PESTLE Analysis

Why is it used?

PESTLE is used by organizations to understand the market in which they are operating. Not only does the framework help companies know which nerves to hit, it also brings their awareness to key nerves to avoid. Each letter represents a factor of strategic development and defines how conducive an environment is to a product or concept. PESTLE is a more detailed extension of SWOT analysis.

Advantages and disadvantages of use?

The advantage to using PESTLE analysis is that it brings awareness to significant environmental factors that could impact the performance of a company or product. Conducting this analysis with fidelity can help an organization avoid costly missteps and embarrassing public relations crises.

An important disadvantage to keep in mind is that each letter represents an aspect of the environment that is fluid and prone to change. Political landscapes can shift drastically, from day-to-day, even. Technological innovations are constant to the point that when a new technology enters mainstream consciousness or use, it is already obsolete. Therefore, the analysis needs to consistently be revisited and revised to avoid any oversights. These fluctuations also can lead to subjectivity of the data, leaving the outcome open to interpretation.

There is also the issue of prioritizing the factors. Are economic concerns more important than cultural considerations? When? The PESTLE framework pulls out a significant amount of information, and it can be difficult to know which items to prioritize. So, when using this analysis approach, it is important to determine which factors will have the most impact.

Real World examples of use?

Zalengera et al. (2014) conducted a PESTLE analysis to determine factors contributing to the energy situation in Malawi, a developing country in Africa. In 2014, the country of Malawi was dealing with a precarious energy situation. Only 8% of Malawians had access to electricity, and 89% of Malawi׳s energy is still sourced from traditional biomass mainly fuel wood. This is true despite a demand that significantly surpasses capacity and a range of efforts from international interests to increase access to modern energy sources. A PESTLE analysis was conducted to generate ideas to address the political, economic, social, technological, legal and economic factors hindering the development of modern electrical infrastructure.

In “Identifying the Criteria Set for Multicriteria Decision Making Based on SWOT/PESTLE Analysis: A Case Study of Reconstructing A Water Intake Structure,” Srdjevic, Srdjevic, and Bajcetic propose using a SWOT/PESTLE analysis to address problems with specific water management systems. The PESTLE factors were divided into SWOT categories, “and identified as internal and external factors according to the domain of their influence on the system. Both the internal and external factors can have a positive or negative impact on the system. The final list of factors along with identification of the positive or negative impact on the (water management) system is defined.” This case study exemplified the need to manage the data gathered from PESTLE in order to support its utility.

Resources and Bibliography

Chartered Institute of Personnel and Development. (2017, September 1) Factsheet: PESTLE Analysis. https://www.cipd.co.uk/knowledge/strategy/organisational-development/pestle-analysis-factsheet#7988

Srdjevic, Z., Bajcetic, R., & Srdjevic, B. (2012). Identifying the Criteria Set for Multicriteria Decision Making Based on SWOT/PESTLE Analysis: A Case Study of Reconstructing A Water Intake Structure. Water Resources Management, 26(12), 3379-3393. doi:10.1007/s11269-012-0077-2

Zalengera, C., Blanchard, R. E., Eames, P. C., Juma, A. M., Chitawo, M. L., & Gondwe, K. T. (2014). Overview of the Malawi energy situation and A PESTLE analysis for sustainable development of renewable energy. Renewable And Sustainable Energy Reviews, 38335-347. doi:10.1016/j.rser.2014.05.050”