Everyday our market is changing the way it is. Many new things are developed and in a matter of about some seconds, the whole scenario stands different in front of us. Among them, there are many things that we can control and then there are other things that fall beyond our control and those are called systematic factors. Systematic things happen in the environment we live in, the environment that surrounds us and many times they greatly influence us.

Businesses are also influenced by the environment that they’re in and all the situational factors that determine circumstances from day to day. It is because of this, that businesses need to keep a check and constantly analyze the environment within which they run their trade and within which the market lays.

A detailed analysis of the macro-environment or the environment as a whole is called PESTLE analysis, which precisely means a bird’s eye view of the PESTLE analysis business conduct. The PESTLE analysis ascertains for the managers and the strategy builders as to where their market currently stands and where it will head off in the future.

PESTLE analysis consists of components that influence the business environment and each letter in the acronym denotes a set of factors that directly or indirectly affect every industry. The letters denote the following things:

P for Political factors: These factors take into account the political situation of a country and the world in relation to the country. For example, what sort of government leadership is affecting what decisions of a country? All the policies, all the taxes laws and every tariff that a government levies over a trade falls under this category of factors.

E for Economic factors: Economic factors include all the determinants of an economy and its condition. The inflation rate, the interest rates, the monetary or fiscal policies, the foreign exchange rates that affect imports and exports, all these determine the direction in which an economy might move, therefore businesses analyze this factor based on their environment so as to build strategies that fall in line with all the changes that are about to occur.

S for Social factors: Every country is different and every country has a unique mindset. These mindsets cast an impact on the businesses and the sales of their products and services; therefore PESTLE analysis includes these factors as well. The cultural implications, the gender and connected demographics, the social lifestyles, the domestic structures; all of these are studied by companies to understand the market and the consumer better.

T for Technological factors: Technology greatly influence a business, therefore PESTLE analysis is conducted upon these factors too. Technology changes every minute and therefore companies need to stay connected along the way and integrate as and when needed. Also, these factors are analyzed to understand how the consumers react to technological trends and how they utilize them for their benefit.

L for Legal factors: Legislative changes occur from time to time and many of them affect the business environment. For example, if a regulatory body would set up a regulation for the industries, then that law would impact all the industries and business that strife in that economy, therefore businesses also analyze the legal developments happening in their environment.

E for Environmental factors: The location of countries influence on the trades that businesses do. Adding to that, many climatic changes alter the trade of industries and the way consumers react towards a certain offering that is launched in the market. The environmental factors include geographical location, the climate, weather and other such factors that are not just limited to climatic conditions. These in particular affect the agri-businesses, farming sectors etc.

There are many companies the world over, that conduct PESTLE analysis on their brands in order to ascertain strategies for the future or else to understand the market before launching them. It is a fundamental tool of market planning and strategizing that must be carried out to comprehend market trends and the systematic risks involved.

PESTLE analysis gives you an overview of the whole situation your business might be in. Precisely, it is a bird’s eye view of the stimulus and the scenarios that surround your trade and you business.

PESTLE, is an acronym in which each letter denotes certain factors for the study. These factors affect the market in many ways and alter the way strategies are thought of and made. P stands for political factors, while E stands for economic ones. S has to do with social factors in a country whereas T sums up all the technological aspects of the market. L denotes legalities of the environment and E accounts for the environmental aspects and its influence upon the nature of the trade you’re in.

Almost every major and minor organization tries to conduct this analysis, but with regards PESTLE analysis example, I would cite an example of a real life case study in which PepsiCo, a beverage giant carried out the PESTLE analysis over its brands.

PESTLE ANALYSIS BY PEPSICO.

PepsiCo is the largest selling beverage the world over, of course after its arch rival Coca Cola. It accounts for a 37% share of the global beverage market, and therefore they need to understand each and every country’s market in order to stay in line with their PESTLE situations.

