PESTLE analysis

Founded by Francis J. Aguilar through his book called ' Scanning the Business Environment'.

The PESTLE analysis is a good way to improve decision-making concerning adapting to change. It takes into account the different external areas that could influence your business. 

PESTLE is an acronym for: Political, Economic, Social, Technology, Legal and Environment.

Analyze each area closely and write down every aspect of that specific area that could influence your business. 

Political

Economic

Social

Technology

Legal

Environment

Use Case

Now that you've got an understanding of the different area's of a PESTLE analysis, let's describe what it's actually used for.

1. Cope with change

In the world of business, change is constant. By performing a PESTLE analysis, you can anticipate these changes and adapt your business accordingly. PESTLE helps you take a proactive stance and makes you resilient in the ever-changing landscape of business.

2. Planning

By using the PESTLE analysis, you arm yourself with a valuable tool to execute strategic planning. Getting an overview of the different areas helps you identify opportunities and anticipate potential risks. This all together helps you make informed decisions regarding your business direction, so you can plan ahead. 

3. Manage risk

The knowledge you gather from performing a PESTLE analysis enables you to develop risk management strategies. By using PESTLE, you can identify the potential risks that come from the various external areas that are gathered in this method.

4. Adapt & innovate

PESTLE analysis is a tool that can be used to gain a competitive edge. By identifying all the different areas, you're one step ahead in positioning yourself as a market leader. It also highlights areas that you need to adapt to or focus your innovative resources on. 

Tips

There are a few points of attention one must pay attention to when utilizing the PESTLE analysis. Here are the most common pitfalls:

1. Avoid oversimplification 

The PESTLE analysis should be clear and concise. But when using to little data input, it's easy to create blind spots. Be sure to take your time and re-evaluate every area closely. 

2. Paralysis by analysis

On the other hand, applying to much data can lead to what is called 'paralysis by analysis'. Analyzing to much data which leads to paralysis in taking action.

3. Continual process

Due to the ever changing economic landscape, the PESTLE analysis is ideally done multiple times per year. Not doing so can result in difficulty anticipating developments that can have a heavy influence on your business.