PESTLE Analysis

Summary

The video introduces PESTLE analysis, a strategic management tool used to examine the external environment impacting businesses. It highlights six key factors: Political, Economic, Social, Technological, Legal, and Ethical/Environmental. These categories help businesses identify significant opportunities and threats outside their control. Examples include government regulations, market demand shifts, technological advancements, and ethical sourcing. The video concludes with a case study of Apple, illustrating how PESTLE analysis can be applied to analyze a company's external challenges and opportunities.

Takeaways

• 🌐 PESTLE Analysis is a strategic tool used to assess the external environment of a business.
• 🏛️ P stands for Political factors, such as government regulations and corporate taxation.
• 💹 E represents Economic factors, including interest rates, exchange rates, and business cycles.
• 👥 S is for Social factors, like demographic changes, consumer behavior, and corporate social responsibility.
• 💡 T signifies Technological factors, highlighting the impact of e-commerce and automation on businesses.
• ⚖️ L is for Legal factors, including national minimum wage laws and health and safety regulations.
• 🌱 The last E can stand for either Ethical or Environmental factors, focusing on ethical sourcing and environmental sustainability.
• 🔗 PESTLE is closely linked to SWOT Analysis, particularly in identifying opportunities and threats.
• 🌟 Apple is used as a case study to demonstrate how PESTLE factors can affect a well-known business.
• 📉 Apple's experience with political controversies, economic downturns, technological competition, and ethical supply chain issues illustrates the practical application of PESTLE Analysis.

Q & A

What is PESTLE analysis?

PESTLE analysis is a strategic business model used to assess the external macro-environmental factors that could influence a business. It stands for Political, Economic, Social, Technological, Legal, and Environmental factors.

Why is PESTLE analysis important for businesses?

PESTLE analysis is important because it helps businesses understand and anticipate changes in the external environment that could impact their operations, strategies, and decision-making processes.

What does the 'P' in PESTLE stand for and why is it significant?

The 'P' in PESTLE stands for Political factors, which are significant because they include government decisions, regulations, and policies that can directly affect how businesses operate.

How do economic factors, represented by the 'E' in PESTLE, impact businesses?

Economic factors impact businesses by influencing market demand, affecting interest rates, exchange rates, and the overall business cycle, which in turn can affect a firm's competitiveness and profitability.

What are some examples of social factors that businesses need to consider?

Social factors include demographic changes, shifts in consumer tastes and lifestyles, and the influence of pressure groups and corporate social responsibility (CSR).

Why is technological change, the 'T' in PESTLE, crucial for businesses?

Technological change is crucial as it can disrupt existing business models, create new opportunities, and affect labor and capital decisions, such as the adoption of automation and robotics.

What legal factors does the 'L' in PESTLE encompass?

The 'L' in PESTLE encompasses laws and regulations set by politicians, including changes in employment law, health and safety regulations, and environmental legislation that can impact business operations.

How does the 'E' for Environmental in PESTLE affect businesses?

The Environmental aspect of PESTLE affects businesses through issues like ethical sourcing, sustainability, and the impact of their operations on the environment, including concerns about pollution and green technology.

Can you provide a real-world example of how PESTLE factors have impacted a business?

Apple Inc. has faced political controversies over privacy issues, economic challenges due to market downturns in China, technological competition with rivals like Samsung, legal issues related to tax practices, and ethical concerns regarding the treatment of employees at supplier factories like Foxconn.

How can businesses use PESTLE analysis to their advantage?

Businesses can use PESTLE analysis to identify potential risks and opportunities, formulate strategic responses, and adapt their operations to align with changing external conditions.

What is the relationship between PESTLE analysis and SWOT analysis?

PESTLE analysis complements SWOT analysis by examining external factors (opportunities and threats) that can influence a business, while SWOT focuses on internal factors (strengths and weaknesses).