Pepsi is a big brand, currently holds the 23^rd place in the Interbrands report of the World’s Leading Brands. Their advertisements feature major celebrities and athletes like David Beckham, Robbie Williams, Britney Spears, and Michael Jackson etc.

Their market reach is also very diverse, as they’re present in almost every country from the US to New Zealand. Their PESTLE analysis is given below:

Political:

Pepsi is a non-alcoholic beverage and is therefore regulated by the FDA. So, they’re supposed to maintain a firm standard of the laws set out by the FDA with consistency. Also, many different markets across the world have different set of regulations that are either relaxed or are either stringent. There is competitive pricing by Pepsi’s competitors and that is one factor that Pepsi has to keep in mind at all times. The political scenario also matters greatly as there can be some civil unrest in certain markets or due to inflation the sales of the product can fall. Most importantly, cross border situations are starkly different therefore Pepsi has to stay in line with all those policies and changes so that they can adapt to all those changes accordingly.

Economic:

As the recent economic downturn has plagued the economy, companies had to restructure their sales and marketing campaigns greatly. Also, with diminishing profits they had to undergo downsizing internally and re-think upon how to penetrate the market. Economic conditions have the highest influence on a business, regardless of what trade it is in. Though, in Pepsi’s favor, the economic downturn that started in 2008 resulted in increased sales of its beverages mainly as people were being laid off from jobs, they were spending time with friends and family or at home.

Social:

Social factors greatly impact Pepsi, as it’s a non-alcoholic beverage it has to remain in line with the strict and stark differences of cultures the world over. Also, Pepsi has to communicate its image as a global brand so that the people can associate it with themselves as something that connects the world together. Usually, the social implications are seen in marketing campaigns for example certain countries have religious festivals, so Pepsi has to keep in line with all those festivals in order to understand the psyche of their market and how they can cash upon the opportunity.

Technological:

With the advent of the new age in technology, companies have completely integrated themselves with all the recent changes that have taken place. To mention a recent trend that has greatly picked up and something that almost every business is turning toward is Social Media. The social media explosion has allowed for increasingly interactive engagement with the consumers with real time results so Pepsi has to stay ahead of all the developments that take place with keeping in view how the youth of today utilizes technology for their benefit and how can Pepsi reach them in order to keep on increasing brand recall and brand engagement.

Legal:

There can be many legal implications upon the beverage industry. I would cite one very famous incident took place in India, where Pepsi was accused of using contaminated water, given a lab test that was done upon the water flowing into the Pepsi factory that was located nearby an industrial estate. A massive recall was issued for the products from shelves and then the product was tested costing the company many billions of dollars upon the tests as India is a very major market.

Environmental:

These factors can affect Pepsi, but not immensely alter its trade and profit generation as these factors affect agri-businesses much more directly.

For small businesses, it is important to analyze all situations carefully before taking any decision. That way, there will be fewer chances of making mistakes and designing strategies that won’t work. To help these businesses, several analytical tools are available, one of them being the SWOT Analysis. However, before you start using a SWOT Analysis template and check out SWOT analysis examples, it is important to understand what this analytical method is all about.

What SWOT Analysis is in simple words

What is SWOT Analysis? This analysis is used to list down favorable and unfavorable factors that go against a particular situation. SWOT analyzes Strengths, Weaknesses, Opportunities and Threats that are associated with a situation by considering all the internal and external aspects of the business and market. This way, business managers can understand whether a situation has enough aspects in its favor and ultimately worth being pursued.

This assessment technique has a remarkable track record of success, providing almost accurate and extremely helpful insights to a business’ resources. To help you understand better how it works, it may be a good idea to look at some SWOT Analysis examples.

Here is an example of SWOT Analysis that was actually carried out by Dell in the mid 90’s to analyze its market position:

Try more general SWOT analysis examples

For more general SWOT Analysis examples, here is one with some general entries. You can let the factors relevant to your situation stay while removing and adding accordingly:

With these SWOT Analysis examples, you can easily understand how you can use this to analyze a business situation in a comprehensive way. After careful analysis, you can determine whether a new venture have enough positives in its favor to be pursued.

