What is PESTLE Analysis?

PESTLE analysis sometimes referred to as PEST analysis, is a concept in

marketing principles. This concept is used as a tool by organizations to keep a
track of the external factors impacting the organization. PESTLE is a mnemonic
which in its expanded form denotes P for Political, E for Economic, S for Social,
T for Technological, L for Legal, and E for Environmental. On the basis of the
organization, it can be reduced to PEST or additional areas can be added (such
as Ethical).

PESTLE analysis forms a much more comprehensive version of the SWOT

analysis. This form of analysis is then compared with the company’s internal
strengths and weaknesses via a SWOT analysis. This aids in determining the
future scope of action and in developing measures for strategic management.

Why is PESTLE analysis used?

Businessmen and entrepreneurs often turn towards business analysis tools for
aiding them in making suitable decisions for their firm. Before any business
venture, the business owners often remain doubtful regarding its outcome and
how it would be received. Pestle analysis is adopted for determining an
answer to these questions. This analysis involves asking questions that give
the analyst an idea about the things to keep in mind. These questions are:

 What is the political situation of a country and what is its effect on the
markets?
 What are the prevalent economic factors?
 How is culture affecting the markets and what are its determinants?
 What are the technological inventions that are trending and what are
other future possibilities in this field?
 What are the current legislations that regulate the industry and if they
need to be changed?
 What are the environmental concerns for the industry?

Analysts find answers to these questions and try to cover all the aspects
through this analysis. The PESTLE analysis is more than just understanding the
market. This framework represents one of the backbones of strategic
management by not only defining what a company should do but also
accounting for an organization’s goals and the strategies strung to them.
Factors of PESTLE Analysis

Each of the factors mentioned above, from Political, Economic, Social,

Technological, Legal to Environmental, have an impact on an organization. Yet
the significance of each of these factors may differ based on the different kinds
of industries.

1. Political factors in PESTLE Analysis

Political factors include tax policy, environmental regulations, trade

restrictions and reform, tariffs, and also political stability. These factors
determine the extent to which a government may influence an industry or a
company. For example, the government may bring new tax reforms that might
change the whole revenue-generating system of a company.

Some tariff trade barriers that can prove to be a hindrance in the way we run
our business operations include customs policy and export subsidies. Non-tariff
trade barriers meanwhile include determining minimum import prices as well
as bans and restrictions on exports.

2. Economic factors in PESTLE Analysis

Economic factors include economic growth/decline, interest, exchange,

inflation and wage rates, minimum wage, working hours, unemployment
(local and national), credit availability, and cost of living. These factors are
determinants to an economy’s performance that directly impacts a company
and also have resonating long term effects.

For example, a rise in the inflation rate of any economy would affect the way
companies price their products and services. Besides, it would also affect the
purchasing power of a consumer and may result in a change in demand/supply
models for that economy.

3. Social factors in PESTLE Analysis

Social factors include cultural norms and expectations, health consciousness,
population growth rates, age distribution, career attitudes, health, and
safety. These factors are helpful for companies to better plan their marketing
analytics and strategy. For example, the Indian market generally witnesses a
surge in demands for vehicles during the last months of the year, due to
marriage and the festive season.

These factors are particularly significant for marketers as they target certain
customers. Additionally, they also highlight the local workforce and its zeal to
operate under certain circumstances.

The factors of PESTLE Analysis

4. Technological factors in PESTLE Analysis

Technological factors mean the innovations and developments in

technologies. These factors impact an organization’s operations. Several new
developments like Artificial Intelligence, IoT, Machine Learning, Deep
Learning, are being made in the technology field and if a company fails to
match up the trend it may lose its position in the market.

A few of the technological factors which are included in the PESTLE analysis
include the rate of technological change, the evolution of infrastructure, and
any government or institutional research.
5. Legal factors in PESTLE Analysis

Legal factors include changes to legislation impacting employment, access to

materials, quotas, resources, imports/exports, and taxation. These factors
have both external and internal sides. Certain laws have an impact on the
business environment in a country.

