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PESTEL analysis......

It's a Sunday morning and my mind is a little mugged up with stressful thought, hence I cannot really sleep. So what the heck - let's write a bit about business today. Globally and through the passage of time, many business concepts have been derived with the very goal of making a business more sound and to aid those charged with governance to improve the management of a business entity.

One of the most fundamental and reknown business concepts - the PESTEL analysis. PESTEL is the acronym for Political, Environmental, Sociological, Technological, Ecological and Legislative analysis. In general, PESTEL analysis is used for external analysis of a company (i.e. to see what's happening around the company), otherwise also known for being used in conducting environmental analysis.

So how does PESTEL help? Here's how - one starts analysing a business environment by identifying factors related to the subtitles of PESTEL (i.e. whether political, environmental, etc) and then analysing how it may affect a business.

An example:
Let's say you run a business doing fishery.

Political environment - they could be threats if the government decides to cut all subsidies for businesses in the fish industry, vice versa it could be beneficial if the government decides to increase subsidies for businesses in the fish industry.

Environmental - Being in the fish industry, and let's say you do massive amounts of research and development, hence you find a way to genetically improve the breeding of fishes. However the threat could like with NGOs that may not like the idea of 'playing God'.

Sociological - by opening a fish farm in a remote area in your country, you may be contributing to employment for undeveloped areas, thus contributing to society which in turns brings popluarity to your business as being socially concerned.

Technological - there could be a boom in the development of fish food that can increase the value of the fishes you sell (i.e. more meaty, or better coloured).

Ecological - back to the genetic improvements, threats could arise since by introducing genetically modified species, no one yet knows the true implication of the introduciton to the ecosystem and natural habitat of other fishes.

Legislative - this point may overlap the Political point but there are those who argue that this point is more specific because certain legislations may not come from the government per se, but from may be town councils. A good example would be for a local town council to declare that all existing ponds be used as recreation ponds and exisiting fish businesses are to shift out. Obviously this will affect your business especially if the pond in the area is really potent for fishery.

And this is PESTEL analysis! For those who are in the business line or planning to venture into business, this may help you in making economic decisions.

Comments

  1. Hi!
    I think that the first E should stay for Economical factors
    Check:
    http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm

    ReplyDelete
  2. This comment has been removed by the author.

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