Originally appeared on PESTLE Analysis.

What is PEST Analysis?

PEST is an acronym for Political, Economic, Social and Technological. This analysis is used to assess these four external factors in relation to your business situation.

Basically, a PEST analysis helps you determine how these factors will affect the performance and activities of your business in the long-term. It is often used in collaboration with other analytical business tools like the SWOT analysis and Porter’s Five Forces to give a clear understanding of a situation and related internal and external factors.

Understanding the PEST Factors

Before you jump ahead and start using this analysis, you should understand what each of these factors in this analysis signifies.

• Political – Here government regulations and legal factors are assessed in terms of their ability to affect the business environment and trade markets. The main issues addressed in this section include political stability, tax guidelines, trade regulations, safety regulations, and employment laws.
• Economic – Through this factor, businesses examine the economic issues that are bound to have an impact on the company. This would include factors like inflation, interest rates, economic growth, the unemployment rate and policies, and the business cycle followed in the country.
• Social – With the social factor, a business can analyze the socio-economic environment of its market via elements like customer demographics, cultural limitations, lifestyle attitude, and education. With these, a business can understand how consumer needs are shaped and what brings them to the market for a purchase.
• Technological – How technology can either positively or negatively impact the introduction of a product or service into a marketplace is assessed here. These factors include technological advancements, lifecycle of technologies, the role of the Internet, and the spending on technology research by the government.

An Example of PEST

Here is an example of PEST analysis that can give you a clear understanding of how this works:

PESTLE Analysis: An extension of PEST Analysis

What is PESTLE Analysis? PESTEL analysis is an extension of PEST that is used to assess two additional macroeconomic factors. These factors are the Legal and Environment conditions that can have an impact on the company. Examples of PESTLE analysis are similar to those of a PEST analysis, but they would include the following:

Environment:

• Changes in weather and climate
• Laws regarding pollution and recycling
• Waste management
• Use of green or eco-friendly products and practices

Legal:

• Discrimination laws
• Health and safety laws
• Consumer protection laws
• Copyright and patent laws

So, if you want to assess a business situation in a comprehensive way, a PEST analysis is a definite must that can help you understand the macroeconomic business environment.

Image via: ozcykler2010.blogspot.com

Originally appeared on PESTLE Analysis.

PESTEL analysis is a more elaborate version of the PEST analysis that includes two additional environmental factors.  If you want a comprehensive understanding of the macro environment in which your business is currently operating, this is the best monitoring tool you can use to get a complete picture. However, before you start using this tool, it is important to understand what each factor included in this analysis means. So, you need to analyse PESTEL itself before you can start using it.

How to Analyse PESTEL

PESTEL analysis takes into account the following factors:

Political Factors

This takes into account the level of government intervention in the economy. Political factors are important as businesses need political stability to operate or they will fail to achieve the desired level of profitability. Apart from the stability, the political factors also taken into account include government policies, tax laws, labour regulations and trade policies.

Economic Factors

Economical factors facing businesses have a direct impact on their profitability and therefore, are important when you analyse PESTEL. These factors include inflation rate, exchange rate, interest rate and disposable income available to end consumers. The economic factors can be further categorized into micro-economic and macro-economic factors. The micro-economic factors are related to how the consumers in the society spend their disposable income while the macro-economic factors are more concerned with the overall demand-and-supply conditions in the economy.

Social Factors

The social environment in which a business operates also has a profound impact on its operation. The social factors include the cultural influences and beliefs of the target audience. For example, a product or an advertisement may be deemed offensive in a particular culture while it would be perfectly normal in another culture. This will also include age demographics, education, likes, interests and opinions of the society.

Technological Factors

Technological factors are one of the most important PESTEL factors. Today, companies allocate considerable resources towards Research and Development to stay ahead in the game and not lose ground to their competitors. Technological factors are not only of significance in the production of goods and services but also in their distribution. These factors help businesses explore new ways of communicating, engaging and interacting with their target audience.