Apart from these laws/rules, companies maintain their own set of rules and
regulations by which an employee is expected to abide by. So, the legal
analysis takes accounts of both these angles and forms strategies keeping
them in mind.

6. Environmental factors in PESTLE Analysis

These factors are mainly concerned with the effect of the surrounding
environment and the influence of ecological aspects. These include waste
disposal laws, environmental protection laws, energy consumption regulation.

This aspect of the PESTLE is crucial for certain industries particularly example
tourism, farming, agriculture, etc. However, Global warming and the increased
need to switch to sustainable resources; ethical sourcing (both locally and
nationally, including supply chain intelligence) have compelled every
organization to consider the environmental factors. Corporate Social
Responsibility (CSR) has been made compulsory for organizations.

How to do a PESTLE Analysis?

Conducting a PESTLE Analysis involves some steps which we have mentioned

below:

 Identify the scope of the research. It should cover the present and the
future scenarios. It should apply to the areas of the business world
where the particular organization operates.
 Form a good team and assign responsibilities accordingly. Involving
diverse people helps in collecting content-rich data.
 Identify appropriate sources of information. These may include people
seeking professional help regarding an issue or a change/update in
current policy.
  Gather and assemble the information. Better create a template as the
basis for recording the information.
 Analyzing the collected information is a significant step.
 Create an order of the issues to be addressed. Try to resolve the issue,
that can create a big impact, at the earliest.
 Identify the business-specific options to address the issues.
 Create a well-informing document for all the stakeholders
 Disseminate and discuss the findings with stakeholders and decision-
makers
 Decide on the actions to be taken and trends that need to be monitored
on an ongoing basis

To be effective, organizations must perform PESTLE analysis on an ongoing or

regular basis. Organizations that do so enjoy a competitive advantage as they
spot trends before others.

What is a PESTLE Analysis used for?

A PESTLE analysis is often used as a broad fact-finding activity. It helps an

organization establish the external factors that could impact decisions made
inside the organization. By understanding the impact these external factors can
have on an organization, it becomes handy for organizations to plan better.
They can form strategies to minimize the threats and maximize opportunities
for themselves.

Uses of PESTLE Analysis

A PESTLE analysis is an appropriate framework that fulfills these purposes.
Apart from that, it also helps organizations in a range of business planning
situations. These include:

1. Strategic business planning

A PESTLE analysis report is a useful document to have by your side when

starting a business planning process. It provides the senior management team
with loads of contextual information about the company like the direction in
which the business is heading, brand positioning, growth targets, and the areas
of concern that may lead to a decline in growth and productivity.

2. Workforce Planning

Workforce planning is a business process that aligns business and people

strategies. A PESTLE analysis helps businesses to identify disruptive changes to
business models that may have a profound impact on the future employment
landscape. Organizations are facing huge changes in their workforce from
increased skills gaps, the creation of job roles that did not exist 10 years ago
like the IT department, and job reductions or displacement.

3. Marketing Planning

As PESTLE analysis brings a lot of information on external factors, it also brings

crucial market insights. So, it can help prioritize business activities to
accomplish specific marketing objectives within a set timeframe.

4. Product development

As mentioned above, a PESTLE analysis also has crucial market insights that tell
about the response from customers about a product or service. This helps
businesses to decide on whether to enter or leave a route, modify an existing
product, and when and what to launch as a new product.

5. Organizational Change
A PESTLE analysis is a powerful tool for understanding the context for change,
and focusing on the areas to make that change successful. In this situation,
PESTLE analysis works best with a SWOT analysis. This helps an organization to
identify the potential opportunities and threats around labor changes, for
example, skill shortage and workforce capabilities.
Advantages and Disadvantages of a PESTLE Analysis

Everything has both aspects and so does a PESTLE Analysis. Let us look at the
advantages as well as the disadvantages of it.