Outlines

00:00

📊 Introduction to PESTLE Analysis

The video introduces PESTLE analysis, a management model used to assess the external environment affecting businesses. The external environment is dynamic and contains factors beyond a company's control. However, these factors can present significant opportunities and threats that businesses must consider. PESTLE stands for Political, Economic, Social, Technological, Legal, and Environmental/Ethical aspects. Each category provides a lens through which to analyze the impact of various external issues. The video will further explain each element of PESTLE, starting with a brief overview of their relevance.

05:00

🏛️ The Political Environment in PESTLE

This section delves into the 'P' in PESTLE, focusing on how political decisions, often made by governments, impact businesses. Examples include regulation of competition, mergers and acquisitions, corporate taxation, government spending, and policies that affect household income. It highlights the crossover between political and economic environments, noting that government decisions on taxation and spending influence the economic context in which businesses operate. Additionally, it emphasizes how interest rates, exchange rates, and the business cycle stage can impact a company's competitiveness.

🌍 The Economic and Social Aspects of PESTLE

The economic environment encompasses factors such as interest rate policies, exchange rate movements, and business cycles that directly affect businesses. The video then shifts to 'S' for Social, discussing demographic changes, shifts in consumer tastes, and lifestyle changes that impact market demand. The importance of social responsibility, or CSR (Corporate Social Responsibility), is noted, including how pressure groups can influence business practices. Technological advancements, especially e-commerce and mobile technology, are highlighted as disruptive forces creating both challenges and opportunities.

⚖️ The Legal Environment in PESTLE

Legal factors closely relate to the political environment since laws are set by politicians. The video explains how changes in legislation, such as minimum wage laws, health and safety regulations, and environmental protection policies, impact businesses. Specific reference is made to the UK's national living wage and the influence of the European Union on employment law. It also notes how complex legislation requires companies to adapt, emphasizing the importance of understanding legal changes within the business's operating environment.

🌱 The Environmental and Ethical Aspects of PESTLE

The environmental aspect overlaps with legal and political factors, covering issues like green technology, pollution, and ethical practices. It emphasizes that businesses must be mindful of their environmental impact and ethical sourcing. Examples include sourcing materials responsibly and the scrutiny over tax practices, particularly for large multinational companies. Apple Inc. is cited as an example, highlighting its struggles with political controversies, demographic changes, competition, and supply chain ethics. The segment encourages applying PESTLE analysis to other businesses to better understand their external environments.

Keywords

💡PESTLE Analysis

PESTLE Analysis is a framework used to evaluate the external factors that affect a business. It stands for Political, Economic, Social, Technological, Legal, and Environmental/Ethical factors. In the video, it's described as a way for management to understand opportunities and threats in the business environment, similar to the 'opportunities and threats' part of SWOT analysis.

💡Political Factors

Political factors refer to how government policies and decisions impact a business. Examples include regulations on competition, mergers, corporate taxes, and government spending. In the video, it discusses how political decisions, such as laws on monopolies, can significantly shape business strategies.

💡Economic Factors

Economic factors include variables like interest rates, exchange rates, and stages of the business cycle that directly affect businesses. The video mentions how fluctuations in the economy, such as interest rates set by the Monetary Policy Committee, can influence the competitiveness of companies.

💡Social Factors

Social factors involve demographic changes, consumer tastes, and societal trends. These shape market demand and influence business strategies. The video highlights demographic shifts and changes in consumer lifestyles as long-term social factors that businesses must consider.

💡Technological Factors

Technological factors refer to innovations that disrupt existing business models or provide new opportunities. The rise of e-commerce and mobile technologies are examples mentioned in the video, demonstrating how advancements like smartphones can both challenge and benefit businesses.

💡Legal Factors

Legal factors include laws and regulations set by governments that affect business operations. This could range from labor laws to environmental regulations. The video discusses changes in the UK’s minimum wage laws and health and safety regulations as legal factors that businesses need to navigate.

💡Environmental/Ethical Factors

Environmental or ethical factors relate to how businesses handle their responsibilities regarding sustainability, pollution, and ethical sourcing. The video mentions how companies like Apple are scrutinized for their supply chain practices, particularly in relation to their environmental impact and ethical standards.

