PESTEL Impact

 PESTEL is an acronym for Political, Economic, Social, Technological,

Environmental and Legal.
 It is an instrument used in companies to evaluate the characteristics and
changes in the environment that can affect the success of the company.
 The instrument allows for companies to discover and evaluate factors that may
affect the business in the present and in the future.
 The unit of analysis assesses these four external factors (Political, Economic,
Social and Technological) and examines the threats and opportunities arising
from them.
 The results of the analysis may assist in,
o carrying out market research,
o creating market strategies,
o developing products, and
o making better decisions for the organisation.

Figure 1: PESTEL Analysis Components.

Political Factors

 Government regulations/policies (external) and legal issues (internal) affect the company’s
ability to be profitable and successful.
 These includes,
o tax guidelines,
o copyright,
o intellectual property law enforcement,
o political stability,
o trade regulations,
o social analysis policy,
o environment analysis policy,
o labour laws,
o and safety regulations.
 Internally, the company’s organisational structure, decision making structure as well as the
power held by positions, may affect the business.
 Political factors also works both ways, externally (political factors towards the company) and
internally (political factors from the company).

 External factors (towards the company):

o Corporate tax (tax adjustments/inflation control)
o Other fiscal policy initiatives (government spending)
o Free trade policies/disputes (international trade, price, customs)
o Anti-trust and other anti-competition issues

 Internal factors (from the company):

o Policies influenced in the company (bribes)
o Thought leaderships from forums (industry associations)
o Supporting policies of a certain political party (incorporating them in the company’s decision
making)

 Steps to perform Political analysis:

o What government policies or political groups could benefit or harm our success?
o Is the political environment stable, or is it likely to change?
o When are the following local, state, or national elections in the country? How might this
change government or regional policy?
o Who are the most likely contenders for power? What are your views on trade policy and
other policies that affect the organization?
o How well developed are property rights and the rule of law, and how widespread are
corruption and organized crime? How are these situations likely to change, and how is this
 likely to affect you?

o Could any pending legislation or tax changes affect your business positively or negatively?
o How will business regulation, along with any planned changes, affect your business? And is
there a trend towards regulation or deregulation?
o How does the government address corporate policy, corporate social responsibility,
environmental issues, and customer protection legislation? What impact does this have,
and is it likely to change?
o What is the likely timeline for the proposed legislative changes?
o Are there other political factors that could change?

Economic Factors

 Consists of examining external economic problems and issues which can affect the business.
 These includes,
o interest rates
o change in inflation,
o unemployment,
o rating of a country (Moodys, Fitch),
o GDP,
o and credit availability.

 External factors (towards the company):

o Interest rates (fiscal and monetary policies which affects banks and businesses)
o Employment rates (government policies, macro-economic factors)
o Inflation (printing money, demand for goods)
o Exchange rates (imports and exports in an economy)

 Internal factors (from the company):

o Job creation (economy support)
o Increasing productivity and paying taxes (adding value to the economy and stability of the
country)
o Import/export (import replacement, export to get foreign income)
o Obtaining foreign investment (allowing foreigners spend money locally)
  Steps to perform Economic analysis:
o What economic factors will affect us in the future?
o How does the performance of the economy affect us right now?
o How are our prices, income, and costs affected by each economic factor?
o How stable is the current economy? Is it growing, stagnant, or declining?
o Are the key exchange rates stable, or do they vary significantly?
o Are customers’ disposable income levels rising or falling? How is this likely to change in the
coming years?
o What is the unemployment rate? Will it be easy to build a skilled workforce? Or will it be
expensive to hire skilled labour?
o Do consumers and businesses have easy access to credit? If not, how will this affect your
organization?
o How is globalization affecting the economic environment?
o Are there other economic factors I should consider?

Social Factors

 Companies assess socio-economic environments in order to investigate the needs of people o

customers.
 By doing so, they wish to understand what drives people to procure certain products or goods.

