PESTEL Analysis

of External
Environment

Presented by:

Mark Anthony E. Vasquez

E-MBA
Introduction to PESTEL Analysis
PESTEL analysis is a framework used to analyze
the external macro-environmental factors that
impact an organization. It stands for Political,
Economic, Sociocultural, Technological,
Environmental, and Legal factors.

PESTEL analysis is important for organizations

as it helps them understand the external
environment in which they operate and
identify potential opportunities and threats.
By analyzing these factors, organizations can
develop effective strategies to adapt to
changes in the environment and stay
competitive.
Political Factors
Political factors refer to the influence that government policies and actions can have on businesses
and the external environment. These factors can include laws, regulations, and political stability.

Labor Laws Political Stability

Labor laws can affect the industry or organization Political instability can create uncertainty for
being analyzed by dictating how employees are hired, businesses.
paid, and treated.
 Economic Factors
The economic factors that can impact the external environment include inflation, interest rates,
economic growth, exchange rates, and taxation policies. These factors can have a significant impact
on the profitability and sustainability of businesses.

Inflation Interest Rates

Inflation is the rate at which the general level of prices for
Interest rates can impact business operations by affecting
goods and services is rising, and subsequently, the
purchasing power of currency is falling. High inflation rates borrowing costs, consumer spending, and investment. High
can lead to reduced consumer spending, lower profits, and a interest rates can lead to decreased consumer spending and
decrease in investment. Businesses must be aware of reduced investment, while low interest rates can increase
inflation rates and adjust their strategies accordingly. borrowing and stimulate economic growth.
 Economic Factors

Economic Growth Exchange Rates

Economic growth can impact businesses by creating Exchange rates can impact businesses that engage in
opportunities for expansion and increased profits. international trade, as they affect the cost of goods and
However, economic downturns can lead to decreased services. Fluctuations in exchange rates can lead to
consumer spending and reduced profits. increased costs and decreased profits.
Social Factors
Social factors refer to the cultural and demographic characteristics of a population that can impact
the external environment of a business. These factors include but are not limited to: population
growth rate, age distribution, career attitudes, health consciousness, and safety concerns.
Technological Factors
The technological factors that can impact the external environment include the rate of
technological change, automation, and the availability of technology infrastructure.

Rate of Technological Change

The rate of technological change can impact the external

environment by creating new opportunities or disrupting
existing industries. Companies must stay up-to-date with
the latest technological advancements in order to remain
competitive and adapt to changes in the market.
Technological Factors

Automation

The increasing use of automation in industries

can impact the external environment by reducing
the need for human labor and potentially causing
job loss. However, automation can also lead to
increased efficiency and productivity.
Technological Factors

Technology Infrastructure

The availability of technology infrastructure, such as

high-speed internet and reliable telecommunications,
can impact the external environment by enabling
businesses to operate more efficiently and effectively.
Without adequate technology infrastructure, businesses
may struggle to compete in the market.
Environmental Factors
Environmental factors refer to the physical and ecological conditions in which a company operates.
These factors can have a significant impact on a company's external environment and its ability to
operate and grow.

Air Pollution

Air pollution is a significant environmental factor that can

impact a company's external environment. This can include
emissions from factories and transportation, which can
contribute to poor air quality and health problems for
employees and local communities.
Environmental Factors
Environmental factors refer to the physical and ecological conditions in which a company operates.
These factors can have a significant impact on a company's external environment and its ability to
operate and grow.

Deforestation

Deforestation is another environmental factor that can impact

a company's external environment. This can include the
destruction of natural habitats, loss of biodiversity, and
increased greenhouse gas emissions. Companies may need to
consider their supply chains and sourcing practices to avoid
contributing to deforestation.
Legal Factors
Legal factors refer to the laws and regulations that can impact the external environment of a
business. These factors can include labor laws, consumer protection laws, health and safety
regulations, and environmental regulations

Impact on Business

Legal factors can have a significant impact on businesses. For

example, changes in labor laws can affect how businesses hire
and manage employees. Consumer protection laws can impact
how businesses market and sell their products. Environmental
regulations can impact how businesses operate and produce
goods.
End of Report