💡Corporate Social Responsibility (CSR)

CSR refers to the expectation that businesses will operate in a socially responsible manner, beyond simply pursuing profits. This includes sustainable practices and ethical sourcing. In the video, CSR is discussed as part of the social factors that pressure businesses to adopt broader responsibilities.

💡Disruptive Technology

Disruptive technology refers to innovations that significantly alter or replace existing business models. The video uses the example of e-commerce and mobile technology as disruptive forces that challenge traditional businesses while offering growth opportunities.

💡Business Cycle

The business cycle refers to the stages of economic growth and decline that businesses experience over time. In the video, this is mentioned as an economic factor that affects firms’ strategic decisions, particularly in terms of their ability to expand or contract based on the economy's stage.

Highlights

PESTLE analysis is a framework for examining the external environment of a business.

PESTLE stands for Political, Economic, Social, Technological, Legal, and Ethical/Environmental factors.

The Political factor includes government decisions, regulations, and taxation policies.

Economic factors impact businesses through interest rates, exchange rates, and business cycles.

Social factors cover demographic changes, consumer behavior, and lifestyle shifts.

Technological changes, like e-commerce and mobile technology, can disrupt and provide opportunities for businesses.

Legal factors involve laws set by politicians and how they affect business operations.

Ethical considerations include corporate social responsibility and ethical sourcing.

Environmental factors are increasingly important for businesses, especially concerning green technology and pollution.

PESTLE analysis is linked to the SWOT analysis, particularly in identifying opportunities and threats.

The external environment is dynamic and contains factors outside a business's control.

Businesses need to account for significant opportunities and threats in the external environment.

PESTLE analysis helps businesses to understand and respond to external factors that could affect their strategy.

The video provides a detailed explanation of each PESTLE category and its relevance to business strategy.

Examples are given to illustrate how PESTLE factors can impact specific businesses, such as Apple.

The video suggests practicing PESTLE analysis on familiar businesses to better understand its application.

PESTLE analysis is a comprehensive tool for strategic management and decision-making in business.

