We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is PESTEL Analysis?

By Osmand Vitez
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

A PESTEL analysis is an acronym for internal and external environmental factors that include issues from the (P)olitical, (E)conomic, (S)ocial, (T)echnical, (E)nvironment and (L)egislative areas of business. Companies typically create a framework for their organizational structure that allows them to review factors from each group and how they impact the business, whether positively or negatively. Under each section of the PESTEL analysis, owners and managers can answer a few basic questions or follow some guidelines that help them complete the entire analysis.

Political factors in a PESTEL analysis are typically external to the company’s operations, such as government regulations or individual politicians who can control how a company operates. A review of political factors can help a company determine how revenue increases will affect its tax liability, the barriers to entry in new markets based on local or national laws and the penalties for acting in violation of political laws and regulations.

Economic trends are also an external factor in the PESTEL analysis. Consumer income and spending rates, available credit, current money supply levels, inflation and interest rates paid or borrowed funds are economic factors a company cannot usually influence. Companies must be aware of these factors, however, to ensure they operate within a set of boundaries consistent with current economic factors. For example, taking on too much debt when interest rates may adjust higher in the future can negatively impact a company.

Social aspects of this analysis relate to the demographics and cultural changes in a local economy. As a nation’s population ages, the demand for goods and services will shift. Consumers may need fewer electronics but more health care-related items. Additionally, an increase in population from immigration or higher birth rates will also signal a change in preferences for economic goods.

Technological changes in the PESTEL analysis is a more increasingly important factor in this analysis. As business technology changes frequently, companies must remain aware of these changes in order to take advantage of them. Failing to stay on pace with competitors who use technology to create a competitive advantage can put a company behind in the economy in terms of production output or cost reduction activities.

Environmental factors relate to the natural environment surrounding a company. This includes natural resources like wildlife, timber, minerals, waterways and similar items. In addition to the company’s direct impact on the environment, companies will most likely have to consider public opinion. The public can have a negative opinion on a company’s business practices, which in turn will dissuade consumers from patronizing the business.

Legislative factors in PESTEL analysis typically relate to future changes in laws and regulations. Most governments tend to add laws or regulations to various business activities. Unfavorable legislation can result in fewer profitable transactions or a more difficult operating environment. Companies working in multiple international markets will have to focus on the legislative factors from each country.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

Discussion Comments

By Ceptorbi — On Feb 12, 2014

Good points, @Nefertini. Technology is also an important consideration in today's market climate. With e-books and electronic devices like tablets and laptops gaining in popularity, companies have to keep up with the latest technological devices and phase out things that fit old technologies and focus on developing new technologies as well as products and services that are aligned with current technologies. If I were starting a business or owned an already existing one, I'd do a SWOT analysis along with a Pestle analysis. A SWOT analysis looks at strengths, weaknesses, opportunities, and threats a business, product, or project faces. Technological strengths, weaknesses, and opportunities are critical factors to examine before launching something new or advertising a current product or service.

By Nefertini — On Feb 11, 2014

Any business looking at external influences in today's market needs to consider both the aging baby boomer population and the economy. Products, businesses, and services that appeal to older consumers will be profitable, and low cost is a consideration of consumers in any age group.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.