In this academic year we have received a lot of queries from our management students on how to do a PESTLE analysis in a correct and impeccable way. As a complete solution for all the queries raised by the students regarding the PESTLE analysis, we are providing here an article on PESTLE analysis which will suffice all your queries and confusions about it.

What actually is the pestle analysis?
Before knowing the best way on how to do a pestle analysis a student should know what a PESTLE analysis is and for what purpose it is conducted. In a scenario or an institution this analysis is conducted to identify and analyze certain factors which will impact the market in which the enterprise is operating. The results obtained from the PESTLE analysis will aid the management of a company in drafting a better marketing strategy. While conducting a PESTLE analysis six factors are checked and validated to analyse the market atmosphere in which the company is working.

Before knowing the best way on how to do a pestle analysis a student should know what a PESTLE analysis is and for what purpose it is conducted. In a scenario or an institution this analysis is conducted to identify and analyze certain factors which will impact the market in which the enterprise is operating. The results obtained from the PESTLE analysis will aid the management of a company in drafting a better marketing strategy. While conducting a PESTLE analysis six factors are checked and validated to analyse the market atmosphere in which the company is working.

POLITICAL — ECONOMIC — SOCIOLOGICAL — TECHNOLOGICAL — LEGAL — ENVIRONMENTAL

An analysis of these six factors will provide an insight on the viability and risks in the market and hence provide a brief idea on whether the company is suitable to be operated in the certain market. After going through the analysis the management can take decision regarding which sections of the company should be expanded and limited and an idea on how to do a conduct pestle analysis.

We hope, you have got a brief idea of what actually the PESTLE analysis is.

Political: To successfully operate a company in a foreign company, the management should have an in-depth knowledge of the political condition and stability of the company. The analysis of the political factors of a market will help the heads of the market in analyzing the impact of government policies on the economy. A minor change in policy of government may risk the position of company in the market. The factors like the price of raw materials, labour wage, market variations etc. depend on the policies of the government. While conducting this test in a particular case the student should take care of these factors.

Economic: The letter E in the PESTLE analysis stands for the economic factor. In this step of the test a comprehensive approach should be taken to analyze the internal and external factors affecting the economy of the market in which the company is working in. After validating this factor the student should be able to analyse the inner economic stability of the company. In this process the accounting and the fiscal policies of the companies should be analysed.

A special focus on tax structure in the interstate, embargoes, and rate of interest should be done while carrying out the analysis of this factor. An in depth analysis of economic factors like labour wages, rate of inflation, laws regarding minimum working hours for labours, availability of funds and revenue in the certain area, etc. should be done in this section. If you have followed these guidelines while preparing the PESTLE analysis, the economic element of the test will be an impeccable one.

Sociological Factor: In this section of the PESTLE analysis the exclusive factors of the society which plays a vital role in creating a change in the market. In this section of the analysis the local trend is analyzed to know the preference and palette of the local people. In this test various possibilities of the social and cultural influences on the targeted market should be analyzed. In order to derive out these possibilities, you have to various dynamics like various norms followed in the area, the dynamics of the population, various expectations among various cultural groups etc. If the company’s product is related to any food products then it is better to analyze the preference of different expectations of cultural groups, adherence to healthy food, athletic activities pursued by the population and there awareness about health.

Technological Factor:This section is a very crucial and significant part of the Pestle analysis. A company has to be updated with the latest technologies and machineries and market and has to install it in their process in order to remain competitive in the market. The innovation and research are in its zenith in the twenty first century and the technologies get outdated even in a year. This analysis will provide an in depth knowledge of the new technologies in the market and provide an idea of the best technology suited for the company. All the possibilities of new technologies are used in this section which will provide the management a good idea of current scenario in the market and make the financial decisions and investments on the technologies very easy.

Legal Factor: The alphabet L in the Pestle analysis signifies the legal factor. In this section many local laws, policies of government, export import regulations, various contracts and treaties etc are analyzed. Many laws and policies promulgated by the government will affect the market in a dynamic way may even risk the position of the company.

The legal analysis of the country and the environment in which the company is operating will help the company heads and management in taking precautions and draft a better strategy in order to prevent the legal risks. While analyzing this section the student should analyze various factors like laws regarding export and import, employment and labour policies, various taxation structures and regulations, stability of the government etc.

Environment: The management of the company should be aware of the environment in which the company is operating. In this section of the PESTLE analysis the environmental factors which may effect the company and its performance are evaluated. There are various aspects in this analysis which should be explored. They are economic, social and natural aspects.

In this section of the pestle analysis the contribution and the policies adopted by the company in reducing its pollution emission should be validated. A brief evaluation of the climate condition like humidity, average temperature, average occurrence of natural calamities should also be done in this section.

The Advantages and the Disadvantages of Conducting a Pestle analysis

Advantages:
The Pestle analysis is very cheap and easy to conduct: In order to conduct a PESTLE analysis no any significant amount is needed. You just have to conduct some research on each section of the pestle analysis. The results obtained from the Pestle analysis helps to provide a sudden impact on the performance of the company.

Provides a better oversight of the situation: All the factors and the hidden risks of the market are not visible by conducting regular official meetings. In the due course of the company’s business, these hidden factors may affect the business in an adverse way. By conducting the Pestle analysis these hidden factors will be traced and a better strategic plan can be drafted to avoid the risks in future.

Provides more alertness in the process: As discussed above, the results obtained after conducting the PESTLE analysis will help the management of the company in creating an alertness against the coming risks and fluctuations in the company. A better plan can be made by conducting this analysis by considering the political, economic, social, technological, legal, and environmental factors. Thus the analysis make the processes and staffs of the company very dynamic.

