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PESTEL ANALYSIS
PESTEL Analysis is a popular method of examining the many different external
factors affecting an organization. The acronym PESTEL stands for the following:

Political- The current and potential influences from political pressures.

• Taxation policy
• Privatisation
Deregulation
• International trade regulations

• General initiatives

• Government stability

• International stability

Economic- The local, national and world economy impact.

• Interest rates

• Money supply

• Credit control

• Financial markets

• Inflation

• Competitors pricing

• Globalization

Sociological- The ways in which changes in society affect us.

• Mobility

• Income distribution

• Population demographics

• Attitude to work and leisure

• Standard of education and skills

• Working conditions

Technological- How new and emerging technology affects our business.

• IT Development

• New Materials and processes

• Government technology funding

• Speed of technology transfer

• Software upgrades

Legal- How local, national and world legislation affects us.

• Employment law

• Trade and product restrictions

• Health and safety regulations

• EU and international laws

• Monopolies commission

Environmental- The local, national and world environmental issues.

• Pollution problems

• Planning permissions

• Waste disposal

• Noise controls

• Environmental pressure groups

One of the main problems, with these external factors, is that we have little or no
control over them.
Let’s suppose we are making and selling beer, and then on one day in April we
switch on the television and the Chancellor of the Exchequer announces an
increase in tax on alcoholic drinks.

"BEER TO GO UP 50p A PINT!"

Or we are in a property development business and one day in June we open the
newspaper and see:
"PROPERTY BUBBLE BURSTS!"

Another problem with these external PESTEL factors is that they are continuously
changing.

Example

Bridges Ltd.
A small, plant and equipment hire company. They began in business five years ago,
hiring tools and equipment to both professional and domestic customers, for
general building maintenance and repair, as well as gardening and landscaping.

A simple PESTEL analysis carried out by the owners of Bridges Ltd. revealed the
following:
Political
• Local councils offering increased grants for repair of older properties.

• Government restricting imports of cheap tools from Far East.

• Government hints at more grants to assist small business development.

Economic
• Predictions that the housing boom is coming to an end.

• Chancellor promises to reduce VAT on hire services.

• Major supermarkets give massive price reductions in domestic tools.

Sociological
• Several new DIY programmes on television.
• More retired people taking up DIY.

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