PESTLE Analysis - Macro Environment

 The term PESTLE is used to describe a framework for analysis of macro environmental factors. PESTLE analysis involves identifying the political, economic, socio-cultural, technological, legal and environmental influences on an organization and providing a way of scanning the environmental influences that have affected or likely to affect an organization or its policy. 

PESTLE is an acronym for: 

  • P - political 
  • E - economic 
  • S - socio-cultural 
  • T - technological 
  • L - legal 
  • E - environmental

  1. Political - Political factors are how government intervenes in the economy and the activities of business firms. It includes the political principles and ideologies, current and future taxation policy, regulatory bodies and processes, government policies, government term and change, thrust areas of political leaders. Further more governments have great influence on the health, education and infrastructure of a nation. 
  2. Economic - Economic factors have major impacts on how businesses operates and take decisions. It includes economy situation and trends, market and trade cycles, specific industry factors, customer/end-user drivers, interest and exchange rates, inflation and unemployment, strength of consumer spending. The money supply, inflation, credit flow, per capita income, growth rates have a bearing on the business decisions. 
  3. Social - Social factors the demand for a company's products and how that company operates. It includes lifestyle trends, demographics, consumer attitudes and opinions, brand, company, technology image, consumer buying patterns, ethnic/religious factors, media views and perception. 
  4. Technological - Technological factors can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Technological shifts can affect costs, quality and lead to innovation. It includes replacement technology, maturity of technology, technology access, licensing, patents, intellectual property rights and copyrights. 
  5. Legal - Legal factors affect how a company operates, its costs, and the demand for its products. It includes business and corporate laws, employment laws, competition laws, health and safety law, international treaty law, regional legislation influencing the business activities and business firms. 
  6. Environmental - Environmental factors affects industries such as tourism, farming and insurance. Its includes ecological/ environmental issues, environmental hazards, environmental legislation, energy consumption, waste disposal.  

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