PESTEL ANALYSIS
Analysis of the External or General Environment normally includes an analysis of
following external factors in terms of the bearing they have on your company. These
factors are:
1. Political
2. Economic
3. Social
4. Technological
5. Legal
6. Ecological
Environmental scanning usually refers just to the macro-environment i.e., Political,
Economic, Social and Technological, but it can also include industry and competitor
analysis, consumer analysis, product innovations, and the company's internal
environment.
I) Political Factors
The political arena has a huge influence upon the regulation of businesses, and the
spending power of consumers and other businesses. Yu must consider issues such as :
1. How stable is the political environment?
2. Will government policy influence laws that regulate or tax your business?
3. What is the government’s position on marketing ethics?
4. What is the government’s policy on the economy?
5. Does the government have a view on culture and religion?
6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN,
or others?
Political Factors (e.g.):
Monopolies legislation
Environment protection laws
Taxation policy
Employment laws
Government policy
Legislation
II) Economic Factors
Marketers need to consider the state of a trading economy in the short and long –
terms. This is especially true when planning for international marketing. You need to
look at :
1. Internet rates
2. The level of inflation Employment level per capita
3. Long-term prospects for the economy Gross Domestic Product (GDP) per capita,
and so on
Economic Factors (e.g.)
Inflation
Employment
Disposable income
Business cycles
Energy availability and cost
III) Socio-cultural Factors
The social and cultural influences on business vary from country to country. It is
very important that such factors are considered. Factors include:
1. What is the dominant religion?
2. What are attitudes to foreign products and services?
3. Does language impact upon the diffusion of products onto markets?
4. How much time do consumers have for leisure?
5. What are the roles of men and women within society?
6. How long are the population living? Are the older generations wealthy?
7. Do the population have a strong/weak opinion on green issues?
Socio-culture Factors (e.g.)
Demographics
Distribution of income
Social mobility
Lifestyle changes
Consumerism
Levels of education
IV) Technological Factors
Technology is vital for competitive advantage, and is a major driver of
globalization. Consider the following points:
1. Does technology allow for products and services to be made more cheaply and to
a better standard of quality?
2. Do the technologies offer consumers and businesses more innovative products
and services such as Internet banking, new generation mobile telephones etc?
3. How is distribution changed by new technologies e.g. books via the Internet,
flight tickets, auctions etc?
4. Does technology offer companies a new way to communicate with consumers e.g.
banners, Customer Relationship Management (CRM) etc?
Technological Factors (e.g.)
New discoveries and innovations
Speed of technology transfer
Rates of obsolescence
Internet
Information technology
V) Ecological Factors
- Pollution control regulations
- - emission control regulations
- industrial waste disposal rules
- disposal of used products and packaging regulations
VI) Legal Factors
Regulatory actions by government agencies often restrict the activities of companies in
affected industries. The recent restrictions against smoking in public places and against
the tobacco industry have lead to dramatic changes in the way cigarette companies
market their product. Today, companies such as ITC and Phillip Morris are airing
advertisements illustrating the negative effects of their products. In addition, in USA a
proposed settlement agreement between the industry and the attorney general of several
states represent a threat that could result in a ban on some types of cigarette advertising
and the regulation of nicotine by the FDA. As can be seen, it is important to identify
political/legal threats and opportunities in order to keep an edge on the market