Environmental Factors

Environmental factors are essential to analyse PESTEL and may be deemed a relatively new addition to the macro-economic analytical tools. However, they have gained significance owing to the rising concern regarding the environment among the masses. Consumers today prefer to buy products from businesses whose products and services are environment-friendly and who are socially responsible.

Legal Factors

Legal factors are also deemed an important part of the whole macro-economic scenario and focus on issues like product safety, consumer rights and laws, equal opportunities, and health and safety. For companies to operate successfully, they should not only know but also abide by the rules and regulations of the country they are operating in.

These factors should be understood by every organisation in order to analyse PESTEL. This analytical tool can help the business plan and achieve its strategic objectives in a more informed and realistic manner.

Originally appeared on PESTLE Analysis.

India, officially known as the Republic of India, is the seventh largest country by area, and the second most populous in the world with more than 1.2 billion people. Attaining independence in 1947, the South Asian country is known for its cultural diversity and is also among the world’s leading democratic countries.

For the past decade or so, India has been experiencing a constant growth in its GDP, along with a continuous growth of liberalization from 1991 till date. The country has also been opening its doors to attract investors and foreign companies to further promote growth. To get a better understanding of the business environment in India, read on, as we analyze it through the PESTLE analysis of India.

What is Pestle Analysis?

It’s basically a framework used for scanning and analyzing an organization’s external macro environment by considering factors which include political, economic, socio-cultural, technological, legal and environmental. Read more about PESTLE analysis here.

1. Political Factors

Being one of the largest democracies in the world, India runs on a federal form of government. The political environment is greatly influenced by factors such as government’s policies, politician’s interests, and the ideologies of several political parties. As a result, the business environment in India is affected by multivariate political factors. The taxation system is well-developed and several taxes, such as income tax, services tax and sales tax are imposed by the Union Government. Other taxes, such as octroi and utilities, are taken care of by local bodies. Privatization is also influenced and the government encourages free business through a variety of programs.

2. Economic Factors

The economy of India has been significantly stable, since the introduction of the industrial reform policies in 1991. As per the policy, reductions in industrial licensing, liberalization of foreign capital, formation of FIBP and so on, has resulted in a constant improvement of India’s economic environment. The country registered a GDP of $5.07 trillion in 2013 following a further improved GDP growth rate of 5% in 2014 as compared to 4.35% in 2013.

3. Social Factors

The social factors refer to any changes in trends which would impact a business environment. For instance, the rise in India’s ageing population is resulting in a considerable rise in pension costs and increase in the employment of older workers. India has a population of more than 1.2 billion people with about 70% between the ages of 15 and 65. Therefore, there are structures with percentages according to age. These structures contain varying flexibility, in education, work attitudes, income distribution, and so on.

4. Technological Factors

Technology significantly influences product development and also introduces fresh cost-cutting processes. India is served with both 3G and 4G technology which has facilitated several of their technological projects. Furthermore, the country also possesses one of the strongest IT sectors in the world, promoting constant IT development, software upgrades and other technological advancements. Recently, India has also attempted to launch their satellites into space.

5. Legal & Environmental Factors

In the recent past, a number of legal changes have been implemented in India, such as recycling, minimum wage increase and disability discrimination, which has directly affected businesses there. However, when it comes to environment, the quality of air in India has been adversely affected by industrialization and urbanization, also resulting in health problems. As a result, there have been establishments of environmental pressure groups, noise controls, and regulations on waste control and disposal.

So, here is the PESTLE analysis of India, which will provide you with a detailed analysis of the four significant factors that affect its external macro environment.

Photo by Trey Ratcliff

Originally appeared on PESTLE Analysis.

Tesco, a multinational food retailing company, is headquartered in the UK and has stores in 12 countries across the world. It is the second largest retailer after Wal-Mart in terms of profits made and also holds the title for the second largest retailer considering revenues. Generally known for selling food and non-food products, Tesco, now also provides finance, mobile, insurance, hardware services and much more. To get a better understanding of this multi-platform international retailer, read on, as we analyze it through a PESTLE analysis for Tesco.

