What is PESTEL Analysis?
PESTEL is a model to analyse external
environment of a business. A business may influence from several factors of
external environment. If the business cannot adopt the influence of external
environment, it will fail to survive in the competition. So, the manager of a
business, at first, must identify the external factors and assess its effect on
business to adopt the influences. PESTEL model help a manager to identify the external
influence of environment.
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| PESTEL MODEL- Business Articles |
Political Factors
Political factors include a country’s Political
System, Political Stability, Tax Policy, Government’s Outlook about opening new
business, Export & Import Duty and Other Government Regulations toward Business.
Economic Factors
Economic factors describe Economic Conditions
of a country. It includes Inflation, Exchange Rate, Strengths of Money & Banking
Activities, etc.
Social Factors
Sometimes, success of a business depends on
social factors. For example, if the customers of a country are educated and
health conscious, they may use little plastics in food products. So, food
companies use alternative way to deliver food to customers instead plastic box.
However, Social factors include, Age Distribution, Income Range, Educational
Level of People, Attitude of Customers, Social & Ethnic Groups of Customers,
Religion, etc.
Technological Factors
When new technologies have been innovated, a business
may be abolished due to fail in adoption of such technologies. Political factors
include Innovation of new technology, Investment on research on technological innovation,
Adoption of new production, accounting and other technologies. A company’s
competitive capability depends on its unique technological innovation
capability largely in this century.
Environmental factors
A business may affect several environmental
factors like Soil, Water, Animals, Birds, Trees, etc. So, A firm must have
capability of conducting its operation by creating less harmful effect on
environment as much as possible.
Legal Factors
Legal factors contain Environment Protection
Law, Employment Law, Fair Wages Law, Gender Discrimination Law on Workplace or
Equal Employment Rights Law, etc. which have a significant impact on the
activities of a business.
A business needs scanning its external
environment continuously to identify the effect of external environment and thereby
actions to adopt such changes of external environment.
