In order to optimize company’s performance, numerous external factors should be identified, understood and analyzed. PESTEL analysis helps to perform this task by providing framework, by which external factors are divided to Political, Economic, Social, Technological, Environmental and Legal. Identification and analysis of these factors helps to plan an effective strategy and minimize planning errors (Pestle Analysis, 2014).
In order to maximize PESTLE Analysis benefit, it should be performed regularly. The impact of some external factors can have severe influence and the PESTLE analysis is useful for clarification why change is required and find out possible options. This technique involves cross-functional expertise and skills, encourages the elaboration of strategic thinking for planning, and helps to discover new opportunities (Free Online Library for Managers, 2015). In order to increase the quality of PESTLE analysis it is recommended to classify all factors by their criticality or importance. The PESTLE analysis with SWOT can be a foundation for analysis of business and environmental factors.
Political factors: Each company has internal as well as external politics. The internal politics such as personal interests, team jealousies is controlled by stakeholders. The external politics is those which are not managed by the stakeholders, like political stability, trade reforms.
Economic factors: All events affecting internal (project viability and soundness) and external (taxes, interest rates, wages, cost of living and etc.) economic environment should be considered.
Sociological factors: These factors are about all events, which influence the community and market socially. These events refer to population dynamics, career attitudes, cultural norm and expectations, fashion and modern styling ethical issues.
Technological factors: These factors are about all events that are influenced by technology (rate of innovation, improvements of technology, automatization).
Legal factors: These factors are about all legal aspects (quotas, imports and exports, taxation, health and safety laws, consumer protection laws, discrimination laws and etc.).
Environmental factors: These factors about environmental aspects like ground conditions and contamination, nearby water sources, laws regarding pollution and recycling and etc. (Dcosta A., 2015)
It is important to consider all PESTLE factors, because:
- Politics is significant for business, because there is a balance between control systems and free markets.
- Economic factors helps to assess the given economic region health.
- Social factors are useful for assessing consumers’ behavior within a definite market.
- Technological factor is about optimizing internal efficiency by the use of innovative technologies and avoiding a product or service become outdated.
- Consumers and governments both avoid dealing with companies who influence negatively to environment.
- In order to minimize legal costs it is important to understand laws and regulations (Boudless, 2015).
Political relations can influence to La Fromagerie shop in London in the following way: economic restrictions can be applied to export due to political conflict, so the shop can lose clients from other country. Also grants and subsidiaries can be provided by government. Economic situation impacts straightforwardly to sales of the shop: better economic situation – more sales, worse situation – less sales. Economic situation impacts pricing decisions on the product. Understanding customers will help to provide them better service. By the use of new technologies, the shop can optimize expenses and make production more high-quality. Having negative environmental effect will influence the reputation of the shop. Violation of laws and regulations will result in fines and penalties.
References
Boundless, 2015. A Framework for Considering Challenges. Available at: <https://www.boundless.com/management/textbooks/boundless-management-textbook/introduction-to-management-1/current-challenges-in-management-21/pestel-a-framework-for-considering-challenges-139-3992/> [Accessed 2 April, 2016]
Dcosta A., 2015. Components of a PESTLE analysis. Available at: < http://www.brighthubpm.com/project-planning/51754-components-of-a-pestle-analysis/> [Accessed 2 April, 2016]
Free Online Library for Managers, 2015. Advantages and Disadvantages. Available at: <http://www.free-management-ebooks.com/faqst/pestle-09.htm> [Accessed 2 April, 2016]
Pestle Analysis, 2014. What is PEST Analysis and Why it’s Useful? Available at: <http://pestleanalysis.com/what-is-pest-analysis/> [Accessed 2 April, 2016]
