Pestel analysis is a method very often used by marketing experts, because it allows the implementation of an effective strategy within a company. What is it and how do you perform a full Pestel analysis? Here is the answer.
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Pestel analysis is a tool intended to study the environment of a company as a whole in order to draw a precise portrait. She is interested in 6 external factors likely to affect her in a positive or negative way. This method looks at the political, economic, socio-cultural, technological, ecological and legal environment of a company in order to determine the opportunities to be seized and the threats that hover over the market.
The components of the Pestel analysis
The Pestel analysis highlights the 6 environments of a company:
It thus provides the company with a global vision of the environment.
The political environment
The political environment should be examined as part of the Pestel analysis in order to assess the influences that emanate from political power.
We must therefore be interested in:
- To the stability of the government.
- To current tax policy.
- At the level of social protection in force.
- Obstacles that could slow down the company’s professional activity.
Example : The costs of a business are increased when a new law increasing taxes on the importation of goods comes into force. A dispute like the one between China and the United States over Tik Tok can also pose a threat to some companies.
The economic environment
The study of the macroeconomic situation of a given geographical area or country must be carried out to know its potential influence on the business operations of the company.
Several questions must be asked to analyze the economic environment of a company, namely:
- What is the current GDP growth rate and how is it expected to evolve?
- What is the purchasing power of the population?
- How are the prices changing?
- What is the unemployment rate?
- Will interest rates change anytime soon?
Example : A positive change in purchasing power can have a very good impact on the prices charged by cinemas. Indeed, the expenses allocated to leisure activities are negatively impacted when purchasing power decreases and vice versa.
The socio-cultural environment
Studying the socio-cultural environment within the framework of a Pestel analysis amounts to looking at the characteristics of the clientele (gender, age, customs), because they are of paramount importance in the demand for products and services. Indeed, the purchasing behavior of customers varies significantly depending on their characteristics.
This involves, for example, asking yourself:
- What are the demographic criteria?
- What is the level of education of the clientele?
- How adaptable is the population to new practices / technologies?
Example : A company that offers products for children will need to ensure that the birth rate is good and that the average age of the population is not too high. Likewise, the cultural aspect must be taken into account in the development of advertising messages.
The technological environment
To analyze the technological environment of a company, it is necessary to study the technical advances in its sector.
In particular, you need to know if:
- Patents have been filed in his field.
- Technological discoveries have been made recently.
Example : If one of a company’s competitors has just filed for a patent, it can expect innovative technology to emerge soon. Likewise, traditional record companies must follow the technological news of streaming platforms like Spotify or Deezer to know in advance the new features to come.
The ecological environment
By doing a Pestel analysis, it is possible to study the advances related to environmental protection. Indeed, ecology is becoming more and more important in the minds of the population. It is therefore an essential variable to take into account in a marketing strategy.
We must then be interested:
- To laws intended for the protection of the environment.
- At the level of current energy consumption.
- The way waste is handled.
- To competing companies that would be more respectful of the environment.
Example : New measures taken to help individuals carry out insulation work in their property in order to reduce their consumption can threaten an energy producer.
The legal environment
The Pestel analysis recommends studying the company’s regulatory framework. Indeed, the law can play an important role in the decisions taken by a society.
We must therefore be interested in what the labor law says, the safety standards in force and the bills to come that could impact the company.
Example : The release of a new security standard can mean significant investments for a company. The ban on riding a scooter on sidewalks has, for example, impacted the development of companies in the sector.
How to perform a Pestel analysis?
To perform a Pestel analysis, you must:
- List macroeconomic factors using press data, browsing the Internet, brainstorming, etc.
- Define which factors represent an opportunity and which represent a threat.
- Establish a suitable business strategy.
Good to know : Macroeconomic factors do not have the same importance for all companies. Thus, the political and socio-cultural environment will be more important for a company in the tax field, while the technological environment will be essential for a startup operating in the field of artificial intelligence, for example.
Performing a Pestel analysis helps to understand current and future structural trends in a market. This awareness is a real asset for thinking about different development scenarios and for adapting a company’s development strategy.
To go further, download this free market research kit for study your competitors and identify the profile of your potential customers.