 The factors require assessment of the following:

o population growth rates/fertility rates,
o age distribution,
o attitude towards work,
o and labour market trends.

 External factors (towards the company):

o Demography (company resources, company base)
o Lifestyle trends (stakeholders, workers lifestyle, GP vs WC, access to services)
o Consumer beliefs (culture, beliefs, needs)
o Attitudes around working conditions

 Internal factors (from the company):

o Job creation (economy support, government policy allowing ease of employment)
 o Community engagement policies (tax relief, policies, own conviction)
o Addressing the needs of the community (changing the world for better)
o Negative influence (examples of ‘wrong’ solutions)

 Steps to perform Social analysis:

o How do the beliefs and values of our customers influence their buying habits?
o How do cultural trends and human behaviour play a role in our business?
o What are the population growth rate and age profile? How likely is this to change?
o Are generational changes in attitude likely to affect what you’re doing?
o What are the levels of health, education, and social mobility in your society? How are they
changing and what impact does this have?
o What employment patterns, labour market trends, and attitudes toward work can you
observe? Are they different for each age group?
o What social attitudes and taboos could affect the business? Have there been recent socio-
cultural changes that could affect this?
o How do religious beliefs and lifestyle choices affect the population?
o Are other sociocultural factors likely to drive change for your business?

Technological Factors

 Technology is essential in a business place, and it affects it negative or positively.

 The factors require assessment of the following:
o government spending on technological research,
o current technology life cycle,
o the internet’s role,
o and the impact of potential information technology.

 External factors (towards the company):

o Automation
o Research and Development (R&D) (investment, innovation, growth)
o Technology infrastructure (IoT, digital transformation)
o Privacy and autonomy (cyber security, POPIA)

 Internal factors (from the company):

o End, replacement or create jobs (as job changes and their definitions)
 o Provision of new technology solutions (old technology being replaced with new)
o Collective ‘pool of knowledge’ (for collective growth)
o Negative effects (example of ‘wrong technology’)

 Steps to perform Technological analysis:

o What technological advances and innovations are available or in the works?
o How will this technology impact our operations?
o Is there any new technology you may be using?
o Are new technologies on the horizon that could radically affect your work or industry?
o Do any competitors have access to new technologies that could redefine their products?
o In what areas do governments and educational institutions focus their research? Is there
anything I can do to take advantage of this?
o How have infrastructure changes affected work patterns (for example, levels of remote
work)?
o Are there existing tech hubs you could work with or learn from?
o Are there other technology factors I should consider?

Environmental Factors

 This factor is important since companies have to deal with scarcity of raw materials, reducing
environmental pollution, doing business as an ethical and sustainable company and carbon
footprint targets.
 By acknowledging the environmental factors in a company allows for the company to observe
changes in the environment and assess if they present risks in the operations.
 The factor requires assessment of the following:
o Carbon footprint
o Climate change impacts
o Increased extreme weather events

 External factors (towards the company):

o Environmental regulations (government policies and environment summit
agreements/commitments amongst countries)
o Management of natural resources (fresh water, flora and fauna, fertile land)
o Green initiatives (reduce, reuse, recycle)

 Internal factors (from the company):

 o Waste management (recycling, treatment)
o Pollution (water bodies/rivers/lakes, chemicals)
o Depletion (extinction, non-rehabilitation)

Legal Factors

 These are factors emanating from legislation which may affect a lot of things namely
companies, industries, individuals and other sectors.
 These factors require assessment of the following:
o Industry regulation
o Required license and permits required to operate.
o Employment and consumer protection laws
o Intellectual Property (IP) protection

 External factors (towards the company):

o Industry regulation (regulation of production and distribution)
o License and permits (permits or licenses required for production and distribution)
o Employment and consumer protection laws (CPA)
o Local regulations (municipal bylaws)

 Internal factors (from the company):

o Influence over legislation and regulations (members participating in legislation and
regulation processes)
o National standards
o Society and environment
o Taxes