PESTEL Analysis is a tool which is used to study the macro environment for companies in the areas they are operating. PESTEL is an acronym for Political, Economic, Social, Technology, Environment and Legal Analysis.
Before starting a business one of the first things the companies need to look at is the macro environment in the regions they wish to operate. Not only for new businesses, PESTEL is equally important for established business so that they can evaluate continuously and is also needed for businesses looking to expand business.
Now, we will take a closer look at each of these elements
Political
Political Analysis would include all the political happenings in the region which could have an impact on your business. It would also mean any restrictions imposed by government on a particular industry. Any political instability or turmoil can have a negative impact whereas sound political environment could help your business flourish.
Economic
Economic Analysis includes factors such as inflation, growth rate, interest rates, currency fluctuations, demand and supply of products. All these factors could have an influence on growth of business and needs to be evaluated continuously.
Social
It includes attitudes of public towards factors like health, population growth and age. For example if particular region has people who are more health conscious that would mean it would mean fast food business would not flourish as much as compared to place where people are less health conscious.
Technological
It would include all technology changes which are taking place and that can impact the business. For example due to various apps offline store footfall can decrease. So all those business would start needing to have their presence online and adapt suitably.
Environmental
It would include all environment factors that can influence the business. For example rising pollution in cities can shift business outside, excessive deforestation in a particular region could lead to mining been stopped and shortage of water leading to plants shutting their operation. Changes in environment need to be monitored continuously so necessary steps can be taken for business.
Legal
The business needs to obey the law of the land in which it operates in. Certain regions might have restrictions on some businesses or some regions might have different laws and thus, business would have to operate differently in order to survive.
