PESTEL Analysis is an important strategic planning tool that helps organizations identify the environmental factors they should be aware of. In this blog post, we will talk about what a PESTEL analysis entails and how students can obtain PESTEL analysis assignment help.
What is PESTEL Analysis?
PESTEL analysis stands for Political, Economic, Social, Technological, Environmental & Legal Analysis of a project. PESTEL is an important tool in strategic planning and marketing research. It helps to analyze external factors that may affect the growth prospects of the organization or company. It also provides a summary of a given market by analyzing macro-environment factors that may affect the industry.
Importance of PESTEL Analysis
PESTEL analysis is a good marketing research tool because it can search for new market opportunities, especially in foreign markets and industries. This tool helps to understand current trends and enables the company to develop strategies based on the future outlook of the concerned market. PESTEL analysis covers political, economic, social, technological, environmental, and legal factors that may affect a company’s growth potential. As per one of the leading business consultancies worldwide, PESTEL analysis will be more effective for large-scale businesses because small and medium scale organizations lack resources to perform this kind of analysis.
The first element in the PESTEL model is political. Political environment mainly refers to the degree of democracy a country enjoys, public participation and involvement in politics, government stability, etc. It also includes conditions like freedom of expression, freedom from fear and favor (corruption), the likelihood of change in political leadership et al. Thus, the political environment may not be directly measurable though it can be seen by analyzing respect for human rights; general civility observed among citizens or lack thereof; public safety about behavioral patterns such as riots, hooliganism, juvenile delinquency, etc.; level of crime per head of population or area (e.g., murder rate) and so on.
The second element is economical. This refers to the state of the economy in a country, divided into macro and micro. Macro-economics factors include inflation rate, level of unemployment, real income per head of population or area (GDP), amount of foreign capital inflows or outflows, etc. Micro-economics factors include the volume of industrial production, degree of competition among industries, success stories, and failures in different sectors like manufacturing, services industry, etc.
The third element is social. Here the focus is on various aspects of societal well-being like literacy rate, child mortality rates/infant mortality statistics, divorce rates/marriage stability, etc. It also includes the state of education facilities available to citizens and conflict between various social groups like LPGMNs, minorities, women, etc.
The fourth element is technological. It refers to whether a country has the infrastructure and facilities to effectively utilize new technologies in its industry sector and in general. This includes the availability of the latest technology for private parties and government departments/entities, universities, etc. Infrastructure available depends on quality, abundance or scarcity of resources, ability to fund projects, etc.
The fifth element is environmental. Here the focus is on elements like natural hazards, water, and air pollution levels caused due to industrial activity or domestic use, the degree to which the environment is being preserved.
The sixth element is legal. The focus here is on elements like the rule of law, the extent to which the judiciary is independent, efficiency in delivering justice, etc.
Things to Remember When Doing PESTEL Analysis
- The PESTEL study is valid for any country or region in which the five major elements are present.
- Each element may be considered separately in its generic sense. Still, one should remember that each is interrelated and can be present in varying intensities and combinations.
- A given country or region may score low on one element but high on another, thus creating a variance.
- The factors are independent of each other, i.e., no factor affects others directly. Still, it can indirectly affect it as it interacts with other elements to bring forth an effect beyond the control of any individual factor alone. Thus at one point, social pressure may be the prime motive for corporate action, while at another juncture, technological innovation might dominate its choice of action even when there might not be many political disturbances going on within the organization’s soil (the two are complementary). Similarly, an economic crisis will not necessarily trigger societal unrest, and political change has its effect independent of economic circumstances.
- An important point to remember is that there can be a “cause and effect” relationship between two factors, but this is not universal. There can be several scenarios. For example, political instability (one of the PESTEL elements) may lead to great social unrest. Still, it might improve technological growth in another case as developed countries thrive more in such turbulent times than little stable ones. Similarly, technology advancement may have both positive and negative influences on human life depending upon the application of the same, i.e., Biotechnology might help develop new medicines on one hand while being used to produce biowarfare agents on the other. The same applies to other elements.
- The PESTEL study is not a “hard science” but, like any form of analysis, has its merits and demerits in terms of accuracy attributable to the following factors:
Factors are hard to identify, define and measure with accuracy because they are abstract (and sometimes intangible) concepts that cannot be exactly quantified and thus cause varying intensity among different individuals depending upon their perception of objective reality towards those factors.
It takes time for any change (either positive or negative) regarding PESTEL elements influencing environmental variables within an organization’s ecosystem, so it becomes difficult to state-specific years when the change was initiated or occurred on account of PESTEL factors resulting from internal or external sources.
iii. Measurement Confusion
The question arises as to how exactly should we measure each factor? While a non-quantitative approach might be more realistic, it has its disadvantage because most management processes involve quantitative evaluation of measurable factors such as financial measures. Such a system is difficult to work with when employing a non-quantitative approach.
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