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What is a pestle analysis a complete pestle analysis guide, what is a pestle analysis.

A PESTLE analysis examines external market factors – including Political, Economic, Social, Technological, Legal, and Environmental – and market trends that might impact your organization’s direction, performance, and position in the marketplace.

Used in tandem with a SWOT analysis, it helps your organization examine external factors that could influence your organization’s opportunities and threats. We get that a PESTLE Analysis is just another acronym that might seem silly, but it is a helpful tool to help you holistically conduct market research and understand what forces your organization currently faces.

In this article, we’ll dig into what is a PESTLE Analysis, what each factor covers, and how to use it as part of your approach to considering internal and external factors for your strategic planning process.

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So why do I need to conduct a PESTLE Analysis?

The last few years have been a whirlwind of change and uncertainty – a global pandemic, natural disasters, looming recession, war, inflation, and more. Organizations have faced a great deal related to external market factors directly impacting their organizations. Current events have been stressful enough for any organization to worry about, whether you’re well-established or new in your market.

While the global situation is intimidating for many current and future leaders, this helpful analysis can help you assess and plan for what might impact your organization – and either seize those forces as opportunities or work to mitigate them as threats. Using a PESTLE allows you to look ahead at challenges your organization may encounter and create strategies to address them.

Pro Tip: We covered using this tool a few years back during the start of the COVID pandemic. This article has some helpful tips on using this analysis to examine market megatrends.

PESTLE Definition and Framework – How to Use this Tool

[also known as the pestel framework, pestle model, or pest framework].

As we mentioned earlier, this analysis looks at the external Political, Environmental, Social, Technological, Legal, and Environmental factors that would influence your organization’s strengths and weaknesses. A PESTLE Analysis is best used in tandem with your SWOT Analysis . As demonstrated below, this framework looks at the macro-trends in your operating environment.

This framework has evolved over the years from a PEST Analysis to a PESTEL Analysis, which adds other market considerations and long-term impact.

As you complete your planning process, this looks at the external analysis portion of your environmental scan – also known as what is happening in your market.

Pro Tip: A PESTLE Analysis looks at external market forces, so they will not influence your organization’s internal strengths or weaknesses . Strengths and weaknesses come from traits or characteristics your organization already processes. A PESTLE Analysis framework only examines the external market.

What are Political factors?

Political factors are those brought on by the government or politics. These are the external political forces affecting your organization, including governmental policies, government leadership, foreign trade and foreign relations, political issues and trends, tax policy, regulations, and de-regulation trends.

A few examples might include the influx of capital from the Paycheck Protection Plan, the change in tariffs on imports from China, and the war and conflict from Russia’s invasion of Ukraine.

Questions to ask:

• What shifts have occurred in the political climate?
• How might those shifts impact our organization? Are they headwinds, or tailwinds?
• Are they short- or long-term plays?
• What are the political threats you should monitor?

What are Economic factors?

The economic factors look at the external forces that can impact the economy your organization operates in. Examples include rising inflation rates, changes and shifts in consumer spending, changes in the supply chain, demand curves, and the health of the global economy.

These economic factors can look at the local economy, national economy, and global economy.

• What is the current health of the economy? How might that impact our organization?
• How will things like labor costs, interest rates, and economic growth rates impact our organization?
• What economic information should we look at or consider?
• Are there headwinds or tailwinds in our supply chain?
• What local economic factor might impact our business?

What are Sociological factors?

Sociological factors (social factors) consider the changes in the greater social environment, such as social justice movements or other social trends like changing opinions on your product or shifting populations and demographics. It’s essential to consider sociological trends that are at play—not just in your organization’s immediate environment—but also in the broader environment that your customers are coming from.

• Are there changing trends in our market’s demographics or population? How best do we serve them?
• How are changing social factors going to impact our organization?
• What shifts can be observed in consumer behavior, sentiment, or opinion?

What are Technological factors?

Changes in technology impact a business’s positioning. Some recent examples are the rise of cryptocurrency (which can also fall into the economic category), the emergence of popular work-from-home technology, AI technology, the increased use of artificial intelligence, and even concerns over cyber security or other technological issues. It is important to consider how technology can prove to be both an opportunity for your organization, or a threat to it.

• How has the technology in our market changed? Is that an opportunity or threat?
• Are you using available technology to its full advantage?
• How much does emerging technology impact your organization?

What are Legal factors?

While similar to the political aspects, the legal elements look at the practical application of the political forces into rules and regulations that may affect your business or customers. These are the laws and regulations that impact your organization.

This could include updated laws, new regulations, or abolishing laws. Depending on your business, local, state, and federal laws and regulations are worth scrutinizing.

