PESTEL analysis is also known as PEST analysis. Organizations typically use it to assess the conditions and their work or plan to launch the next business venture or introduce an innovative product or service.
Meaning of PEST Analysis
PESTEL is an acronym for Political, Economic, Social, technological, environmental, and Legal. It offers a comprehensive view of the entire business environment from various perspectives. Each aspect of the PESTEL analysis technique is essential for every trade or business.
Apart from helping to understand the nature of markets, it also provides an essential framework. It is not just a list of what an organization should do and how it should do it. Also, it assists in determining goals for the future of the company and the methods that will helpful to achieve them.
Various 6 Factors of PESTEL Analysis
These are the factors of PEST analysis in the following:
1. The Political World
These include the government’s laws, regulations, and interventions to regulate businesses. The government has introduced new rules, taxation, tariffs, and taxes on industries that affect the costing strategies. Government established standards by which businesses produce products or services and regulate the types of goods and services produced.
2. Economics Factors
These are the present and historical patterns which are in place in the nation. They include the rate of growth in economics, inflation, exchange rates, average income, and so on. They impact the flow of money and affect business activities.
3. Social Factors
Variables include the entire range of factors directly related to the public. They are interconnected to consumer behavior and influence the overall demand for goods and services. These variables include population growth, literacy and employment, and public safety.
4. Technological Factors
Technological aspects are among the essential elements that impact business activities in the fast-paced business environment. These factors bring technological advancements to the marketplace—automation of business processes, research and development projects, etc.
5. Environmental Factors
Environmental factors include all the elements that influence or are in influence the environment around them. Ecological aspects are essential for specific sectors, especially agriculture, tourism, and farming. However, the business environment isn’t in restriction with weather or climate. Physical location, and global shifts in the weather, encompass all of them.
6. Legal Aspects
The above relates to the legal aspects of the business. They may be extrinsic or intrinsic. The authorities of a country create specific laws. These laws affect the environment for the company’s business and are not inherent to the organization. The organization makes some policies to protect its interests and also to ensure the smooth operation of the organization. Both of these viewpoints are given the proper weightage when analyzing legal issues. It is the basis for the strategies that are in developing stage. In the case example, before beginning any business venture, it is essential to consider the laws governing consumer or safety rules or labor laws.
What is PEST Analysis Meaning?
Organizations often utilize it to evaluate the environment and their operations, plan to start their next business venture, or launch the introduction of a cutting-edge good or service. Additionally, it helps in identifying the company’s future objectives and the approaches that will be most effective in achieving them.
What are the Six Elements of PESTEL?
These are the six elements that affects PESTEL analysis.
1. Political Factors 2. Social Factors 3. Legal Aspect 4. Technological Factors 5. Economic Factors 6. Environmental Factors