Political Factors

Since the retailing company operates worldwide, global political factors greatly influence the performance of Tesco. These include, tax rates, acts of legislation and of course, the stability of the country it operates in. Due to ongoing financial instability in the world, many governments encourage retailers to create jobs for the domestic population. As Tesco plays its part in creating employment opportunities, it also, in turn, increases the demand for its products and diversifies its workforce.

Economic Factors

These factors are the main point of concern for Tesco, as they are most likely to leverage costs, demand, profits and prices. Therefore, the company should be aware of any changes in policies, such as changes in taxation or any other factors which could affect the accessibility of finance. It is important to mention that although the business is growing internationally, the company is still quite dependent on the UK market where it has a market share of around 30%.

With that said, internationalization and diversification have been two key strategies pursued by the company over the years, and a major reason for its success. Furthermore, due to decline in disposable income levels and household incomes, Tesco, has shifted most of its focus towards advertising its value brands rather than the more luxurious items.

Recommended: Another example of PESTLE analysis: PepsiCo

Social Factors

Due to a variety of social changes, trends indicate that customers in the UK have moved towards bulk shopping and one-stop shopping. Therefore, Tesco has increased the number of non-food items offered for sale. The type of goods and services demanded by consumers is mostly influenced by their beliefs and attitudes which, in turn, are influenced by social conditioning. Because customers are becoming more aware of health issues, due to which their approach towards foods is changing constantly, Tesco is adapting to these changes by accommodating the demand for organic products.

Technological Factors

The advancements in technology have brought various new opportunities for Tesco. Two of the most distinct ones include, firstly, the development and introduction of online shopping with facilities for home delivery. Secondly, self-service checkout points have provided convenience and ease for customers, which in turn have reduced labor costs. Furthermore, Tesco has also invested a significant amount on energy efficiency projects to fulfill its long-term objective to reduce its carbon footprint.

Environmental Factors

With increased pressure on companies to address environmental issues and to adopt ways of operations which what would benefit society, Tesco is clearly committed to reducing its carbon footprint by 50% by 2020. Also, Tesco is minimizing the waste produced in their stores by increasing social conscience in customers.

Legislative Factors

Government policies and legislations also directly impact the performance of Tesco. For example, the Food Retailing Commission (FRC) in 2004 suggested a Code of Practice should be introduced which would ban many current practices, such as changing prices without notice or demanding payments from suppliers. To facilitate these policies, Tesco provides its customers price reductions on the fuel they purchase, in accordance to the amount spent on their grocery stores. Also, there are several promotion offers where prices are lowered.

So, here is a PESTLE analysis for Tesco which will provide you detailed information about the factors that affect its business environment. Read more about PESTLE analysis for monitoring a business here.

Photo via John Blackmore

Brazil, officially known as the Federative Republic of Brazil, is the fifth largest country in the world, in terms of both population and area, and the largest country in the Latin America and South America region. With a population of more than 200 million people, Brazil ranks seventh in the list of the largest economies in the world and is home to a variety of natural resources, natural environments and wildlife.

The country suffered a recession in 2009. However, tough fundamentals have led the country out of the crisis. To get a better insight about the business environment in Brazil, read on, as we evaluate it through a PEST analysis of Brazil.

Political Factors

The government is proactive and stable and there is no political instability in the country at the moment. However, for how long? This is something which cannot be predicted, as the modern history of Brazil indicates things can change overnight, especially during elections, as the political situation tends to heat up a great deal.

Corruption still remains a big issue in the country and it’s worsening. It has escalated to the extent that even opening a small business (at times) may require you to make payments to government representatives and officials. According to a survey by Transparency International, Brazil is ranked 72^nd out of 180 countries when it comes to corruption. This is even higher than economies like Turkey, Bulgaria and Cuba.