• What changes in our international, national, and local legislation impact our organization?
• What government policies do we need to consider?
• What is our regulatory environment like?
• How are these legal changes going to impact our organization positively or negatively?
• What legal forces may be on the horizon?

What are Environmental factors?

Environmental factors are affected by weather, geography, climate change, and health crises. In addition to the public health crisis caused by the COVID pandemic, the world has also been impacted by wildfires across the globe.

Organizations should consider the short-term and long-term impacts of these accelerating changes, e.g., rising ocean levels, drier and warmer seasons, and yearly weather conditions such as hurricanes and typhoons.

• What environmental factors are impacting us right now?
• What is the environmental impact of industry like? What is the impact on our natural resources?
• What environmental factors might impact us in the future?
• What environmental factors do we need to monitor?

Bonus – What are Ethical factors?

Over the last few years, business and marketing strategy experts have added a third ‘E’ to the PESTLE – the ethical factor. This can include things such as fair-trade practices, child labor issues, even society’s increasing demand for conscious business models, and corporate social responsibility.

• What external factors are your business ethics?
• What changes to your business or suppliers might you consider as key factors to your ethics? IE – fair trade suppliers?
• What kind of impact or example do you hope your company may set?

Advantages and Disadvantages of a PESTLE Analysis

What are the advantages of using a pestle analysis.

There are several advantages to conducting this analysis for your business. Here’s a breakdown:

• It is a simple and straightforward framework that is easy to implement into your strategic plan.
• It also allows you and your team to facilitate a great understanding of the wider business environment and how current events can potentially affect your business.
• Additionally, it helps organizations anticipate business threats and figure out how to mitigate the risks. Plus, it helps organizations spot business opportunities on which they can capitalize.

What are the disadvantages of using a PESTLE Analysis?

While it’s a great tool, here are a few of the disadvantages to using this:

• This assessment can be as light or as heavy as one wants to make it.
• It is easy to oversimplify the data or collect insufficient data.
• It is also easy to make it too heavy by collecting too much data and becoming so overwhelmed that you don’t know where to start. This is a phenomenon called ‘analysis paralysis.’
• It’s a great tool, but it doesn’t analyze your organization’s internal strengths and weaknesses. That’s why we recommend using it in conjunction with your SWOT Analysis.

Best Practices – When and How to Use this Assessment:

You should conduct your PESTLE Analysis in the pre-planning stages of your business or strategic plan with a SWOT Analysis. A SWOT looks at your organization’s internal strengths and weaknesses and the external opportunities and threats the market presents. This will be an excellent companion piece to your SWOT as it informs your SWOT by looking at all aspects of the external market environment.

So, when conducting your analysis, break down each factor and look at both the positive aspects you can leverage (the opportunities) and the pitfalls to avoid (the threats) within the political, economic, social, technological, legal, and environmental spheres. If you want to see some real world examples, check out our PESTLE Analysis Examples .

While this exercise is typically conducted in the beginning stages of a strategic plan, it is best to set a regular cycle to check in and revisit it. With the speed at which things are constantly shifting and changing, the analysis you conducted five years ago may need to be revised today. It is best to update it at a minimum every three years. Or, when you update your SWOT. It can be helpful to look at these trends annually, too. Make it a habit to keep a pulse on current events and market changes, so you always know what is going on in your market and how it will affect your organization.

Conclusion: Where does PESTLE Analysis fit into strategic planning?

Leveraging your PESTLE Analysis as the first step to your business and strategic planning process is the ultimate way to ensure that you know all the areas your business can capitalize on and which pitfalls you can work on to mitigate. This will help you get the complete picture of where your organization is playing and just what you need to ensure that you will win.

PESTLE Analysis FAQs

A PESTLE Analysis examines external market factors – including Political, Economic, Social, Technological, Legal, and Environmental – and market trends that might impact your organization’s direction, performance, and position in the marketplace. Used in tandem with a SWOT Analysis, it helps your organization examine external factors that could influence your organization’s opportunities and threats .

It also allows you and your team to facilitate a great understanding of the wider business environment and how current events can potentially affect your business. Additionally, it helps organizations anticipate business threat. figure out how to mitigate risks, and help organizations spot business opportunities to capitalize upon.

One of the disadvantages of a PESTLE Analysis is that it can be as light or as heavy as one wants to make it. It is easy to oversimplify the data or collect insufficient data. While it’s a great tool, but it doesn’t analyze your organization’s internal strengths and weaknesses. That’s why we recommend using it in conjunction with your SWOT Analysis.

This helpful analysis can help you assess and plan for what might impact your organization – and either seize those forces as opportunities or work to mitigate them as threats. Using a PESTLE allows you to look ahead at challenges your organization may encounter and create strategies to address them.

