PESTLE Analysis

PESTLE  a tool used in management for the analysis of business evaluation proposes. 

It is actually a tool for exploring and listing the external factors that lay their impact on our business and planning.It stands for Political ,Economic, Social ,Technological Legal and Environmental. It is an extended version of PEST.

This explores the ways to map out the external environment.

It helps in many ways such as providing a correct picture of the external influences on your businesses and allowing decision-makers to take more knowledgeable decisions.

Also, one thing that cannot be avoided is that it gives the industries a platform to assess current and future markets.

Let's discuss few PESTLE factors.

We will try to understand a few factors in very simple language with no technical term or any management concept one by one.{only 3 factors are discussed here of each point}

P-Political

 

1.Political Stability of Country

Usually when a business expands its wings to another country this factor plays a major role. For example in country 'X' suppose ruling party was ABC when Business entered that country, business was running smoothly with no any issue but after sometime a new party 'PQR' came into existence and changed the entire business scenario like laws,policies etc. making difficult for the business to survive in this country which can obviously lead this business to leave that country. A stable political system can make business-friendly decisions that promote local businesses and attract foreign investors.

2.Government Policies

Government policies influence business with respect to interest rates(for example),Higher rates lead to decreased consumer spending. While lower interest rates attract investment as businesses increases its production. 

Also,taking permission from government to run the business or legal licence for this purpose is a game of government policies. Means, with how much ease the business is given the licence for it's operations in that country.

Further,FDI(Foreign Direct Investment) rates decided by the government also play great role for any business to decide whether to entering this Nation will be beneficial or not.

3.Taxation Laws 

We know the government takes tax in order to spend it among the citizens of a nation. The more it spends the more the tax it imposes on the industries or businesses.

There will be no investment in the industry leading to its failure and death.

Also, export/import charges set by taxation law by the government of concerned country also affects the business.

E-Economical

1.Raw material cost

For production if there is high cost for its raw material why would the factory/business pay that amount?

Of course it will shift to the location from where it gets raw material at givable amount. 

2.International exchange rates

It is because of ups and downs in money exchange rates that businesses shift their thought of running business in such a country where its currency is weaker than the currency of its own giving it zero result of profit.

3.Inflation

Although inflation may be good in some cases, yet it decides the future of any business in the country.It lowers the cost of borrowing and reduces unemployment. Causing business to take further decisions for its operations

S-Social 

1.Religion

While running business it should be clear in mind that the business being run is not going to hurt the religious sentiments of any religion (for ex.Business of Beef is fruitful only in non-hindus countries)

2.Money

It depends upon the pocket size of an individual how much he earns obviously the more he earns the more he will spend buying the product or service of your company.

3.Lifestyle trends

We all know that products like Audi,BMW, Mercedes etc. are for elite class not for the middle class family so as the SOL(standard of living) goes up, the purchasing capacity also increases.

T-Technological

1.New Production Technology

Companies need to update their production strategy with the passage of time.

Product is being produced ultimately for the customer,so it should have new and more ease providing quality in comparison to its previous product or service. 

2.Automation

Automation is the use of technology to execute recurring tasks or processes in a business where manual efforts are replaced. It is done to minimize costs, increase efficiency, and streamline processes. 

3.Consumer's Access to Technology

Advent of Revolutionary product can make people with less knowledge confuse.Because of their unawareness about its use/operation etc. 

L-Legal

1.Health and safety guidelines

Simply it can be explained as "Employees,workers should not be considered as tireless machines for company's production."

2.International Trade Agreement and treaties

In this aspect ,Negotiations take place between nations over export/import of company's product. The company will have to followed these agreements.

Question while analyzing--Are they properly maintained?

3.Regional/Local laws and circulars

The business will have to follow set of laws made by local government.

For example during Covid-19 the number of employees in any company was reduced to a certain number and the company had to follow it.

E-Environmental

◆The location influences business trades.

◆Climatic changes can affect the trade of

businesses.

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