What potential actions could be taken to mitigate the threats and take advantage of the opportunities?

Strategy:

  1. NOODLE and TAG: What strategies could minimize the threats and leverage the opportunities identified? Tag with the PESTLE areas that these strategies address.
  2. COMBINE to eliminate similar and duplicate ideas.
  3. MULTI-CRITERIA RATE each strategy based on impact and effort required to implement.
MC Rate.JPG

       4. ACTION PLAN: For each top-rated strategy, identify a specific action plan to implement it.

  RESULTS

  • Shared understanding of ongoing and potential changes in the external environment
  • Valuable insight that informs the organization’s strategy
  • Early identification of potential risks and opportunities

  BENEFITS & IMPACT

This exercise will enable:

Quality  Make informed, high-quality decisions for your organization by identifying and assessing change factors before strategizing.

Efficiency – Identify threats and opportunities well in advance to tailor your risk management.

Engagement – Engage a diverse group of stakeholders for broad analysis and deeper insights.

Agility  Reuse the PESTLE model when launching a project/initiative, reviewing positioning on an ongoing project/initiative, and evaluating major decisions.

  REFERENCES

Chartered Management Institute (2013, November). Carrying out a PEST analysis checklist 196. Chartered Management Institute. http://www.managers.org.uk/~/media/Files/Campus%20CMI/Checklists%20PDP/Carrying%20out%20a%20PEST%20analysis

Downie, J., (2007, October). Strategic analysis tools: Topic gateway series no. 34. The Chartered Institute of Management Accountants. http://www.cimaglobal.com/Documents/ImportedDocuments/cid_tg_strategic_analysis_tools_nov07.pdf.pdf

Gray, B., (2016, October 20). How to effectively conduct a PESTLE & SWOT analysis. LinkedIn. https://www.linkedin.com/pulse/how-conduct-pestle-swot-analysis-byron-gray/

Morrison, M. (2016, May 6). Introduction to the PESTLE analysis tool. RapidBI. https://rapidbi.com/introduction-to-the-pestle-analysis-tool/

Sadgrove, K. (2016). The complete guide to business risk management. Abingdon, Oxon: Routledge.

UNICEF, (n.d.). SWOT and PESTEL. UNICEF Knowledge Exchange Toolbox. https://www.unicef.org/knowledge-exchange/files/SWOT_and_PESTEL_production.pdf