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PESTLE Analysis History and Application

written by: Amanda Dcosta • edited by: Ginny Edwards • updated: 5/19/2011

This review of the PESTLE analysis history and application gives an idea of how the famous PESTLE Analysis came about and how it affects major management areas of work. There are many parameters at play around a project, and PESTLE Analysis is the right tool to understanding these factors.

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    PESTLE Analysis: History

    In examining the PESTLE Analysis history and application, one must first go back to the roots of the PESTLE factors and discuss how they are applied in today's project management environment.

    The PESTLE Analysis history is quite vague. There is no major documentation of credits given to any particular individual or organization for pioneering this analysis. However, from citations and records of its earliest uses, there are a few individuals who are considered important in connection with the same.

    Francis J. Aguilar: In 1967, there was a mention of Aguilar in "Scanning the Business Environment", where he discussed the environmental factors affecting a business. He gave them the acronym "ETPS" to indicate the "Economic, Technical, Political, and Social" factors.

    Arnold Brown: In the early 1970's, Brown focused on "STEP" (Strategic Trend Evaluation Process) and outlined the environmental factors as STEPE (Social, Technical, Economic, Political and Ecological).

    1980+: After a decade of Brown's STEPE analysis, many people tried to define the environmental factors in many ways, thus resulting in PEST, PESTLE, STEP and STEEPLE analysis.

    By following the history of the acronym PESTLE, we reach the conclusion that the PESTLE analysis became popular from the second half of the twentieth century. It outlines the need for conforming to environmental factors and also makes use of these mentioned environmental factors towards the success of the project.

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    PESTLE Analysis

    PESTLE Analysis Pestle Analysis in terms of its applications is based on its six parameters. They are Political, Economic, Social, Technical, Legal and Environmental.

    1. Political: Projects are conducted in a real environment. This implies that there are a lot of factors that determine the way decisions in a project are made and the level of responsibilities that are assigned. This gives rise to conditions of internal politics which is the first parameter of importance when outlining or carrying out a project. In addition to in-house politics, organizations also have a duty of responsibility to governing bodies, local,, state-wide or federal in conforming to political specifications.

    2. Economic: Economics or the fiscal contributions of projects are the main reasons for projects being carried out. In other words, an organization undertakes a project to gain financial wealth which upgrades or improves the status of an organization in terms of its wealth.

    3. Social: There are many sociological factors at play when a project is conducted. A project may be dependent on external services of the locality or town or may depend on external funding from other parties. Any project carried out has a social obligation to work in compliance with the social norms and not tamper with or degrade the living conditions of the society that surrounds it.

    4. Technical: Projects are based upon technical proficiency and skill. Technical input, support and feedback are part of the functioning of any project. A project team is required to conform to technical specifications and expectations, and is required to respond to technical issues at the earliest moment as it could give rise to major drawbacks along the project's progress.

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    5. Legal: There are many legal implications of a project. While there may be many stakeholders involved with contributions of funds from various sources, likewise there is an invested interest in the profits of a project. Every project therefore centers on a legal framework which helps in resolving such issues. The legal aspect may involve not only stakeholders but also other parties when documents, records and contracts are prepared or signed.

    6. Environmental: The environmental parameter is the actual physical surroundings of the project. It takes into consideration the effects a project will directly have on the environment or ecology around. It also studies the physical conditions and how it will affect the project. For example, if it is an earthquake prone area, would it be a good idea to construct a concrete building? Or, if it is a flood prone area, exposed to torrential rain, would it be advisable to build by the river banks?

    The review of the PESTLE analysis history and applications gives a fair idea of attributes and parameters affecting a project, or the effects of a project on various supporting factors. It works alongside the SWOT analysis in determining the external factors such as threats and opportunities of the project and likewise with the various approaches for assessing risks in a project.

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    PESTLE Analysis: Applications

    1. Business Planning: PESTLE Analysis forms a safe start for a business endeavor. It provides the management with data, feedback and information about the factors involving a business decision. When used along with the SWOT Analysis, it can help identify the major threats and opportunities that a business decision will face.

    2. Marketing: PESTLE Analysis greatly influences the marketing environment of a product or service. It also determines the strategies adopted in marketing based on information obtained through this analysis.

    3. Product Development: In order to decide on a product to be developed, knowing the external factors of the project via the PESTLE Analysis helps this decision making.

    4. Organizational: While PESTLE Analysis takes into account the major external features, it also affects the organizational structure, especially when decisions in changes to be made come into play. For example, it may concern the political makeup of the organization or the fiscal factor of project funds.

    5. Research: PESTLE Analysis is a good way to study the environmental factors affecting a project. While it may be relevant to a current project, documented reports of risks may be referred to during future projects facing similar conditions.

    (Image Credit: Author, Amanda Dcosta)