PESTEL Analysis Framework

A simple and powerful way to identify and examine the external factors that may impact your brand’s growth.

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What Is PESTEL Analysis?

PESTEL Definition

At its core, PESTEL analysis is a framework to break down and examine the large external forces that affect every business. The acronym represents 6 categories of factors to consider:

Political
Economic
Social
Technological
Environmental
Legal

Variations of PESTEL

In other contexts, you may see this same idea expressed as just the shortened PEST, other variations like STEEPLE (which adds Ethics), DESTEP (which adds Demographics), SPELIT (which adds Intercultural), or simply an alternate spelling PESTLE.

One more version for geography-centric or global brands is LoNGPESTEL. This adds the analysis of the PESTEL factors relative to Local, National, and Global geographies.

Regardless of which variation you focus on, the principles are the same. It’s a framework that allows us to look at how external factors can create potential threats and opportunities for your business and brand.

As a little visual to help remember the name, you can think of a “pestle” (i.e. pestle and mortar) that’s applying specific pressure on your business. Or even a “pest” like an insect flying around that you need to keep an eye on.

PESTEL Analysis Categories and Factors

Here’s a breakdown of the 6 core PESTEL categories along with potential factors for each. Not all of these will be relevant for your brand, but reviewing the lists can make you aware of factors you may not have considered.

You can use these lists as thought starters for the PESTEL exercise and template below.

Political:

Tax policy
Trade restrictions
Government subsidies
Regulation
Tariffs
Labor laws
Political stability
Activism
Competition regulation

Economic:

Competitor prices
Stock market health
Exchange rates
Inflation rates
Unemployment rates
Industry growth
Loan access
Interest rates
Disposable income

Social:

Buying habits
Education access
Health consciousness
Population growth rates
Cultural taboos
Religious beliefs
Immigration rates
Life expectancy rates
Age distributions
Family size
Career attitudes
Social activism

Technological:

Automation
Internet access
Mobile applications
Communication infrastructure
Machine learning
Artificial Intelligence
Autonomous vehicles
Wearables
Virtual Reality
Augmented Reality
Cloud migrations
Blockchain
Internet of Things (IoT)
Computer hardware costs
Security
Biometrics

Environmental:

Climate and weather
Sustainability
Environmental programs and initiatives
Carbon footprint
Product packaging
Recycling
Waste management
Climate change
Renewable energy

Legal:

Copyright infringement
Advertising standards
Product labeling
Intellectual property laws
Privacy laws
Data protection
Discrimination laws
Labor laws
Competitive regulations

PESTEL Analysis Exercise and Template

One of the biggest limitations of many PESTEL templates is that they simply focus on helping you create lists of factors. Like any strategy exercise, the value in PESTEL comes from digging deeper, getting specific, and being thoughtful about how factors apply to your brand.

Map & Fire’s PESTEL template pushes you in this direction by adding classifications and grading:

Opportunity vs. Threat: Classifying each factor as being a potential benefit or challenge for your brand
Impact: Grading each factor on its relative impact to your brand
Urgency: Grading each factor on the relative timing of its impact on your brand
Identify The Top Factors: Using the grades to pull out the most important factors to focus on now

While this doesn’t replace the detailed discussion and analysis you need to do with your team, it provides additional structure to spark your thinking.

Exercise:

To get started on a PESTEL Analysis for your brand, you can follow these 5 steps:

Selection: Select up to 4 factors that you feel are relevant to your brand for each of the 6 PESTEL categories
Type: For each factor decide whether it represents an Opportunity for your brand or a Threat
Impact: For each factor, grade how big of an impact it could have (or is having) on your brand (High = significant impact >> Low = minimal impact)
Urgency: For each factor, grade the level of urgency there is to address it (High = must be dealt with asap >> Low = won’t be relevant in the near future)
Top Opportunity and Top Threat: Taking into account the grades for each factor’s Impact and Urgency, select one Opportunity and one Threat that should receive the most resources and attention.

Free PESTEL Template:

Download our Free PESTEL Analysis PDF

Note, you may have multiple Opportunities and Threats of similar weight so as a tie-breaker you can also consider which factors your team is best equipped to act on first.

As you you’re able to address factors you can revisit your list and reprioritize based on current market conditions and internal resource availability.

PESTEL Analysis Questions

Here are 5 questions to consider as you evaluate factors in your PESTEL Analysis:

Is a factor that you viewed as a threat actually an opportunity? A service-based business may see the expansion of automation through AI and machine learning as a threat. However, if they embrace these changes they could be a in a unique position to take advantage of these technologies with their expertise.
How do these factors affect your target customers? While the focus of this work is on your business and brand, you should always think through the lens of your customers. What factors do they view as being important even if they’re not a current focus for your business.

Which factors have the biggest impact on buying decisions? There will always be tradeoffs around areas of cost and quality. Your offering’s quality can also have a big impact on areas like sustainability. Where so you want to invest and what factors are most important to your target audience?
Which factors might have the biggest impact on your long term success? There may be factors that don’t feel as urgent right now, but their long term impact could be huge. Again, looking at things like emerging technologies. Ignoring those trends today could catch your brand flat-footed in a few years.
Where are your competitors investing? Keep an eye on where your competition is investing to avoid getting left behind. Monitor shifts in their products and even their content (i.e. blog articles, white papers, etc) to get a feel for the directions they may be headed.

PESTEL Analysis Examples

Below are examples of a high level PESTEL Analysis for Tesla and Netflix. This represents some initial factors that would be relevant to their brands.

Tesla:

Political

Government support for auto manufacturers
Incentives for purchasing electric vehicles
Trade regulations for components like their batteries (China, Japan, South Korea)

Economic

Price of materials
Growing shifts in consumer preference to purchasing electric vehicles
Renewable energy costs decreasing
Low interest rates for purchasing

Social

Growing interest in environmental sustainability
Awareness of carbon emissions
Access to highly skilled engineering talent

Technological

Emergence of autonomous vehicles
Decreased dependence on vehicle ownership through ride sharing
Increase in electric vehicle options

Environmental

Need for reduction of carbon emissions
Need for ways to utilize renewable energy
Expansion of environmental programs

Legal

Intellectual property protection
Dealership model regulations
Antitrust laws

Netflix: