What is the PESTEL analysis and how is it used?

PESTEL is short for Political, Economic, Social, Technological, Environmental and Legal. This analysis is an effective instrument used to carefully examine these forces making up the macro-environment affecting the organization.

Political factors- These factors influence the impact the government and its policies have on the organization. They include taxations and fiscal policies.

Economic factors- These factors influence the economic standing of the organization and its profitability. This comprises of foreign exchange rates, unemployment rates, interest rates and material costs.

Technological Factors- These factors focus on technological advancements and developments that impact the industries. Research, automation and digital technology are included.

Environmental Factors- These factors take in consideration the environmental or ecological aspects. Due to rise in the significance of CSR, these factors have gained significant importance focussing on climate and sustainability.

Legal Factors- Legal factors are important influencing factors for the organization. These factors slightly differ from political ones in terms of their compliance. Political factors are laid down by the government whereas legal factors are must to follow.