PESTEL analysis is a strategic tool used by organisations to evaluate external factors affecting their operations, helping them understand the macro-environmental influences that may impact their decision-making and future planning. It examines six key areas: Political, which includes government policies, regulations, and stability; Economic, encompassing factors like inflation, exchange rates, and economic growth; Social, focusing on societal trends, cultural norms, and demographic shifts; Technological, addressing advancements, innovation, and the pace of technological change; Environmental, which evaluates ecological and environmental issues such as climate change and sustainability; and Legal, involving laws, compliance requirements, and legal risks. By analysing these factors, companies can identify potential risks and opportunities, allowing them to develop more informed strategies and adapt to changing market conditions. PESTEL analysis is particularly valuable for businesses operating in complex or rapidly evolving environments, as it provides a comprehensive overview of the external landscape. As such, they should be conducted regularly to ensure that factors are up to date. When used alongside other strategic tools, such as SWOT analysis, PESTEL enables organisations to gain a holistic understanding of both internal and external factors influencing their performance and potential for growth.
