PESTEL Analysis EXPLAINED | B2U | Business To You

Summary

This video script introduces PESTEL analysis, a vital tool for mapping an organization's external environment, focusing on macro factors like political, economic, social, technological, environmental, and legal influences. Host Lars explains the difference between internal and external factors, emphasizing PESTEL's role in assessing the general environment's impact on business. He details each factor's significance and suggests using weighted averages to evaluate potential markets, recommending resources for data collection.

Takeaways

• 📌 PESTEL analysis is a tool for mapping out the external environment of an organization, focusing on macro-environmental factors.
• 🏢 The analysis does not consider internal factors of the company, such as organizational structure, culture, or management.
• 🔍 It also excludes task environment factors like competitors, suppliers, and customers, which interact directly with the company.
• 🌐 PESTEL stands for Political, Economic, Social, Technological, Environmental, and Legal factors, covering a broad view of the general environment.
• 🏛️ Political factors include government policies, stability, corruption, trade policies, and their impact on education, infrastructure, and health sectors.
• 💰 Economic factors encompass economic growth, exchange rates, inflation, interest rates, consumer income, and unemployment, affecting consumer purchasing power.
• 👥 Social factors involve demographic characteristics, norms, values, and attitudes that can influence market targeting and workforce conditions.
• 🛠️ Technological factors relate to innovations, regulations, and market awareness that may affect industry operations and product development.
• 🌳 Environmental factors include ecological aspects like resource scarcity, pollution, and climate change, impacting company operations and offerings.
• 📜 Legal factors involve specific laws like discrimination, antitrust, employment, consumer protection, and health and safety regulations.
• 📊 To apply PESTEL, calculate weighted averages of factors relevant to your business to assess and compare different markets or countries.
• 🔎 Data for PESTEL factors can be found on various websites that quantify these aspects per country, aiding in informed business decisions.

Q & A

What is the primary goal of PESTEL analysis?

The primary goal of PESTEL analysis is to help analyze the external environment of an organization, which is especially useful when starting a new business or entering a foreign market or a different industry.

What does the acronym PESTEL stand for?

PESTEL stands for Political, Economic, Social, Technological, Environmental, and Legal factors, which together make up an exhaustive list of the general environment.

How does PESTEL analysis differ from examining the task environment?

PESTEL analysis focuses on macro-environmental factors that have a one-way effect on a company, unlike the task environment which includes direct interactions with competitors, suppliers, distributors, customers, and strategic partners.

What are some examples of political factors that PESTEL analysis might consider?

Examples of political factors include government policy, political stability or instability, corruption, foreign trade policies, tax policies, and regulations affecting the education system, infrastructure, and health sector.

How do economic factors impact a company according to PESTEL analysis?

Economic factors such as economic growth, exchange rates, inflation rates, interest rates, disposable income of consumers, and unemployment rates can have a direct or indirect long-term impact on a company by affecting the purchasing power of consumers and the demand and supply in the economy.

What demographic characteristics does the social dimension of PESTEL analysis include?

The social dimension includes demographic characteristics such as population growth rate, age distribution, income levels, and attitudes towards careers, health, lifestyle, and cultural barriers.

Why are technological factors important in PESTEL analysis?

Technological factors are important because they pertain to innovations in technology and the regulations surrounding it, which may affect the operation of an industry in the market favorably or unfavorably, influencing decisions such as entering certain industries or launching products.

What is the significance of environmental factors in the context of PESTEL analysis?

Environmental factors are significant as they address ecological aspects such as weather, climate, environmental offsets, and climate change, reflecting the well-being of the planet and the growing awareness of potential impacts of climate change on how companies operate.

How do legal factors overlap with political factors in PESTEL analysis?

Legal factors, while overlapping with political factors, include more specific laws such as discrimination laws, antitrust laws, employment laws, consumer protection laws, copyright and patent laws, and health and safety laws.

What is a practical approach to applying PESTEL analysis for a company considering entering a new market?

A practical approach is to calculate weighted averages of the available options by selecting PESTEL factors most important to the business, assigning grades for each factor per country, and then comparing the weighted averages to determine the most attractive market.

Where can one find quantified data for the factors mentioned in PESTEL analysis?

Quantified data for the factors can be found on various helpful websites that measure these factors per country, such as the Corruption Perception Index for corruption.