Advantages

 It is a simple framework- easy to understand and conduct

 It facilitates a better and broader understanding of the business
environment.
 It encourages organizations to develop external and strategic thinking
 The most talked advantage- it enables an organization to anticipate
future business threats and allows it to minimize or nullify the impact
 It also allows organizations to spot an opportunity and to capitalize on
them

Disadvantages

 Some PESTLE analysis users oversimplify the amount of data used for
decisions – it’s easy to use insufficient data.
 It’s easy to get lost in the enormous amount of data. So, there always
remains a risk of capturing too much data and undertaking too
much data analytics that may lead to ‘paralysis by analysis’
 As a PESTLE analysis works on assumptions, there remains a risk of being
wrong
 Once in a while an attitude doesn’t work with PESTLE analysis. So, it
must be a regular practice.
 The pace of change makes it difficult to anticipate the developments and
this may affect the organization in future

Conclusion
It can be stated that PESTLE analysis is a great tool for businesses that can be
leveraged for several purposes. It brings information about the possible impact
of the six external factors on an organization. This makes it easier for
organizations to prepare for any sort of problems caused by these PESTLE
factors.
VUCA WORLD
VUCA is an acronym that stands for volatility, uncertainty, complexity and
ambiguity, a combination of qualities that, taken together, characterize the
nature of some difficult conditions and situations. The term is also sometimes
said to stand for the adjectives: volatile, uncertain, complex and ambiguous.

The term VUCA originated with the United States Army War College to
describe conditions resulting from the Cold War. The VUCA concept has since
been adopted throughout businesses and organizations in many industries and
sectors to guide leadership and strategy planning. An awareness of the forces
represented in the VUCA model and strategies to mitigate the harm they might
cause are integral to crisis management and disaster recovery planning.
Volatility

Volatility refers to the propensity for changing from one state to another.
Under certain conditions, volatile materials can dangerously explode, changing
rapidly from stable to disordered. This provides another implication that
volatile conditions are dangerous conditions.

Another example of volatility is found in financial markets, and it the concept

of volatility expresses the rate and amount of change from buying to selling
and the changing interest (in terms of numbers of contracts/shares) in any
given market.

The interesting thing about volatility is that even though it might represent
danger, it can also represent opportunity. Let’s return to the financial market
situation: many market traders make excellent money by trading on volatility
(making an informed bet on the movement of a financial instrument) such as
trading options on a company that is making a scheduled earnings
announcement. The point is this: volatility is a good if you are seeking
opportunities and bad if you like predictability.

Uncertainty

Uncertainty refers to the lack of specific information, which can be found by

answering specific questions. Asking “What is the probability that it will rain
today?” is a question that is an attempt to characterize uncertainty.

Complexity

Complexity refers to the number of components, the relationships between

the components. The normal layperson’s usage of the complexity tends to
oversimplify the scope of practical problems facing leaders in organizations.
Complexity differs from “complicated.” A complicated issue can be understood
by analysis and investigation beforehand.

Ambiguity

The Latin prefix “ambi-“refers to multiple or non-fixed, such as its use in the
words ambiance and ambidextrous. Ambiguous language is language that can
be interpreted differently. Ambiguity is a cause of stress for many people
(especially those who work in well-structured organizations) as the disorder
implied by ambiguity is not comfortable. People tend to avoid, ignore, or
minimize ambiguity.
VUCA is a condition that calls for questions — lots of them. Penetrating
questions that ferret out nuance. Challenging questions that stimulate differing
views and debate. Open-ended questions that fuel imagination. Analytical
questions that distinguish what you think from what you know. The only thing
you know with certainty about your strategy is that it’s wrong. Persistent
probing will help you discern if it’s off by 5 percent or 95 percent before events
swiftly reveal the answer to you. Agility is critical because strategic
adjustments must be made continually.