Aids in capturing the opportunities: The analysis result obtained after conducting the pestle analysis will make the management of the company in predicting and locating the opportunities present in the market. This will help in grabbing the opportunities and make fast advancement in the business. The analysis will help you in tracing the market trends and thus gives a very thorough idea of what may the possible variations in the market in the coming time.

Some Limitations in Pestle Analysis
Less accuracy in the analysis of the external factors: The result of the pestle analysis is not accurate as the observations obtained from other strategic management tools. In the Pestle analysis most of the factors checked are mostly the external factors which affect the performance of the company. This test is carried out by many companies to stabilize the factors which cause instability in the operational market of the company. In practise, only the internal factors of the company can be analyzed accurately as the external factors are very volatile and hard to predict. Because of these factors pestle analysis seems to be a less accurate test in strategic management.

The analysis has a reputation of a banal and unimpressive presentation: However you present it, wherever you present it, the pestle analysis can only be presented in the same format in the same sequence of the analysis. The simple format of the Pestle analysis defies any modifications in its presentation. In whatever order you present it, the same six elements will be presented and thus may seem a little unimpressive and banal in corporate meetings and academic gatherings. There are many other analysis which are much creative in its own aspective and are visibly more impressive than pestle analysis.

The authentic way of conducting pestle analysis: As to provide extra information we had provided the limitations of pestle analysis in the above section. The primary objective of this article is to provide you with the knowledge of how to conduct the pestle test in a company or a market. In your academic career you may come up with the task of implementing pestle analysis on various case studies. We are focusing on the ways to conduct pestle analysis in this section.

Identifying and validating various factors tested in Pestle analysis: A company needs to arrive at a better conclusion in the test to draft an error free strategy.While conducting the pestle analysis each and every aspect of the six elements tested in the pestle analysis. Below are given the areas which are covered in each factor of the PESTLE analysis and help a student to know how to do a pestle analysis.

Political Dimension

1. Various policies and ordinances promulgated by the government.
2. Change in the government because of end of tenure or political instability.
3. Policies followed by the government till a long period of time
4. Many political instabilities like reging war, internal conflicts and increasing terrorism.
5. Periodic elections and change in the political think of voters.
6. Instabilities in the politics inside the state.
7. The foreign policy followed by the company.
8. Various sanctions and subsidies allowed by the government.
9. Presence of pressure groups in political system like lobbies and mafias.
10. Lack of integrity and level of corruption in the system.

Economic Dimension

1. 1. The stability of the local economy
2. 2. The normal trend which is followed in the market.
3. 3. The rate of inflation
4. 4. The rate of interest in the market.
5. 5. The structure of taxation followed.
6. The rate of growth in the field of manufacturing and industries.
7. The disparity between the extend of import and expert.
8. The performance of the currency in international market.

Sociological Dimension

1. The population distribution and demographics in the country.
2. The availability of technology, major brands and companies in the country.
3. The working ethics followed by the labours in the nation.
4. The normal trend among the society and the standard of living of the citizens.
5. The restricted norms and taboos byth society and the cultural groups.
6. The major ideology put forward by the media of the nation.
7. The patterns of the purchasing done by the citizens.
8. Various celebrations and cultural festivals.
9. The method of advertisement followed in the country.

Technological Dimension

1. Various inventions and emerging of new technologies.
2. Various legislations promulgated by the parliament regarding science and technology.
3. Allocation of funds from annual budget towards the research and development.
4. Use of the intellectual minds by the nation in the field of research.
5. Various technologies adopted by the competing companies.
6. Advancement in the field of communication and information and technology.

Legal Dimensions

1. Various legislations regarding the change in tax structure.
2. The new legislations promulgated by the government.
3. The acts proposed in the parliament for the amendment in existing corporate laws.
4. Laws regarding labour and employment.
5. The norms and rule followed in international trade.
6. Various regulations regarding the protection of the rights of consumers
7. Various regulations to eliminate unfair competition in the market.
8. The laws and regulations regarding health of the labours in the companies.

Environmental Dimensions

1. Many regulations imposed by the government of the nation in order to preserve the ecosystem.
2. Social compulsion because of the ecological and social campaigns done by the competitor company.
3. The sudden climatic change in the country because of the pollution.
4. The presence of sustainability in the nature.

Gathering valid Information to carry out analysis
Conducting an in depth analysis in the concerned dimensions is the best way to gather information in order to conduct the test. Conducting a research also provides an in depth knowledge of the condition of the company to the officials. In order to gather relevant information the researchers have to go through a large amount of data. A concise effect is given by the officials of the company in order to sort out the relevant data from group of information. The most significant source for information is the internet which provides various peer reviewed journals, research papers and the annual trend data and prediction of the market. Carrying out research offline is a cumbersome task and may cost money in order to collect data.

Throwing light on Opportunities
By conducting this test and doing a vast research because it will help in getting a crystal clear idea of what is happening in the concerned market. By using the outcomes of the pestle analysis various opportunities in the market can be identified and can be utilized in order to leave behind the competitors. By the results a new strategic plan can be drafted in order to make special efforts in providing customers with the product of their preference and quality. A new scope research can be obtained for deriving out a new product for the company. As the company should have known the characteristics of the market by conducting the pestle analysis a suitable market for the company be traced out.

Taking threat in account
Market not only provides the opportunity to grow, but also consists of pitfalls and pose the company certain critical risks. These risks, if left unattended, may cause a very negative impact on the progress of the company. Even if the company does not have the ability to divert the risk they can mitigate its effect.

Choosing an appropriate action
As the company will get additional control of the situation by the conduction of pestle analysis, they should make discrete choices while drafting strategic plan for the company.