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PESTEL analysis is a strategic business tool used to understand the
macro (external) environment in which an organization operates 12.
PESTEL is an acronym for Political, Economic, Sociocultural,
Technological, Environmental, and Legal12.
Here's what each factor represents:
1.Political: This includes government regulations and legal
issues under which the firm operates1. For example, a
company may face different political factors in different
countries. The stability of the political system can affect the
appeal of a particular domestic market1.
2.Economic: These factors impact the economy and the
performance of the business1. This could include economic
growth, exchange, inflation, and interest rates, economic
stability, anticipated shifts in commodity and resource costs 1.
3.Sociocultural: These factors examine the social environment
of the market1. This includes the demographics, cultural trends,
attitudes towards the product, lifestyle trends, and fashions 1.
4.Technological: These factors pertain to innovations, access to
technology, licensing and patents, manufacturing, research
funding, global communications1.
5.Environmental: These factors include all those that influence
or are determined by the surrounding environment1. This
aspect of the PESTEL framework identifies environmental
aspects that can affect how an organization operates. This can
include weather, climate, geographical position, climate
change, and environmental offsets1.
6.Legal: These factors have both external and internal sides 1.
There are certain laws that affect the business environment in
a certain country while there are certain policies that
companies maintain for themselves1.
Let's take the example of Starbucks to understand this better:
7.Political: Starbucks operates in more than 70 countries and
must navigate various regulations and political climates.
8.Economic: Economic factors like inflation, unemployment, and
consumer income affect Starbucks. For example, in times of
economic recession, consumers spend less on luxuries like
premium coffee.
9.Sociocultural: Starbucks has positioned itself as a luxury
brand and has a strong emphasis on customer service. Its
'third-place' concept where Starbucks stores are a place to
relax and meet friends, apart from home and work, resonates
with consumers.
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10. Technological: Starbucks uses technology like mobile
order and pay, and its rewards app to enhance customer
experience.
11. Environmental: Starbucks is committed to minimizing
its environmental footprint through energy and water
conservation, recycling, and green construction.
12. Legal: Starbucks must comply with health and safety
regulations, labor laws, and tax codes in all the countries it
operates in.
In conclusion, PESTEL analysis provides a comprehensive view of the
external factors and helps companies like Starbucks to take
strategic decisions.
Source(s)
1. PESTLE Analysis Explained (With Examples)
2. What is a PESTLE Analysis? A Complete PESTLE Analysis Guide - OnStrategy
3. PESTEL Analysis & Uses in Finance - Corporate Finance Institute
4. PESTLE Analysis Example I 6 Real-World Companies + Free Guide - OnStrategy
5. What Is a PESTLE Analysis? Factors, Examples and Uses
