PESTEL Model

This lesson is about PESTEL analysis. As we know from our lesson on the marketing environment the wider macroenvironment impacts upon how marketing managers make decisions. During this lesson we’re going to look at how we audit and evaluate our external business environment. There are a number of acronyms which are popular for doing this including PEST (Political/Economic/Sociocultural/Technological), PESTEL (Political/Economic/Sociocultural/Technological/Environmental/Legal), SLEPT (Societal/Legal/Economic/Political/Technological), STEP (Society/Technological/Economic/Political) and others which include LE-PEST-C and SPECTACLES. They are all pretty much the same. Below are details of how to complete a PESTEL analysis, supported by some examples.

Political

The political environment revolves around the current government in a particular country in which we manufacture or trade, and also laws/legislation operate within your home market as well as overseas. If your government is socialist then perhaps there is a policy to tax more and to invest in the public sector. On the other hand if you have a more conservative or Republican government then the free-market is left to take control, taxation is less and there is often a smaller public sector.

Economic

The economic environment is a direct influence on all businesses. Obviously if you are studying marketing there is a huge element of economics within the topic itself, and you should be no stranger to the principles of economics. As we saw from our lesson on the marketing environment there is a macroenvironment, and internal environment and the microenvironment.

More specifically you’ll be at looking elements such as where a business is in terms of the current business cycle, and whether or not you are trading in a recession.

Sociocultural

The sociocultural environment embodies everything which is social and cultural within a nation or society. There are plenty of examples of society and culture on the marketing teacher website, so we recommend that you go to our lesson store and look through some of the consumer behaviour pages. Some notable examples would include the influence of learning, memory, emotion and perception, motivation, lifestyle and attitude and consumer culture. Have a look at the six living generations in America, social environment and class, the impact of your birth order on how you behave as a consumer and take a look at the eight types of online shoppers.

In a more general sense consider influences such as the increase in life expectation of Western consumers, and demographics which is the study of populations.

Technological

Technological factors are a multifaceted influencer. Let’s just think about the sorts of technology that you come in touch with almost daily. Smart phones such as Android and iPhone are now common – all – garden, and we are used to being able to access information and communication technology instantly no matter where we are. During studies or at work we have access to information on quick PCs and over the Internet, with faster broadband connections arriving in many parts of the world.

Technology also surrounds business processes. As we saw from our lesson on the functions within an organisation all departments use information technology or technology in one form or another. Our manufacturing operations will use technology to produce goods and services. Our logistics and warehousing functions use forklifts and lorries as well as order tracking technology and software. The customer service department will use communication technology to talk to customers but will also have access to internal systems, such as technology to simplify credit control and stock control for example. There are many, many more examples of technology.

Environmental

Environmentalism and marketing connect where marketing may affect the environment when serving consumers with products and services. There is an environmental movement which puts pressure on businesses, governments and everyday people to be green. There are a number of examples of how companies can be greener internally and externally, from addressing manufacturing today, to designing a much more sustainable future. A manufacturer might reduce the amount of waste produced as a result of the manufacturing process or a restaurant might reduce the amount of packaging or food waste. An environmental approach is set in today’s tactics, but will eventually be embedded in the strategic vision of the business.

Legal

When marketing overseas your business will need to take into account laws in the local market. For example cars sold in mainland Europe and the United States tend to be left-hand drive, whilst cars which are marketed in Japan and the United Kingdom right-hand drive. This is a local requirement. Different countries have different laws in relation to maximum speed limits and safety ratings on vehicles, as well as many other bylaws and codes.