PESTEL Framework

By- Prof. Abha Rishi

 The PESTEL/ PESTLE
framework

Categorises environmental
influences into six main types:
political, economic, social-
cultural, technological,
environmental and legal
 PESTEL FRAMEWORK
THE FRAMEWORK PRIMARILY INVOLVES THE FOLLOWING
TWO AREAS

1. THE ENVIRONMENTAL FACTORS AFFECTING THE

ORGANIZATION

2. THE IMPORTANT FACTORS RELEVANT IN THE PRESENT

CONTEXT AND IN THE YEARS TO COME.
 The PESTEL framework
• Political ( e.g. government stability, taxation policy,
foreign trade regulation, social welfare policy)
• Economic (e.g. business cycle, interest rate,
unemployment)
• Social (e.g. population demographics, income
distribution, lifestyle changes)
• Technological (e.g. government spending on research,
new discoveries, speed of technology transfer)
• Environmental ( environmental protection laws, energy
consumption)
• Legal ( employment law, health and safety, product
safety)
 What characteristics measure
economic development
• Quantitative Indicators are numerical
indications of development.
• Qualitative Indicators include descriptions of
living conditions and people's quality of life. They
are useful in analyzing features that are not
easily converted to numbers such as freedom
and security.
• Composite Indicators combine several
quantitative indicators into one figure and
generally provide a more balanced view of a
country. Usually they include one economic, one
health and one educational indicator.
 Quantitative Indicators
• GNP, GDP, etc.
• Purchasing power parity (PPP) in which the actual comparative
purchasing power of the money in the country is calculated.
• Economic indicators include
– unemployment rates,
– energy consumption and
– percentage of GNP in primary industries
• Social (demographic) indicators include the
– birth rate,
– death rate
– fertility rate.
• Health indicators include nutrition (calories per day, calories from
protein)
– percentage with malnutrition,
– infant mortality
– population per doctor.
 Qualitative Indicators( Socio-
cultural)
• Happiness Index
• Health Index
• Fidelity Index
• Aggression Index
• Empathy Index
• Racism Index
• Authority Index
• Grooming Index
 Composite Indicators
• The HDI (Human Development Index) is now the most
widely used composite indicator. A number is calculated
between 0 and 1 taking into account the most important
measures: GNP per capita, the adult literacy rate, the
school enrollment rate and life expectancy. A HDI
between 1 and 0.8 is considered high, 0.8 and 0.6 is
considered medium and 0.6 to 0.4 is considered low.
• The PQLI (Physical Quality of Life Index) which was a
precursor to the HDI which used infant mortality rate
instead of GNP per capita and rated countries from 0 to
100. It was calculated by assigning each country a score
of 0 to 100 for each indicator compared with other
countries in the world. The average of these four
numbers makes the PQLI of a country.
 POLITICAL
• GOVERNMENT STABILITY
• POLITICAL VALUES AND BELIEFS SHAPING
POLICIES
• REGULATIONS TOWARDS TRADE AND
GLOBAL BUSINESS
• TAXATION POLICIES
• PRIORITIES IN SOCIAL SECTOR

• Check out different political systems on

http://www.Nationmaster.Com/encyclopedi
a/form-of-government
 ECONOMIC FACTORS

•GNP/GDP TRENDS
•BoP
•INTEREST RATES/ SAVINGS RATES
•MONEY SUPPLY
•INFLATION RATES
•UNEMPLOYMENT
•DISPOSABLE INCOME
•BUSINESS CYCLES
•TRADE DEFICIT/SURPLUS
 Economic Indicators
• 1. Ease of doing business index
• 2. Cost of living Index
• 3. Consumer- price index
• 4. Consumption index
• 5. (Sectorial) Growth Index
• 6. Producer price Index
• 7. International Manufacturing Cost
Comparisons Index
SOCIO-CULTURAL FACTORS

POPULATION DEMOGRAPHICS
– ETHNIC COMPOSITION
– AGING OF POPULATION
– REGIONAL CHANGES IN POPLULATION GROWTH/DECLINE
SOCIAL MOBILITY
LIFESTYLE CHANGES
ATTITUDE TO WORK AND LEISURE
EDUCATION-SPREAD OR EROSION OF STANDARDS
HEALTH AND FITNESS AWARENESS
MULTIPLE INCOME FAMILIES
 TECHNOLOGICAL

