PESTEL Analysis; is a concept in marketing principles.

Moreover, this concept is used as a tool by

companies to track the environment they’re operating in or are planning to launch a new
project/product/service etc.

1. Political: These factors determine the extent to which a government may influence the
economy or a certain industry. Political factors include tax policies, Fiscal policy, trade tariffs
etc. that a government may levy.
2. Economic: These factors are determinants of an economy’s performance that directly impacts a
company and have resonating long term effects. [Economic factors include inflation rate,
interest rates, foreign exchange rates, economic growth patterns etc.
3. Social: These factors scrutinize the social environment of the market, and gauge determinants
like cultural trends, demographics, population analytics etc.
4. Technological: These factors pertain to innovations in technology that may affect the
operations of the industry and the market favorably or unfavorably. This refers to automation,
research and development and the amount of technological awareness that a market
possesses.
5. Legal: These factors have both external and internal sides. There are certain laws that affect the
business environment in a certain country while there are certain policies that companies
maintain for themselves.
6. Environmental: These factors include all those that influence or are determined by the
surrounding environment. Factors of a business environmental analysis include climate,
weather, geographical location, global changes in climate, environmental offsets etc.

Usefulness of PESTEL
- PESTEL is useful for organizations for analyzing and understanding the ground realities of
the environment they have to operate in.
- Using PESTEL the organization can be in a better position to analyze the challenges,
environment, factors, opportunities, restrictions and incentives it faces.
- In case an organization fails to take into account any one of these factors, it may fail to plan
and operate properly.
- When entering a foreign country, PESTEL helps in understanding the current business
environment which can be seen as a starting point for international strategy planning.

Limitations of PESTEL
- The external factors considered during PEST analysis are dynamic and they change at a very
fast pace. At times, these changes may occur in less than a day’s time, thus making it tricky
to predict why and how these factors may affect the present or future of the project.
- PESTEL is usually a simple list of the environmental factors that can affect the project.
Unless the attributing factors are critically examined in terms of the degree of impact, the
findings of the analysis don’t seem to be of much value.
- Collecting enormous amounts of relevant data from the right sources becomes a bit of a
problem.
- The lack of easily available updated information, leads to one more problem – making too
many assumptions.