Pestle analysis, an extension of Pest analysis, is a business analysis tool that helps in evaluating external factors. It also helps evaluate the impact that they have on the business activity. Those external factors include political, economic, social, technological, legal and environmental factors (PESTLE is an acronym for these words). The Pestle analysis examples can help you understand how its implementation can help the businesses.
The Pest analysis includes political, economic, social and technological factors, whereas Pestle analysis, the extended version, includes legal and environmental factors too. Through this analysis, businesses can understand the ways in which and the extent to which these factors can affect the business activity.
First, the businesses can understand how can the political situations of the country in which they are operating can affect their business. Is the current government in their favor or against them? Second, how can the current economic conditions affect the business activity? If the country is in recession, there is no point of launching an expensive & luxurious product in the market. Third, are the pressure groups strong enough to threaten the business activity. How much value is given to corporate social responsibility in the country? Fourth, what are the technological conditions? Can there be a reduction in cost by using new efficient machinery? Fifth, is the business activity legal? And last, what affect can the business activity have on the environment? Is it harmful? How strong are pressure groups? Can they intimidate the business activity? And the question of corporate social responsibility, again.
PESTLE Analysis Examples
By now, you sure have gotten the basic idea about what Pestle analysis actually is. Now, we will further solidify those learnings by looking at some PESTLE Analysis examples. We will look at two giant firms in their respective fields. These firms practice Pestle analysis in order to understand how these external factors can affect the business activities.
PepsiCo operates in many different countries from US to New Zealand. Therefore, it has to meet the rules and regulations of each country. The firm has to negotiate with the governments of each country over matters of imports, exports, employment, subsidies, and grants etc. Such giants like PepsiCo can also gradually gain the power to influence government decision too. The firm also has to see the economical conditions of each country before making any big decisions. The firm will be reluctant to launch new products in a country which is suffering in the recession. Adding to this, PepsiCo has different product ranges in different countries depending on each society’s preferences.
Moreover, PepsiCo may face high costs in those countries which do not have much technological advancement. As they will have to import machinery from another country. For the law part, each country has different laws, as mentioned above, so the firm has to ponder over those laws. An example is of Muslim countries where Muslims have concerns about the Halal foods. Last, the firm has to take serious concern over the environmental issues too. People are getting more and more sensitive to environmental damage. The act of corporate social responsibility can help the firm a lot. As it promotes a very good image of the company in front of others.
This Pestle analysis example of PepsiCo demonstrates how can the external factors listed above impact the business activity, and how can they avoid problems due to these factors. This Pestle analysis example can help PepsiCo in unlocking business growth just like they have been doing for so many years now.
Another Pestle analysis example that will be considered is of the luxurious brand, Apple. As Apple is manufacturing in China, there can be problems for them due to the differences between China and America. However, as we can see, Apple holds a strong position and can handle political problems by exerting some pressure, because it provides jobs to thousands of people and huge amounts of revenue too. The economic conditions are extremely important for Apple, because it is a luxurious product, and hence it is expensive. If the incomes of people are low, there are less chances of sales of their products. For the same reason, Apple does not offer its products in all countries around the world. Employees’ salaries and working conditions matter a lot in today’s era, so Apple needs to take care of the society too instead of just making profits for itself.
Technology, Law, and Environment
Apple is technology and technology is Apple, so the T for technology in Pestle is, without any doubt, extremely crucial for Apple. Apple needs much technologically advanced equipment at low costs to produce such technologically advanced iPhones, iPods, laptops and so on. The law needs to be seen too in different countries. Some things are legal in some places while illegal at others. For example, China has cheap labor, but if Apple tries to pay such low amounts of salary to people somewhere else in the country, they will suffer due to several problems and lawsuits of exploitation of labor. So, Apple will face much pressure from media and other pressure groups to reduce activities that harms the society. The environment is of concern here, so Apple needs to make sure they do not get into any such activities that can harm the environment.
This detailed Pestle analysis example of Apple would help the company to know what can happen to them as a result of changes in any of these factors. Apple can try to avoid the negative impacts and maximize the positive impacts. However, it is to be noted that whichever company it is, controlling these factors is out of our hands and we do not need to control these factors, but we need to control our actions that can cause a reaction to these factors.
The examples that we have demonstrated above are very short examples. Real Pestle analysis is much longer and much more detailed. Past records, interviews, observations and so on are used in evaluating these factors and how will they react.