2. PESTEL Analysis
PESTEL analysis is one important tool that
executives can rely on to organize factors
within the general environment and to
identify how these factors influence
industries and the firms within them.
PESTEL reflects the names of six segments
of the general environment :
Political , Economic, Social, Technological,
4. Why is PESTEL Analysis is used?
Business owner’s or managers often
turn towards business analysis tools for
aiding them in making suitable
decisions for their firm.
Before any business venture, the
business owners or managers often
remain doubtful regarding its outcome
and how it would be received.
5. Why is PESTEL Analysis is used?
This analysis involves asking questions that give the analyst an
idea about the things to keep in mind.
These questions are:
1. What is the political situation of a country and what is its
effect on the markets?
2. What are the prevalent economic factors?
3. How is culture affecting the markets and what are its
4. What are the technological inventions that are trending
and what are other future possibilities in this field?
5. What are the current legislations that regulate the
industry and if they need to be changed?
6. What are the environmental concerns for the industry?
The political segment centers on the role of
governments in shaping business. This
segment includes elements such as tax
policies, changes in trade restrictions and
tariffs, and the stability of governments.
Political instability can negate a company’s
strategy and damage the company
The Political factors include the
–Political and government stability;
–Level of corruption;
–Foreign trade policies; and
–Social welfare policies.
These factors determine the extent to which a
government may influence an industry or a
• For example, the government may bring
new tax reforms that might change the
whole revenue-generating system of a
• Some tariff trade barriers that can prove to
be a hindrance in the way we run our
business operations include customs policy
and export subsidies.
• Non-tariff trade barriers meanwhile include
determining minimum import prices as well
as bans and restrictions on exports.
The economic segment centers on the
economic conditions within which
Economic factors are determinants to
an economy’s performance that directly
impacts a company and also have
resonating long term effects.
11. Economic- Example
High unemployment will cause consumers to
have less spending power.
Less spending power translates into lower sales
volume for retailers.
If retailers are selling fewer products, then they
will order fewer goods from manufacturers.
Therefore business will more than likely be
affected by high unemployment.
12. Economic - Example
A rise in the inflation rate of any
economy would affect the way
companies price their products and
It would also affect the purchasing
power of a consumer and may result in
a change in demand/supply models for
Social factors tend to be more difficult to
quantify than economic ones.
They refer to shifts or evolutions in the
ways that stakeholders approach life and
leisure, which in turn can impact
Social factors may seem like a small
consideration but they can have a
shockingly outsized impact on entire
Social factors include:
• Demographics (age, gender, race, family
• Consumer attitudes,
• Opinions and buying patterns;
• Population growth rate
• Employment patterns;
• Socio-cultural changes;
• Ethnic and religious trends;
• Living standards
15. Social Example
Post-pandemic, management at a
technology firm has had to seriously
reevaluate hiring, onboarding, and
training practices after an overwhelming
number of employees indicated a
preference for a hybrid, work-from-home
16. Social Example
Trends towards healthier and more active
lifestyles have ushered in the evolution of
connected fitness technologies, and
changes to the nature of food products we
consume and how these food products are
packaged and marketed.
17. Social Example
Another interesting social factor would be working
In many countries, the standard workweek
extends from Monday to Friday with employees
working an 8-hour day with a break for lunch.
In other countries, the workweek might be 5 ½
days with Thursday afternoon and Friday being the
In the Middle East, the weekend falls on Friday
For business leaders doing business in countries
with different workweeks and working hours,
these differences can be important.
Technological factors mean the innovations
and developments in technologies.
These factors impact an organization’s
operations such as new developments like
Artificial Intelligence, Machine Learning are
being made in the technology field and if a
company fails to match up the trend it may
lose its position in the market.
Technology is almost always the secret
ingredient in a company’s tipping point, and
it is no surprise that today’s most valuable
firms – Facebook, Amazon, Netflix, Google
and Apple – have technology at the heart of
their value proposition.
•Cost – Benefit of new
•Life cycle of technology
•Market awareness &
•Benefits of Automation
•Using social media
•Innovation in your
•Impact of the internet in
•Know your customer
21. Group Task
Work with your team (15 min)
Step 1: Watch the link video :
Top 10 Changes in the Airline industry
(due to pandemic)
Step 2 : Examine how Airline Industries
can use the PEST analysis in making
suitable decisions as an impact from the
These factors are mainly concerned with
the effect of the surrounding environment
and the influence of ecological aspects.
These include waste disposal laws,
environmental protection laws, energy
This aspect of the PESTLE is crucial for certain
industries particularly example tourism,
farming, agriculture, etc.
However, Global warming and the increased
need to switch to sustainable resources;
ethical sourcing (both locally and nationally,
including supply chain intelligence) have
compelled every organization to consider the
Corporate Social Responsibility (CSR) has been
made compulsory for organizations. 23
from wind and solar
toward being “green”
•Pollution of air and
•Availability of health
A perfect example of how environmental
factors impact companies is the restaurant
Using natural ingredients if possible, will be
locally sourced from farmers that raise crops
and livestock in a way that does not damage
the land or other natural resources, preserving
it for future generations.
In addition to sustainably sourced food,
purchasing highly-rated equipment and
fixtures (including kitchen, A/C, etc.) for
maximum energy efficiency.
Environmental factors affect every company
in every country.
Some businesses are motivated simply to
save money by increasing energy efficiency,
while others are motivated by being better
members of their communities.
No matter the motivation, all successful
leaders today must evaluate environmental
factors when considering strategic changes
to their business.
Legal factors are those that emerge from changes to the
regulatory environment, which may affect the broader
economy, certain industries, or even individual
businesses within a specific sector.
Regulation can serve as a headwind or a tailwind for
An example headwind might be increased capital
requirements for financial institutions
An example tailwind is if regulation is so heavy in a
particular industry (let’s say food production) that it may
serve as a protective channel for established operators,
creating an additional barrier preventing potential new
•Health and safety
•Civil rights laws
•Privacy and data
Consumer law -consumer law (alternatively known
as consumer protection) is designed to protect
consumers from fraudulent companies or practices,
and preserve their rights in the marketplace.
Employment law — employment law, also known
as labour law, dictates how companies’ employees
should be treated.
• Minimum wage laws can limit the various
different employment possibilities a company
• Child labour laws can affect the way tight-knit
home businesses in third world countries
• Dismissal laws can make firing employees 29