PESTEL analysis, the external analysis of a company

Analyzing the external factors that affect a company is essential for its
survival, as it determines their ability to adapt to changes in the
market. There are different tools that allow detecting risks and
environmental opportunities, one of the most known is the SWOT analysis, although
The PESTEL analysis is a more powerful and comprehensive tool.

What is PESTEL analysis?

The PESTEL analysis is a tool used to identify the forces

external factors at the macro level that influence a business and can determine its
evolution, both in economic terms and in reputation. The acronym PESTEL
it refers to the factors that are analyzed: Political, Economic, Social,
Technological, Ecological, and Legal. Therefore, the PESTEL analysis is astudy
of market exclusively of external factors that affect a company.

How to conduct a PESTEL analysis?

To analyze the external environment of a company, one must ask themselves

how macro factors can affect the business. With this example of the analysis
You will be able to understand Apple’s PESTEL better.

1. Political factors. The policies of the country where it operates are analyzed.
company, government stability and changes in agreements
international. In the case of Apple, the trade tensions between
United States and China, country where the tech giant manufactures its
iPhones, added to the pressures from the US government to
their production to national soil, are destabilizing factors.

2. Economic factors. Changes in tax regulations, crises

economic, inflation, exchange rates and interest, as well as the rate of
employment, are also external factors that affect a company. To
Apple, the loss of purchasing power of the European middle class and
American, linked to the rise in manufacturing costs due to the
salary increases in China are important factors that threaten
his business.

3. Social factors. The PESTEL analysis includes an assessment of the

cultural patterns, shared values, geographical movements of the
consumers and changes in their consumption habits. In the case of Apple,
the concern for business ethics due to its factories in China, thus
 how the growing negative reaction towards expensive products and the
planned obsolescence poses great risks to the brand.

4. Technological factors. The cost of access to technology, investments

in R&D, and technological updates are essential aspects for the
external analysis of a company. Apple, for example, must face
large competitors like Google and Samsung that respond faster
to changes in consumer needs. The constrained environment
The iOS is another factor against the brand.

5. Ecological factors. They are all aspects related to the

environmental preservation, from the pollution emitted by the
business activity and the use of natural resources up to management of
waste. In this regard, Apple's biggest problems are:
removal of your electronic devices, the pollution they produce
their factories and the environmental impact of their supply chain.

6. Legal factors. This includes the laws that affect the company and limit
its performance, from the regulations governing employment to those in
occupational safety, intellectual property, consumer protection
and/or energy consumption. In the case of Apple, its dependence on laws
of intellectual property for the software and music it distributes, makes it
vulnerable to piracy and litigation.

1#Analysis of the political environment

Politics and its rulers, whether at the local, regional, national, or international level.
they clearly affect business organizations due to the impact
of the decisions made at that time or in the future. Therefore, they constitute
An opportunity or risk factor that must be analyzed in detail.

The elements to be studied are the different current government policies and
future predictions related to the sector in which the organization operates. By
example the policies:

The monetary policy of the country could impact the price of money
and their interests, as well as in the cost of operations between currencies.
The subsidy policy, as it could provide financial assistance
to the organization or, on the contrary, eliminate it with the negative impact that
would have.
 Political time is also key for an organization. That is to say, to estimate
possible changes in government in the short term may affect the
strategy of an organization.
International politics, which could impact the company through the
different trade agreements between countries.
Fiscal policy, which could lead to a tightening of the
taxes. Therefore, it would put pressure on a company's income statement
it could even push her towards new, less pressured sectors
fiscally.

Analysis of the economic environment

The analysis of economic factors consists of analyzing the issues

current and future economic factors that may affect us in the execution of our
strategy. Therefore, also in achieving our objectives.

We have two types of data that are potentially interesting for your study:

On the one hand, the macroeconomic data, which are the data related to the
large magnitudes such as:

National income
The GDP
Investments
The exports of a group of countries

On the other hand, the microeconomic data that is closely related to

aspects such as:

The family income

Inflation
The consumption
The financing
Interest rates
The mortgages

In addition, it is important to know that economies operate through cycles of

expansion and recession where we do not know the duration of each of them. The
the strategy to follow in each of those cycles must be different if the objective is
adapt to the environment.

3#Analysis of the socio-cultural environment

Socio-cultural factors are much more important than they may seem.
a priori. This is because they cause changes in behavior, trends and
trends in people.
Trend analysis is a key socio-cultural factor. In fact, there are
methodologies that teach us to detect signals of change and, moreover, multitude
reports that preach about such trends or signs of change.

On the other hand, the demographic level of a society is an important factor of

social analysis. This is because it provides key information about groups
demographics and their future behavior. For example, in Spain, the largest group
the population is among people aged 40-45. These are products aimed at
at these ages those with the largest market size, and in 20 years,
they will be products and services aimed at older people.

The level of education of a country's society, the technological gap, the index of
poverty the distancing between different social classes are others
elements that need to be analyzed based on the sector in which it operates
organization and estimate its potential impact.

4#Analysis of the technological environment

This point is one of the most complex to analyze since, although it has always been
The technological change has accelerated in recent decades.
until reaching levels of exponential growth. It is important to emphasize that not
Any technology will be appropriated for the interests of a particular organization.
Therefore, the value lies in the ability to understand the possibilities it offers.
each technology while knowing how to analyze its benefits and risks before a
possible implementation.

Currently, there are certain mature technologies that can impact

any organization like Artificial Intelligence, Robotics, the Internet of
Things, Blockchain, Metaverse, NFTs and many others.

5# Analysis of the ecological environment

Ecological factors are related to both social awareness of the

consumers as with the public policies adopted by organizations with
the goal of protecting the environment and the planet we inhabit. While some
they may think that they only affect companies in very specific sectors, it is in
reality the exact opposite. The ecological social consciousness of people is more
more important than ever, and the companies that do not follow the foundations of a society
sustainable practices can be punished by their customers.

Thus, the ecological factors to be studied must be related to both

the social conscience of consumers as well as with policies
policies adopted by governments with the aim of protecting the planet against
the signs of climate change. Circular economy actions related to
product or service, the emission of gases like CO2 into the atmosphere by plants
from production, the selection of ethical suppliers with the environment,
the packaging of my products or efficient supply chains are
determinants to analyze by one's own conscience, and by sharing values with
our clients.

6#Analysis of the legal environment

Finally, these factors refer to all those changes in the legal regulations.
related to an organization and that can affect it positively or
negative. A good analysis of these factors allows companies
adapt to the current legal context in order to develop the most effective strategies
adequate and thus achieve their objectives.

Some of the legal environment factors to study are, for example, licenses.
for opening new facilities, the regulations on the creation of
companies and the existing regulations and updates on labor standards
hiring and employee security.

It is important to determine the level of regulation of the sector, if the sector in which
the company is highly regulated, in that case the entry will be complex, but
The advantages will be great for those who are already in.

Another important factor to study is the existing regulations regarding the

protection of intellectual property such as patents or utility models.

The PESTEL analysis technique offers simple steps to analyze the

key aspects of the environment of an organization in order to adapt
strategically and thus achieve their objectives.