For more marketing frameworks and models, visit the Marketing Theories page.
Welcome to the Professional Academy marketing theories series. This entry looks at the PESTEL analysis in more detail. A PESTEL analysis, more recently named PESTELE, is a framework or tool used by marketers to analyse and monitor the macro-environmental (external marketing environment) factors that have an impact on an organisation. The result is used to identify threats and weaknesses, which are then used in a SWOT analysis.
PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal. A more recent addition adds a second E for Ethical. Each of these macro-environmental factors is examined in turn below.
Political Factors
These are all about how, and to what degree, a government intervenes in the economy. This can include government policy, political stability or instability in overseas markets, foreign trade policy, tax policy, labour law, environmental law and trade restrictions. It is clear from this list that political factors often have an impact on organisations and how they do business. Organisations need to be able to respond to current and anticipated future legislation, and adjust their marketing policy accordingly.
Economic Factors
Economic factors have a significant impact on how an organisation does business and how profitable it is. Factors include economic growth, interest rates, exchange rates, inflation and the disposable income of consumers and businesses. These can be further broken down into macro-economic and micro-economic factors. Macro-economic factors deal with the management of demand in any given economy, and governments use interest rate control, taxation policy and government expenditure as their main mechanisms. Micro-economic factors are about the way people spend their incomes, which has a large impact on business-to-consumer organisations in particular.
Social Factors
Also known as socio-cultural factors, these are the areas that involve the shared beliefs and attitudes of the population. They include population growth, age distribution, health consciousness and career attitudes. These factors are of particular interest as they have a direct effect on how marketers understand customers and what drives them.
Technological Factors
These concern how fast the technological landscape changes and how this impacts the way products are marketed. Technological factors affect marketing and its management in three distinct ways:
- New ways of producing goods and services
- New ways of distributing goods and services
- New ways of communicating with target markets
Environmental Factors
These factors have come to the forefront in recent years. They have become important due to the increasing scarcity of raw materials, pollution targets, and the drive towards doing business as an ethical and sustainable company, alongside carbon footprint targets set by governments. This is a good example of where one factor could be classed as both political and environmental at the same time. More and more consumers are demanding that the products they buy are sourced ethically, and, if possible, from a sustainable source.
Legal Factors
Legal factors include health and safety, equal opportunities, advertising standards, consumer rights and laws, product labelling and product safety. It is clear that companies need to know what is, and what is not, legal in order to trade successfully. If an organisation trades globally, this becomes a particularly complex area to manage, as each country has its own set of rules and regulations.
Ethical Factors
The most recent addition to PESTEL is the extra E, making it PESTELE or STEEPLE. This stands for Ethical and includes ethical principles and moral or ethical problems that can arise in a business. It considers issues such as fair trade, slavery and child labour, as well as corporate social responsibility, where a business contributes to local or societal goals such as volunteering or taking part in philanthropic, activist or charitable activities. Many large brands take part in corporate social responsibility, running campaigns that raise money for charity, provide pre-employment training and development, or offer training in digital skills and online safety.
Watch the PESTEL Analysis Explained
The video below is part of the Professional Academy Marketing Theories series, presented by Professional Academy tutor Peter Sumpton, outlining how to complete a PEST, PESTEL or PESTELE analysis in a series of simple steps.
After completing a PESTEL analysis, the results can be used to help identify the strengths and weaknesses for a SWOT analysis.
How Professional Academy Supports Your Journey
The PESTEL analysis is taught within the CIM courses offered by Professional Academy. With over 27 years of experience, Professional Academy helps marketers master these theories and apply them in practice. To learn more marketing theory and gain an industry-recognised marketing qualification, explore the CIM marketing qualifications or the Marketing Theories page. If referencing is needed for an assessment, the Harvard Referencing guide can help.