PESTLE Analysis is typically conducted in the beginning stages your strategic planning process to help evaluate your organization’s macro-market. It is best when used in tandem with your SWOT Analysis to examine the current state of your organization.

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PESTEL Framework: The 6 Factors of PESTEL Analysis

The PESTEL framework (political, economic, social, technological, environmental, legal) helps managers assess how external factors affect a business.

The PESTEL framework is a strategic planning tool for analyzing an organization's external business environment. By identifying six key external factors that greatly impact business operations and performance, the framework will facilitate an easier and more efficient decision-making process.

What is the PESTEL Framework?

The PESTEL framework, or PESTEL analysis, is a business planning template that identifies and assesses how Political, Economic, Social, Technological, Economic, and Legal factors are affecting an organization or industry. Depending on the analysis results, businesses can improve their strategic management and planning while responding to forces that are out of their control and gaining a competitive advantage.

PESTEL Framework External Factors

PESTEL factors are often present in other types of similar analyses. Business managers can choose any, based on the nature of the organization and the factors they wish to study. These different frameworks help to identify key factors to acknowledge, understand, and potentially use to their advantage. These include:

• STEP or the more popular PEST analysis that misses the Legal and Environmental factors
• STEEP analysis is based on the PESTEL framework minus the Legal part
• STEEPLE analysis adds the Ethical factors
• STEEPLED analysis includes the same factors plus ethical and demographic factors

What exactly do the categories in the PESTEL framework consist of? Each is unique and offers a broad understanding related to factors involving politics, economy, social traits, tech uses, environment, and legalities.

I have discussed some characteristics of these external factors below. For a more detailed breakdown of these factors, check out this article . The article will help you determine which factors are more important to the company's strategy. This might serve as preliminary inspiration. However, you will have to dig deeper into the details to make accurate decisions.

Political Factors in PESTEL Framework

Politics plays an important role in business. This is because there is a balance between systems of control and free markets. As global economics supersedes domestic economies, companies must consider numerous opportunities and threats before expanding into new regions. Political factors may even help determine the location of corporate headquarters.

This category can sometimes combine laws (from the legal group) since the government and their bills are closely linked. In general, you should focus on the political trend the current administration is leaning toward. Is the current government favoring open trade or focusing more on border control? Are they expected to stimulate the economy, or are they looking to improve the health system? Do they care more about corporations or about the workers?

Some of the political factors you need to watch and include in your PESTEL framework are:

• Stability of government and change of leadership
• Government policies
• Trade tariffs
• Tax policies
• Regulations
• Social policies (e.g. social welfare etc.)
• Trade regulations (e.g. the EU & NAFTA)
• Labor regulations
• Political trends

Political factors examples in PESTEL analysis

• Tax Policy : A government may increase corporate taxes, affecting company profits and potentially discouraging foreign investment.
• Trade Regulations : The imposition of tariffs on imported goods can increase production costs for companies relying on foreign raw materials.

You may find a more extensive list of political factors and how they affect businesses here .

Economic Factors in PESTEL Framework

Economic factors are metrics that measure the health of any economic region. The economic state will change many times during the organization's lifetime. You must compare the current levels of inflation, unemployment, economic growth, and international trade to better carry out your strategic plan.

General economic factors, such as goods, services, monetary value, and currency, will affect any business or product. Indicators like exchange rates, GDP, and inflation are critical to management. They can tell when it is a good time to borrow and help determine how an economy might react to certain changes.

Some examples of economic factors you can take into account in your PESTEL framework are:

• Disposable income of buyers
• Credit accessibility
• Unemployment rates
• Interest rates
• Exchange rates

Economic factors examples in PESTEL analysis

• Interest Rates : Higher interest rates can increase borrowing costs, leading to reduced capital spending by businesses.
• Economic Growth : An uptick in economic growth can boost consumer spending, leading to higher demand for products and services.

You may find a more extensive list of economic factors and how they affect businesses here .

Social Factors in PESTEL Framework

Social factors assess the mentality of individuals or consumers in a given market. These are also known as demographic factors. This category focuses on buying behavior and how consumer needs can affect the value and necessity of a product or service. The following are some social factors to focus on in your PESTEL framework:

• Population demographics: (e.g. aging population)
• Distribution of Wealth
• Changes in lifestyles and trends
• Educational levels
• Cultural differences
• Ethnicities

Social factors examples in PESTEL analysis

• Demographic Shifts : An aging population may increase demand for healthcare services and products tailored to senior citizens.
• Cultural Trends : A growing trend towards sustainability can influence consumer preferences, leading businesses to adopt greener practices.

