The PESTLE analysis is the analysis of the environment as a whole in which a business operates or tends to offer its trade. These are systematic factors that are beyond one's control and businesses need to chart out strategies keeping the results in view to peacefully coexist and keep on gaining revenues despite the concurrent situation.
It is of utmost importance to understand in depth the meaning of PESTLE and how every letter of the acronym represents an important aspect of the environment your business is in. PESTLE stands for:
- P for Political
- E for Economic
- S for Social
- T for Technological
- L for Legal
- E for Environmental
The political factors account for all the political activities that go on within a country and if any external force might tip the scales in a certain way. They analyze the political temperament and the policies that a government may put in place for some effect. For example, the fiscal policy, trade tariffs and taxes are those things that a government levies on traders and organizations and they greatly alter the revenue that is earned by those companies.
The economic factors take into view the economic condition prevalent in the country and if the global economic scenarios might make it shift or not. These include the inflation rates, foreign exchange rates, interest rates etc. All these can affect the supply and demand cycle and can result in major changes of the business environment.
Social factors have to do with the social mindset of the people that live in a certain country. This sums up the aspect of culture, age demographics, gender and its related stereotypes, at times this analysis has to include the religious factors (when pertaining to products or services of a different kind).
Technological factors take into consideration the rate at which technology is advancing and how much integration does a company needs to have with it.
Legal factors have to do with all the legislative and procedural components in an economy. Also, this takes into account certain standards that your business might have to meet in order to start production/promotion.
Environmental factors have to do with geographical locations and other related environmental factors that may influence upon the nature of the trade you’re in. For example, agri-businesses hugely depend on this form of analysis.
This is a template that allows a company to understand what basics are required to conduct the analysis onto the environment. It combines all the representative factors in one table, and then you need to analyze based on the current market situation.
Here is a comprehensive list of headings that one must look toward while carrying out the analysis on a market.
1. Political factors:
- Trading policies
- Government changes
- Shareholder and their demands
- Funding,
- Governmental leadership
- Lobbying
- Foreign pressures
- Conflicts in the political arena
2. Economic factors:
- Disposable income
- Unemployment level
- Foreign exchange rates
- Interest rates
- Trade tariffs
- Inflation rate
- Foreign economic trends
- General taxation issues
- Taxation changes specific to product/services
- Local economic situation and trends
3. Social factors:
- Ethnic/religious factors
- Advertising scenarios
- Ethical issues
- Consumer buying patterns
- Major world events
- Buying access
- Shifts in population
- Demographics
- Health
- Consumer opinions and attitudes
- Views of the media
- Law changes affecting social factors
- Change in Lifestyle
- Brand preferences
- Working attitude of people
- Education
- Trends
- History
4. Technological factors:
- Technological development
- Research and development
- Trends in global technological advancements
- Associated technologies
- Legislations in technological fields
- Patents
- Licensing
- Access into the technological field
- Consumer preferences
- Consumer buying trends
- Intellectual property and its laws
- How mature a certain technology is
- Information technology
- Communication
5. Legal factors:
- Employment law
- Consumer protection
- Industry-specific regulations
- Competitive regulations
- Current legislation home market
- Future legislation
- Regulatory bodies and their processes
- Environmental regulations
6. Environmental factors:
- Ecological
- Environmental issues
- International
- National
- Stakeholder/ investor values
- Staff attitudes
- Management style
- Environmental regulations
- Customer values
- Market value
Examples of PESTLE Analysis
There are many companies the world over, that conduct PESTLE analysis on their brands in order to ascertain strategies for the future or else to understand the market before launching them. It is a fundamental tool of market planning and strategizing that must be carried out to comprehend market trends and the systematic risks involved.
PESTLE analysis gives you an overview of the whole situation your business might be in. Precisely, it is a bird’s eye view of the stimulus and the scenarios that surround your trade and you business.
PESTLE, is an acronym in which each letter denotes certain factors for the study. These factors affect the market in many ways and alter the way strategies are thought of and made. P stands for political factors, while E stands for economic ones. S has to do with social factors in a country whereas T sums up all the technological aspects of the market. L denotes legalities of the environment and E accounts for the environmental aspects and its influence upon the nature of the trade you’re in.
Almost every major and minor organization tries to conduct this analysis, but with regards PESTLE analysis example, I would cite an example of a real life case study in which PepsiCo, a beverage giant carried out the PESTLE analysis over its brands.
PESTLE ANALYSIS BY PEPSICO.
PepsiCo is the largest selling beverage the world over, of course after its arch rival Coca Cola. It accounts for a 37% share of the global beverage market, and therefore they need to understand each and every country’s market in order to stay in line with their PESTLE situations.
Pepsi is a big brand, currently holds the 23rd place in the Interbrands report of the World’s Leading Brands. Their advertisements feature major celebrities and athletes like David Beckham, Robbie Williams, Britney Spears, and Michael Jackson etc.
Their market reach is also very diverse, as they’re present in almost every country from the US to New Zealand. Their PESTLE analysis is given below:
Political:
Pepsi is a non-alcoholic beverage and is therefore regulated by the FDA. So, they’re supposed to maintain a firm standard of the laws set out by the FDA with consistency. Also, many different markets across the world have different set of regulations that are either relaxed or are either stringent. There is competitive pricing by Pepsi’s competitors and that is one factor that Pepsi has to keep in mind at all times. The political scenario also matters greatly as there can be some civil unrest in certain markets or due to inflation the sales of the product can fall. Most importantly, cross border situations are starkly different therefore Pepsi has to stay in line with all those policies and changes so that they can adapt to all those changes accordingly.
Economic:
As the recent economic downturn has plagued the economy, companies had to restructure their sales and marketing campaigns greatly. Also, with diminishing profits they had to undergo downsizing internally and re-think upon how to penetrate the market. Economic conditions have the highest influence on a business, regardless of what trade it is in. Though, in Pepsi’s favor, the economic downturn that started in 2008 resulted in increased sales of its beverages mainly as people were being laid off from jobs, they were spending time with friends and family or at home.
Social:
Social factors greatly impact Pepsi, as it’s a non-alcoholic beverage it has to remain in line with the strict and stark differences of cultures the world over. Also, Pepsi has to communicate its image as a global brand so that the people can associate it with themselves as something that connects the world together. Usually, the social implications are seen in marketing campaigns for example certain countries have religious festivals, so Pepsi has to keep in line with all those festivals in order to understand the psyche of their market and how they can cash upon the opportunity.
Technological:
With the advent of the new age in technology, companies have completely integrated themselves with all the recent changes that have taken place. To mention a recent trend that has greatly picked up and something that almost every business is turning toward is Social Media. The social media explosion has allowed for increasingly interactive engagement with the consumers with real time results so Pepsi has to stay ahead of all the developments that take place with keeping in view how the youth of today utilizes technology for their benefit and how can Pepsi reach them in order to keep on increasing brand recall and brand engagement.
Legal:
There can be many legal implications upon the beverage industry. I would cite one very famous incident took place in India, where Pepsi was accused of using contaminated water, given a lab test that was done upon the water flowing into the Pepsi factory that was located nearby an industrial estate. A massive recall was issued for the products from shelves and then the product was tested costing the company many billions of dollars upon the tests as India is a very major market.
Environmental:
These factors can affect Pepsi, but not immensely alter its trade and profit generation as these factors affect agri-businesses much more directly.
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