VUCA has more recently been adopted by an increasing number of CEO’s and
organisations as a framework to approach different types of challenging
situations bought about due to external factors such as politics, economics,
society, advancing technology and the environment.
PROBLEMS/ CHALLENGES FACED BY CORPORATE SECTOR IN
INDIA:
1. Regulatory Procedure and Related Delays: Too many regulatory
measures imposed by the Government on the private sector has
resulted in lengthy procedure and delays in getting final clearance of a
new industrial project. On the Government level, decision making
system is poor delays completion of large investment project.
2. Unnecessary Control: From the beginning, the private sector of the
country is subjected to unnecessary Government control. Price controls
imposed by the Government on certain goods has resulted in
disincentive to increase production. Rather competition among the rival
producers can enlarge the production base and thereby can reduce the
prices automatically. Price controls, dual pricing etc. has resulted in
black marketing and hoarding of such commodities.
3. Inadequate Diversification: The private sector has been suffering from
inadequate diversification as the Government did not allow them to
participate in basic, heavy and infrastructural sectors like defence and
railways which were earlier reserved for the public sector.
4. Lack of Finance and Credit: Although the large scale industrial corporate
units of the private sector are mobilising their fund from banks,
development financial institutions and from the market through sale of
their equities or debentures but the small scale units are facing acute
problem in raising fund for their expansion. Further increase in NPA has
led to decreased credit for private sector.
5. Starting a business in India: It is not easy to start a business in India. It
can take between months to complete all the required procedures, with
fees and add-on costs dependent on the size and type of business being
registered.
6. Poor implementation of law: With the introduction of the Companies
Act 2013, the law makers had intended to introduce a modular law to
the Indian economy, but the stringent provisions led a setback to
implementation. The increase in the compliance burden has, to a great
extent, curbed the incorporation of companies in India.
7. Land acquisition issue: Land acquisition remains complex, because of
the difficulties in establishing legal ownership. There are many litigations
due to inheritance, fragmented holdings, and demands by sellers to be
paid in cash.
8. Electricity: The demand is currently more than supply. As the economy
booms, and there is a potential for power outages. Power is essential for
manufacturing sector and service sectors.
9. Infrastructure: There is much focus on infrastructural development,
boosting road transport, creating dependable power generation, and
modernising state-owned railways. An infrastructure strain poses a
challenge to distribution and logistics.
10.Exports and imports challenges: Despite government legislation to
improve international trade, there are still various hurdles to importing
and exporting goods. Exporters and investors face non-transparent and
often unpredictable regulatory and tariff regimes. Several layers of
bureaucracy make it challenging to move goods efficiently, and
companies must file a long list of documents before moving products
across borders.
11.Skill gap in India: Accessing the right skills is a challenge. Further,
employment laws in India are complex. At present, there is a huge
variety of laws which need to be consolidated.
REFERENCE LINKS

EASE OF DOING BUSINESS -

https://www.makeinindia.com/eodb

BIG DATA AND ITS IMPORTANCE -

https://techvidvan.com/tutorials/why-big-data/

VUCA -
https://www.forbes.com/sites/jeroenkraaijenbrink/2018/12/19/what-does-
vuca-really-mean/?sh=47fe62b317d6
https://www.vuca-world.org/

BOOTSTRAPPING -
https://www.uschamber.com/co/start/startup/bootstrap-funding-pros-and-
cons
https://corporatefinanceinstitute.com/resources/knowledge/strategy/
bootstrapping/

CROWDFUNDING -
https://www.indiafilings.com/learn/crowdfunding-in-india/
https://keap.com/business-success-blog/growth/planning-strategy/
crowdfunding-for-small-business

VENTURE CAPITAL -
https://www.investopedia.com/terms/v/venturecapital.asp
https://accountlearning.com/importance-of-venture-capital-financing/

ANGEL INVESTOR -
https://www.goodreturns.in/classroom/2018/02/who-are-angel-investors-
their-role-start-up-companies-672048.html
https://www.forbes.com/advisor/investing/what-are-angel-investors/

INCUBATORS -
https://www.opengrowth.com/resources/major-benefits-of-startup-
incubators
https://www.draperuniversity.com/blog/what-is-a-business-incubator
https://www.universitylabpartners.org/blog/why-startups-need-incubators

ACCELERATORS -
https://www.draperuniversity.com/blog/what-is-accelerator
https://www.feedough.com/what-is-a-startup-accelerator/