Transcripts

hi there

in this video we're going to take a look

at pestle analysis

now pestle analysis is one of several

models or frameworks that are helpful

for management

as they determine the strategy of a

business and pestle is particularly

useful when it comes to analyzing the

key features of the external environment

facing your business

the external environment is a highly

dynamic environment and of course the

important thing to remember is that it

contains factors that are outside the

control of a business

but if those factors are significant

then the business needs to take account

of them for example significant

opportunities and significant threats

so you can see that pistol analysis

links in quite nicely to the bottom half

of swot analysis opportunities and

threats

festival is actually an acronym

and the

the six letters each stand for a

different category into which you can

place

many of the key external issues facing

your business p stands for political

e is the economic environment

s stands for the social environment

t is for technological

l is for legal or legislative and e

depending on which books you read is

either ethical

and or environmental now of course

that's a pretty broad range of

categories there and in most cases you

can put most

external issues into one of those six

categories let's have a quick look and

see what kind of things we mean by each

of those

obviously for p political we're dealing

here with the impact on business of

decisions taken by governments by

politicians so areas such as the

regulation of competition

what governments do in terms of laws to

affect for example mergers and takeovers

of course several industries

particularly those which might be

considered monopoly industries such as

light and heat and power and transport

in some cases those industries are

regulated government and politicians set

the the set the scene for the nature of

regulation and of course governments

also set the decisions in relation to

things like corporate taxation

government spending

personal tax which has a direct impact

on household income

and of course governments also have a

wide range of government policies which

impacts on businesses all of those are

contained within the p or political

environment

there's a bit of a cross over there

between the

economic environment because we

mentioned government decisions on

taxation and spending

but of course there are a variety of

other economic factors which impact

directly on businesses and we look at

each of these on separate revision

videos

for example uh the setting of interest

rates

in the uk by the monetary policy

committee which is independent of

government has a very close

impact and significant impacts on

businesses

similarly movements and exchange rates

can significantly affect the

competitiveness of businesses as does

the situation or the stage of the

business cycle that a firm finds itself

in

under s for social we're dealing with

issues here such as demographic change

so for example shifts usually long term

in the structure of the population and

how does that impact factors such as

market demand

we're looking at the changes that arise

in consumer tastes and fashions and how

our lifestyles change

a lot of that can be picked up by

changes in the details of what we spend

our money on

but also social will also include the

increasing impact of pressure groups in

other parties keen to make sure that

businesses take account of their broader

social responsibilities a concept called

csr

corporate social responsibility and we

look at that in a separate video

when we're looking at t t stands for

technological change and of course here

the the role of e-commerce is a

particularly good example of the impact

of disruptive technologies in particular

the the rising uh use of mobile

technologies based around smartphone

technology

very great fantastic examples of how

a technological change is challenging

existing businesses but also providing

great opportunities for

for growth of market share increases

of course technology is is rural than

that it also impacts the decisions

between labor and capital intensity

for example the increased use of

robotics as part of a shift towards

automation not just in manufacturing but

potentially in service businesses as

well

and for those of you studying factors

such as big data and dynamic pricing

you'll know that technological change

has a significant impact on marketing

decision making all of those will be

contained within the external

environment known as the technological

environment

the legal area links quite closely to

the political area in the sense that

most laws are set by politicians but

what we're really looking at here are

the specifics

the key areas particularly where the law

changes and how that impacts business

so for example here in the uk in recent

years we've seen some fairly significant

changes in what's known as the national

minimum wage

and now the national living wage

of course the impact of the european

union as well as the uk parliament on

the the increasingly complex area of

health and safety and employment law is

another external factor that affects a

lot of businesses

as does the increasing

amount and complexity of legislation

designed to ensure that businesses look

after the environment so all of those

aspects those legal aspects are

contained within the legal environment

and finally and again there's some link

here between the legal environment and

the environmental

areas for example around green

technology

and

pollution environmental damage that the

whole issue of ethics looking after the

environment is a particularly uh

complex area increasingly important area

for businesses

so just looking at picking out a couple

there from the list on the screen

ethical sourcing making sure that you

source

your supplies from suppliers who are

operating to the same degrees and same

standards that you would expect of

yourself

tax practices closely linked to the

legislative and political environment a

good example there

would be the increasing concerns about

tax avoidance particularly by large

multinational businesses

so the ethical and environmental area of

the external environment is an

increasingly complex and potentially

challenging area for a lot of businesses

particularly big businesses

so we've had a look through there the

six main aspects of of pesto let's just

give you a quick example of how you

might apply this this is a really good

technique to have a go out maybe by

picking a business you know well

and seeing what points you can come up

with from the external environment i've

picked up apple here as a business that

most of us know pretty well

and just try to pick out a few recent

examples

on the political side i think the whole

piece around the the outcry when apple

refused to allow the fbi access to the

security system on the iphone

of of a terrorist was a good example of

the political controversies that can dog

a business

apple's uh decline in sales partly as a

result of the economic stir down in

china is a good example of how the

economic environment

affects the business as does demographic

change

of course apple is consistently trying

to innovate and out innovate its

competitors but faces significant

competition particularly from

competitors such as samsung and xiaomi

in china

we've picked up on the legal side there

this uh

increasingly

aggressive

global crackdown by governments against

multinationals engaging what's known as

tax avoidance and apple has been caught

up in that somewhat not the only one of

course

and finally of course apple has been

well known over the years for the issues

that have arisen from how its suppliers

treat its employees in particular a

business called foxconn

so ethical sourcing and

generally the sustainability and ethics

of the supply chain is a big external

issue for apple

but it's worth having a go at the pastel

analysis

on one or two other businesses that you

know well just to practice the technique

that's been an overview of an

introduction to pistol analysis