A popular follow on from the SWOT which you can read about here…
A PESTLE is basically an acronym to help you to think about the different external factors that have an impact on, in this case, an organisation.
Political
Economical
Sociological / cultural
Technological
Legal
Environmental / ethics
It is important to understand that this is a tool / a technique that acts as an aid so you can ask your self questions. I say this because many of my students assume they must fill every box on the template and that they need to do so in great detail. This isn’t the point, its there to help and if you find a particular header has very little significance then why put time and effort into it?
The technique was actually originally just PEST with the ‘LE’ added later and in fact many do find they tend to enter legal factors into political and environmental into sociological.
Fact is – it doesn’t matter, its an aid not an art. If it helps to prompt you to think about these areas then big thumbs up, its done its job.
Just to confuse matters there are other acronyms out there that do the same job. STEEPLE / STEEP / STEP is just a rearrangement of letters and there are others you will find in research.
I mentioned above that a SWOT is a good starting point for a PESTLE and this is true for the beginner but once you understand the concepts its easy to merge the 2 which you can do my simply adding the acronym to the Opportunities and threats of the SWOT. Be aware though that a PESTLE needs detail and an evaluation which the SWOT technique doesn’t normally offer.
The SWOT’s ‘OT’ stands for opportunities and threats which are external and this is what the we look for in a PESTLE.
I have included a template below for download, don’t worry, its free and you don’t have to subscribe to anything for any of my templates. In honesty, you just need the headers and something to write on! Unless of course this is for coursework, in which case a neatly presented template is best.
So what is the PESTLE classed as when researching models? Well one of the Benefits of this and indeed the SWOT is that they are classed as planning models, environmental / horizon scanning methods but also analytical techniques and if you are undertaking a course that includes these then SWOT PESTLE act as a double bonus winner. For the courses I deliver on I always encourage use of these as I know that in doing so we can complete more than one criteria in one go.
In order to undertake a PESTLE, just as in a SWOT, it is useful to have more than one opinion and I have given advice on this in my blog about SWOTs so wont repeat it here.
A PESTLE should help you weed out the insignificant and focus on matters of importance. In my template I ask the user to give the facts and implications a rating which helps to consider how important something is. This is a little like risk rating but it includes the importance of recognising potential opportunities and I have a couple of examples below to illustrate both. I would point out here that after a PESTLE analysis I always then move onto scenario planning. Its quite difficult when blogging to separate the 3 models as I really feel they belong together so as this blog finishes I recommend you continue reading onto the scenario planning blog.
So lets just consider the first item on the list.
Political
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There are various things you can think about here such as :
change in government
unrest (we all know that one!)
Changes in policy
Decisions made in Government – 2020 – say no more.
So how about Economical
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You might argue this fits in with politics but actually the global economy impacts here and markets can have a mind of their own despite how much the qualified economists love to think they know the score… they don’t always get it right. Remember the PESTLE is about external factors not cashflow within a business. A good example of this was pre Brexit. Many economists predicted doom and this of can in itself make the Market nervous. Business owners take less risks and delay plans and investments while they wait to see how bad the damage will be. It is this attitude that actually causes the problem! As it was, it wasn’t as bad as predicted and we bounced back pretty quickly.
Sociological / cultural
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Don’t underestimate this ! Customer taste, trends and changes in culture seriously have an impact on us. The market trends are governed by what the customer wants and demands. Think about fads here and how quickly products can be brought to market and how also how quickly their lifecycle can burn out. Anyone who decided to get in on the loon bands trend just as it was about to enter its decline and death lifecycle? And who scoffed at the vegan lifestyle as something that wouldn’t last? One of the biggest, fastest growing food trends that also due to health benefits and the environmental benefits is set to continue growing and expanding. I agree its not easy to judge these kind of trends but Im sure its easier if you have your eye on it which is why these tools are important to review regularly.
Technological.
Well this is so fast growing you cant blink without something new. I guess a good example here would be the use of teams and zoom as we went into lockdown. Maybe an easy an obvious change you might think but not all organisations such as small concerns and small charities have had the luxury of being in a position to work at home and ‘go online’ so quickly. In fact even many of the larger companies were reactive in their response to this. This aside, the world of technology needs little introduction when considering how the factors impact orgainsations. I remember being warned how websites would fail to work when everything went mobile – this was just as mobiles and tablets were starting to use the internet and be able to see web pages effectively. Don’t ask me how or why, not my bag! I only know that once upon a time viewing websites on your mobile phone meant zooming in and out to find the tabs. When the new format came out anyone who wasn’t ready missed out on a whole new generation of web surfers who used their mobiles / tablets, NOT their laptops. Luckily we listened and were ready for it.
Legal
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As mentioned previously you may consider this within political if you are just undertaking the PEST. Considerations here should keep an eye on whats up for review and awaits approval as new legislation. You could think of the two most obvious events that caused for many changes in law. Brexit and Covid both had a huge impact on organisations as new legislation has been brought in and it’s a minefield in some industry sectors navigating around the changes here. It does stress the importance of keeping your eye on what is happening in policy and legal change.
Environmental
No this isn’t just recycling and carbon footprint. When you consider environment as part of a PESTLE you are being asked to look around you and think about how changes could impact on you.
Location – where is the organisation based OR where is it thinking of as its base? Is it in a built up area with residents and do your activities have an impact on the local area that could prove problematic for complaints? Conversely are their plans in the area that could impact on your business and this could include opportunities such as increased footfall / traffic providing easier access to your premises. Theres a lot to think of here but hopefully I have got you started.
You can download the template here
……… and don’t skip the evaluation, this is the part where you give the implications a ‘value’ and in doing this you are assigning a level of importance. So if for instance you found a potential opportunity and felt that its impact could be significant then rate it high. If you considered a threat as being unlikely to happen anyway then rate it low (warning though – who would have thought we would find ourselves living out an American movie in 2020! In fact would any of us have ever considered a global pandemic something we should include on a risk register?)
I hope you have gained a good insight here that will at least allow you to develop your external scanning skills. Just remember to keep your eyes open to the horizon and what is happening around you. Its so easy as a busy Manager / Leader to become hemmed in by the immediate ‘stuff’. Take time out regularly to stand back, look at the wider picture and decide if it something that you need to examine. Before you know it, you wont need a PESTLE… Youll be an automatic scanner ! I have included a separate blog on the advantages and limitations of a PESTLE which you may also wish to read here….
Learners: If you are undertaking an ILM or CMI NVQ in Leadership and management this post will assist your learning for the following unit / criteria:
500 ML45 1.1 Evaluate a range of strategic planning models
500 ML45 1.2 Evaluate the advantages and limitations of a range of analytical techniques
500 ML45 2.1, 2.2 & 2.3 Evaluate political, economic, social (include market factors), technological, legal and ethical factors affecting the development of strategic plans. Then evaluate the application of your PESTLE as a tool for strategy development.
700 ML57 1.1 Evaluate a range of strategic planning theories and models.
703 ML56 1.2 Evaluate the use of environmental scanning techniques and scenario planning models.
703 ML56 1.6 Analyse the usefulness of strategic planning tools and theories
703 ML56 1.7 Assess the relationship between strategy analysis and strategic choice
703ML56 2.1 Evaluate the impact of political, economic, social, technological, legal, ethical and environmental factors on an organization and its markets
703ML56 2.5 Model a range of scenarios relating to an organisation’s intended market position