• BIOTECHNOLOGY
• PROCESS INNOVATION
• DIGITAL REVOLUTION
• GOVERNMENT SPENDING ON RESEARCH
• GOVT AND INDUSTRY FOCUS ON
TECHNOLOGICAL EFFORTS
• NEW DISCOVERIES/DEVELOPMENT
• SPEED OF TECHNOLOGY TRANSFER
• RATES OF OBSOLESCENCE
 Environmental

• Recycling
• Waste management
• Air pollution
• Water pollution
• Ozone depletion- carbon credits (Kyoto
protocol)
• Endangered species- biodiversity, sui
generis ( WTO-TRIPS)
 LEGAL

• MONOPOLIES LEGISLATION/ ANTITRUST

REGULATION
• EMPLOYMENT LAW
• HEALTH AND SAFETY
• PRODUCT SAFETY
• FOOD LAWS
• ENVIRONMENTAL LAWS
PESTEL-AN INDIAN FRAMEWORK
PESTLE - Key Economic Variables-1

• Shift to a service economy in India

• Availability of credit
• Level of disposable income
• Propensity of people to spend
• Interest rates
• Inflation rates
• Economies of scale
• Money market rates
 PESTLE – Key Economic Variables-2
• Government budget deficits
• Gross domestic product trend
• Consumption patterns
• Unemployment trends
• Worker productivity levels
• Value of the Rupee in world markets
• Stock market trends
• Foreign countries’ economic
conditions
PESTLE - Key Economic Variables-3

• Import/export factors
• Demand shifts for different categories of
goods and services
• Income differences by region and
consumer groups
• Price fluctuations
• Exportation of labor and capital from India
• Monetary policies
PESTLE – Key Economic Variables-4

• Fiscal policies
• Tax rates
• European Economic Community (ECC)
policies
• Organization of Petroleum Exporting
Countries (OPEC) Policies
• Coalitions of Lesser Developed Countries
(LDC) policies
 PESTLE – Key Social, Cultural,
Demographic, Environmental Variables – 1

• Number of marriages
• Number of divorces
• Number of births
• Number of deaths
• Immigration and emigration rates
• Life expectancy rates
 PESTLE – Key Social, Cultural, Demographic,
Environmental Variables – 2

• Per capita income

• Location of manufacturing, retailing and
service businesses
• Attitudes toward business
• Life-styles
• Traffic congestion
• Inner-city environments
 PESTLE – Key Social, Cultural, Demographic,
Environmental Variables – 3

• Average disposable income

• Trust in government
• Attitudes toward government
• Attitudes toward work
• Buying habits
• Ethical concerns
• Attitudes towards saving
IDENTIFY FEW KEY ACTIVE POLITICAL
FORCES AND HOW THEY ARE SHAPING
THE OVERALL ENVIRONMENT IN THE
COUNTRY ?
SUPPOSE THE FOREX RESERVES REDUCE TO HALF OF
THE PRESENT LEVEL BECAUSE OF FEW DEVELOPMENTS
IN THE OUTSIDE WORLD . DISCUSS THE ECONOMIC
EFFECTS IT MAY LEAD TO ::
THERE HAS BEEN A THRUST ON WOMEN LITERACY. DISCUSS
THE INFLUENCES YOU SEE IN THE SOCIAL ENVIRONMENT AND
THEIR IMPACT ON BUSINESS.
ENUMERATE FEW OF THE TECHNOLOGICAL ADVANCES IN THE
AGRICULTURE AND DISCUSS ITS ROLE IN TAPPING BETTER
OPPORTUNITIES IN THE OVERSEAS MARKETS
LIST OUT THREE MAJOR INDUSTRIES WHICH IN YOUR VIEWS
POSE DANGER TO ENVIRONMENTAL CONDITIONS.MENTIONING
YOUR REASONS SUGGEST HOW THESE INDUSTRIES MAY
CORRECT THE SITUATIONS.

DISCUSS THE LEGISLATION ON PATENTS IN INDIA AND

COMMENT ON ITS IMPACT ON THE BUSINESS.