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What Is a PESTLE Analysis?
Most of us have heard of the SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats) that is helpful in determining if a business or product will be viable. A PESTLE analysis pretty much does the same thing, however, considers other factors.
The acronym PESTLE represents the following areas: political, economic, sociological, technological, legal, and environmental factors. Some variations of the PESTLE analysis are PEST, (without the legal or environmental factors), and a PESTLIED analysis, where international and demographic factors are considered.
Rapid BI, recommends that each PESTLE analysis can be as “simple or complex” as you want it to be depending upon the project at hand. So, let’s look at a PESTLE analysis example along with a free template to help you start using this project planning and predictor tool.
Image Credit: (Google Images)
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When to Use a PESTLE Analysis
Must like the SWOT analysis, a PESTLE analysis looks at various factors that could verify or deny whether a product, business venture or opportunity would be beneficial or detrimental for either an external client or for the organization as a whole. For example, say the project at hand is to determine if a new feature on an existing product would be a good or bad thing. Or, if a joint venture with another company would be not just a profitable idea, but also one that considers each PESTLE factor before making a decision. Think of a PESTLE analysis as a strategic way to look a possible idea.
For our PESTLE analysis example, let’s say the project is to determine if a new hand lotion that also includes a petroleum jelly ingredient would work on the market for our client—who is already a well-known hand lotion manufacturer—we’ll call our client Soft for Sure and the potential product Petro-Hand.
Image Credit: (Google Images)
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Using the PESTLE Analysis: An Example
Before we discuss the PESTLE analysis, first download the free PESTLE template found in our Project Management Media Gallery (you can also view a screenshot to the right—click to enlarge). To find out if Petro-Hand should even be developed for our client, the best weapon is to look at each factor within this PESTLE analysis example and answer the questions for each factor on our template.
- Things that may change – With our Petro-Hand lotion possibility, as far as political elements, will the new product use any animal testing and if so, how much? How big is the market for people who purchase hand lotions tested on animals?
- Short, medium & long-term outlook – Can Soft for Sure develop the hand lotion without animal testing and how long will that process take to implement?
- Importance / impact / relevance scale – Will changing to non-animal testing hinder product sales or will they remain steady?
- Internal or external factors – What external organizations may protest the product due to animal testing?
- Actions – To test on animals or not to test.
- Things that may change – How much will the client Soft for Sure have to invest to get Petro-Hand on the market?
- Short, medium & long-term outlook – How long will branding efforts take and how much will they cost?
- Importance / impact / relevance scale – How much will the client be impacted by the expense of a new product—can it afford a new line at the current time?
- Internal or external factors – What vendors are most likely needed such as suppliers, manufacturing plant equipment, advertising or marketing services, etc.
- Actions – From the above analysis, you should be able to determine if the new product Petro-Hand will be beneficial to the client as far as sales revenues.
- Things that may change - Will Soft for Sure lose consumer confidence with a new product that is tested on animals? If so, how many and will it impact other products Soft for Sure sells?
- Short, medium & long-term outlook – Can consumers be persuaded to accept Petro-Hand, if so how long will it take?
- Importance / impact / relevance scale – How important is it to the company to lose some customers? Will the new product impact consumers in a positive or negative way?
- Internal or external factors – Can the company utilize inside resources to combat the social challenge of animal testing or will promoters be required to enforce the good name of the company?
- Actions – From the above, you should be able to see how Petro-Hand will be accepted socially by consumers.
Screenshot above courtesy of author.
Please continue on to Page 2 for more on our Petro-Hand PESTLE analysis example.
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Explaining the PESTLE Analysis With Examples In part two of free PESTLE analysis examples, we continue to explore how to utilize this type of analytical tool to determine if a product, business idea or opportunity will be profitable or detrimental to pursue. You'll find out a step-by-step guide on performing a PESTLE analysis along with a free template to help get you started.
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PESTLE Analysis Example (Continued)
- Things that may change – Will Soft for Sure have to purchase any IT or rely on technical providers they don’t already have onsite or in place? How many and how much will these resources cost?
- Short, medium & long-term outlook – How long will extra technical resources be needed?
- Importance / impact / relevance scale – How important is it to the end-product to include extra technological resources? Can they be cut back or avoided?
- Internal or external – Identify the specific resources needed and from where.
- Actions – From here, you should be able to determine the necessary technological resources the client will need to manufacture Petro-Hand.
- Things that may change – Will the company incur any legal expenses? If so, how much? What legal ramifications will the client face?
- Short, medium & long-term outlook – How long will Soft for Sure need outside legal services for Petro-Hand?
- Importance / impact / relevance scale – What will be the impact if the client decides not to utilize any legal services?
- Internal or external – Would the company save money by bringing on an internal legal team or by outsourcing legal needs?
- Actions – Here, you should now be able to determine the legal ramifications and expenses if the company decides to manufacture Petro-Hand.
- Things that may change – Will any part of the production of Petro-Hand require special environmental issues such as disposing of waste, etc.
- Short, medium & long-term outlook – Here, if the company will endure many environmental issues, will they be for the long-term and life of the product?
- Importance / impact / relevance scale – How much must the company consider the environment (and consumer’s beliefs on being eco-friendly)? Is it an important issue or will it impact the company on the low end of the scale?
- Internal or external – Will Soft for Sure need to hire professional disposable waste vendors or can they be handled internally?
- Actions – Once the above has been analyzed, you should be able to determine all the environmental concerns as they pertain to the development of Petro-Hand.
Image Credit: (Google Images)
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Wrapping Up the PESTLE Analysis
In our very simple PESTLE analysis example, we looked at each element of the acronym PESTLE, much like we would in a SWOT analysis to see if indeed the client Soft for Sure should introduce the new product Petro-Hand.
By analyzing each issue thoroughly, a project team may determine that the risks here would outweigh the profitability of Petro-Hand. Or, they may determine that little risks exist. The important thing to remember in a PESTLE analysis is that each time you use it, be as clear as possible on each issue—it’s not an analysis as simple as a SWOT analysis and includes a more detailed look into the product, new venture or opportunity.
As a project team, you can save a client (or if internal) your organization money on ideas that may not work, or you may find that through a PESTLE analysis, the idea is guaranteed to be successful.
The author thanks Rapid BI (http://rapidbi.com/pestle/Introduction-to-the-PESTLE-analysis-tool.html#PESTLEtemplete) for their expertise on completing a PESTLE analysis.
Image Credit: (FreeDigitalPhotos)