Economic Factors

Thanks to a large population and FDI inflow, Brazil’s potential for growth is extremely high. There is a substantial trend of a growing middle-class and the gap between the rich and poor is declining steadily. Additionally, the Central Bank has successfully reduced the risk of currency devaluation and has also brought inflation under control. However, when it comes to the dollar, the currency is considered to be overvalued, which is adversely affecting the exports of the country.

Both domestic and foreign enterprises are treated equally and labor costs are considerably low. For import duties, a system is in position, which gradually decreases the tariff depending on the amount of successful importing years. Furthermore, the corporate tax is set at 15% and there are no incentives for leaving profits in the country. Compared to other economies, such as Greece and Ireland, the tax rates are considerably high.

Social Factors

Next up in PEST analysis come the social factors. There is economic inequality with the population as around 20% of the population lives under the poverty line. Looking at the class distribution, there are a considerable number of wealthy citizens and a huge segment of people with minimal incomes. The middle class is growing. However, there is still time for it to establish. In addition, Brazilians are up-to-date in the fashion world and are considered modern, as they are aware of big brands and are keen to buy expensive and luxurious products. The country hosted the FIFA World Cup 2014 and a majority of the population has a keen interest in football.

Technological Factors

Compared to countries like the US and Russia, Brazil possesses a weaker technological infrastructure, as well as investment, but there are efforts being made to push the development of technology centers all over the country. However, IT is a sector in which Brazil has been constantly improving and it currently ranks 53^rd in the world.

So, hopefully this PEST analysis of Brazil will provide you the detailed information about the factors which affect the country’s external macro environment.

Photo by Thomás.

Thinking about airlines, the first thought which probably comes to mind would be luxury and comfort. However, there is much more to the airline industry than just that. Yes, most of the airlines worldwide are facing a cycle of rising operating costs and declining profits and margins. Now, passengers may not be able to observe these characteristics, but after extensive research it is quite apparent the global airline industry is in disarray.

So, what factors are affecting the industry? And more importantly, how is the industry coping with them? Here is a PEST analysis for airline industry to give you a better idea.

Political

The airline industry operates in a highly regulated political environment where passengers are favored over the airlines. This is due to the fact that passenger safety is paramount and the political establishment have been made weary of the airlines and resorted towards strict regulations for their operations, due to their earlier inclinations towards monopolistic behavior. Furthermore, with there being more competition in the industry and regulations in demand, passengers are in a position where they can push for lower prices and amenities.

Economic

The 9/11 attacks left a major impact that the airline industry is yet to recover from. The prolonged recession, fluctuations in oil prices and an imminent global slowdown are other debilitating factors that are affecting the growth of the airline industry. Airlines have to cope with declining passengers, high fuel prices, competition from low-cost airliners, labor demands and soaring operating and maintenance costs. In addition, events such as the recent Malaysian airline disappearance, is also adversely affecting the global airline industry.

Social

Over the years, the millennial generation’s emergence into the consumer class has resulted in major social changes, more importantly in terms of service, where consumers have become much more demanding. Therefore, to meet the increasing demands of this segment, airlines have to stabilize their costs. Additionally, the passenger profile has changed as well with there being more economically minded passengers. When it comes to business class passengers, improved communication facilities have reduced the need to fly down for meetings.

Technological

With intense competition in the airline industry, latest technology must be adapted by airliners in order to survive in the already tough environment. Additionally, the use of latest technology in aircrafts would not only lower fuel consumption, but also the cost of airline operations and improve efficiency.

Conclusion

So, this PEST analysis for airline industry has highlighted four important factors that are affecting its external macro environment. By keeping these factors in mind, we have come to the conclusion that the increased costs of doing business, strict rules and regulations imposed by regulators, competition from low-cost airliners, changes in passenger profile, in addition to the recent airline related deaths, all have affected the viability and profitability of the global airline industry badly. It will require a lot of patience and hard work for the industry to find its way back to the right track.

Photo by Tim RT