PESTEL model focus on the macro environment influences an organization or group of organizations (i.e. Overall Industry). PESTLE is an acronym that stands for Political, Economic, Social, Technological, Environmental and Legal aspects of a Country. It is an analysis consisting on many factors change in the macro-environment e.g. Tax changes, New laws, Trade barriers, Demographic change and Government Policy etc.
1 Political factors
These include Trade regulations, Taxation policy, and Government stability.
- What goods and services does a Government want to provide in the country?
- What are its priorities in terms of business support for that particular Industry?
- To what extent does it believe in subsidizing firms or organizations?
2 Economic factors
These include interest rates, inflation, economic growth, economic recession, changes in currency exchange rates etc
- Higher interest rate in a country may deter investment because it costs more to borrow.
- A strong currency of a country may make exporting more difficult because it may raise the price for foreign country in terms of foreign currency.
- Economic boom in a country may boost demand for an organization’s products.
- If inflation is high then employees may demand higher wages and salaries and may finally raise cost for organization.
3 Social factors
These include cultural change, expectations, demographic change, social trends and family change etc.
- What is the population’s growth rate and age profile and how is this likely to change?
- How do religious beliefs and lifestyle choices affect the population?
- What is the culture prevailing in that country?
- What are the current and emerging trends in fashion and lifestyles?
- Whether the social changes lead to an opportunity or threat?
4 Technological factors
These include changes in technology
- Is organization using up to date or latest technology for producing goods and services?
- It also includes changes in retailing methods i.e. selling goods through internet?
- Is there any competitor that have accessed to new technologies?
- What are the new technological research and developments?
- What is the Impact of emerging technology on the industry or particular organization?
5 Environmental factors
These include the weather and climate changes.
- Change in temperature can impact many industries like farming, tourism etc.
- If organization’s operations badly impacting environment, it may lead to heavy penalty.
- Today there is a growing desire to protect environment e.g. more taxes are being placed on fuel driven vehicles as compared to hybrid vehicles.
6 Legal factors
Related to legal environment in which firms/organizations are operating. Changes in existing laws or introduction of new legislation may have bad impact over organization or overall industry.
- Consumer laws
- Competition laws
- Employment laws
- Health and safety legislation
- Disability discrimination legislation
- Age discrimination legislation