Environmental Factors:Įnvironmental factors have come to the forefront only relatively recently. By knowing what is going on technology-wise, you may be able to prevent your company from spending a lot of money on developing a technology that would become obsolete very soon due to disruptive technological changes elsewhere. These factors may influence decisions to enter or not enter certain industries, to launch or not launch certain products or to outsource production activities abroad. This refers to technology incentives, the level of innovation, automation, research and development (R&D) activity, technological change and the amount of technological awareness that a market possesses. These factors pertain to innovations in technology that may affect the operations of the industry and the market favorably or unfavorably. In addition, it also says something about the local workforce and its willingness to work under certain conditions. These factors are especially important for marketers when targeting certain customers.
This inlcudes population trends such as the population growth rate, age distribution, income distribution, career attitudes, safety emphasis, health consciousness, lifestyle attitudes and cultural barriers.
This dimension of the general environment represents the demographic characteristics, norms, customs and values of the population within which the organization operates. PESTEL Analysis Video Tutorial Social Factors:
Consequently it also affects the way companies price their products and services. Factors include economic growth, exchange rates, inflation rates, interest rates, disposable income of consumers and unemployment rates. These factors may have a direct or indirect long term impact on a company, since it affects the purchasing power of consumers and could possibly change demand/supply models in the economy. Economic Factors:Įconomic factors are determinants of a certain economy’s performance. These are all factors that need to be taken into account when assessing the attractiveness of a potential market. Furthermore, the government may have a profound impact on a nation’s education system, infrastructure and health regulations. This can include government policy, political stability or instability, corruption, foreign trade policy, tax policy, labour law, environmental law and trade restrictions. These factors are all about how and to what degree a government intervenes in the economy or a certain industry. Basically all the influences that a government has on your business could be classified here. In this article, we will stick simply to PESTEL since it encompasses the most relevant factors in general business. However, throughout the years people have expanded the framework with factors such as Demographics, Intercultural, Ethical and Ecological resulting in variants such as STEEPLED, DESTEP and SLEPIT. PESTEL is an acronym that stand for Political, Economic, Social, Technological, Environmental and Legal factors.
It is often used in collaboration with other analytical business tools such as the SWOT analysis and Porter’s Five Forces to give a clear understanding of a situation and related internal and external factors. This tool is especially useful when starting a new business or entering a foreign market. A PESTEL analysis or PESTLE analysis (formerly known as PEST analysis) is a framework or tool used to analyse and monitor the macro-environmental factors that may have a profound impact on an organisation’s performance.
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