PESTEL Analysis

Understand your environment
Contributed by

Matt Napiorkowski

Published August 08, 2022

What Is PESTEL Analysis?

PESTEL analysis is a framework for scanning the environment for factors that could impact an organization's market, business position, and/or operational strategies.

Context helps to identify and frame why an organization should pursue a particular strategy.

Why Do PESTEL Analysis?

PESTEL analysis is particularly useful before embarking on any new strategy (ex. new line of business, new geographic market, business transformation, etc.).

It is also useful to periodically perform PESTEL analysis for existing business lines and/or markets. Changes in the environment may present new opportunities (or threats!) to existing operations.

PESTEL analysis naturally feeds into other strategy setting practices like SWOT Analysis, Five Forces Analysis, and/or Target Outcomes.

Reviewing context from multiple lenses in a single analysis builds a shared understanding that individuals may not understand otherwise. (Ex. business staff understand technology trends, technical staff understand economic factors, etc.)

How to do PESTEL Analysis?

  1. Identify scope for analysis (business unit, whole company, etc.) with a sponsor and/or key stakeholders

  2. Pull together a diverse group of experts to obtain broad set of viewpoints (ex. mix of business, marketing, product, operations, and technical staff)

  3. Participants brainstorm environmental factors, trends, and/or changes from the following six lenses:

    • Political and governmental factors (ex. tariffs, political stability, etc.)
    • Economic and monetary factors (ex. economic growth/contraction, inflation, price sensitivity, etc.)
    • SocioCultural factors (ex. demographic shifts, , ESG Active investors, etc.)
    • Technological factors (ex. rise of public cloud, IoT, global connectivity, new security threats, etc.)
    • Environmental or ecological factors (ex. COVID-19, drought/flooding, etc.)
    • Legal factors (ex. GDPR, data sovereignty, etc.)
  4. Aggregate / Affinity map similar factors. Discuss/restate all factors to ensure all participants share understanding.

  5. Identify the most impactful factors to the organization (ex. using dot voting)

Image designed by Greg Emmerich

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Links we love

Check out these great links which can help you dive a little deeper into running the PESTEL Analysis practice with your team, customers or stakeholders.

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