You may find a more extensive list of social factors and how they affect businesses here .

Technological Factors in PESTEL Framework

This step entails recognizing the potential technologies available. Technological advancements can optimize internal efficiency and prevent a product or service from becoming obsolete. The role of technology in business is increasing each year, and this trend will continue because R&D drives new innovations.

Recognizing evolving technologies to optimize internal efficiency is a great asset in management. But there are a few threats. Disruptive innovations such as Netflix affect DVD players' business. The best strategy is to adapt to the changes. Your strategies should sidestep threats and embrace opportunities.

Technology is continuously evolving — and not just digital technology, although the use of applications, websites, and similar products is on the rise. But even technology related to manufacturing, distributing, or communicating with consumers/employees must be considered too.

This is a large challenge for management. Below is a list of common technological factors to become part of a PESTEL framework:

• New discoveries and innovations
• Rate of technological advances and innovations
• Rate of technological obsolescence
• New technological platforms (e.g. VHS and DVD)

Technological factors examples in PESTEL analysis

• Advancements in AI : New artificial intelligence technologies can streamline operations and improve efficiency in industries like manufacturing and customer service.
• Cybersecurity : Rising threats in cyber security can compel businesses to invest significantly in secure IT infrastructures to protect sensitive data.

You may find a more extensive list of technological factors and how they affect businesses here .

Environmental Factors in PESTEL Framework

Sometimes referred to as ‘ecological’ factors as well, these PESTEL external factors involve physical changes. Think less of the workplace environment—which would apply to communication among employees—and more about how locations are affected.

Both consumers and governments penalize firms for adversely affecting the environment. Governments levy huge fines upon companies for polluting. Companies are also rewarded for having a positive impact on the environment. Consumers are willing to switch brands if they find a business ignoring its environmental duties.

The impact on the environment is a rising concern. Note that the environment benefits the company too. Running water for a hydro-power plant is an example.

A few common environmental factors of the PESTEL framework are:

• Waste disposal laws
• Environmental protection laws
• Energy consumption regulation
• Popular attitude towards the environment

Environmental factors examples in PESTEL analysis

• Climate Change : Increasing awareness of climate change can push companies to reduce carbon emissions and adopt more sustainable practices.
• Regulations on Waste : Stricter environmental regulations regarding waste management may require companies to invest in new recycling processes and technologies.

You may find a more extensive list of environmental factors and how they affect businesses here .

Legal Factors in PESTEL Framework

This final step involves learning about the laws and regulations in your region. In other words, ways in which particular laws may affect business, ideas, or concepts. It is critical to avoid unnecessary legal costs. The laws are created by policymakers and government bodies, which is why they are sometimes weaved within the political section of PESTEL analysis. But the regulations here focus on the well-being of consumers or society rather than benefiting the agencies that crafted the laws.

This is the last factor in the PESTEL framework. These factors overview the legal elements. Often, start-ups link these elements to the political framework. Many legal issues can affect a company that does not act responsibly. This step helps to avoid legal pitfalls. You should always remain within the confines of established regulations.

Common legal factors that companies focus on include:

• Employment regulations
• Competitive regulations
• Health and safety regulations
• Product regulations
• Antitrust laws
• Patent and Copyright infringements
• Import/Export laws

Legal factors examples in PESTEL analysis

• Data Protection Laws : New regulations like the GDPR impose strict rules on data management, affecting how companies collect and handle personal information.
• Employment Laws : Changes in labor laws, such as minimum wage increases, can impact operational costs and hiring practices.

You may find a more extensive list of legal factors and how they affect businesses here .

Why use the PESTEL Framework and How to do a PESTEL analysis

When you go through each of the six categories and apply the insights to a business, product, or concept, you will understand what is standing in the way of its success. Conducting a PESTEL analysis is a pivotal step before making significant decisions or embarking on major projects. Understanding all the influencing factors is the first step to addressing them.

While you can’t change fixed external elements like copyright laws, taxes, or inflation rates, understanding their direct impact on a business each quarter is paramount. For example, you can understand what percentage of taxes will cost your business each quarter and what it means for the economy as a whole if inflation rates skyrocket and how that impacts the business world.

With this understanding in place, you can use it to your advantage. Especially in comparison to competitors who may not leverage the richness of insights provided by a PESTEL analysis .

Remember, there are many factors other than these which can have an effect on business success.  The evaluation is a one-to-one process; what proves beneficial for one company might pose significant challenges for another. Identifying factors with strategic and competitive implications allows you to tailor your business strategies effectively.

Undertaking a PESTEL analysis is a comprehensive endeavor due to the complexity of the macro-environment. However, mastering this framework helps you systematically identify each opportunity and threat, enabling a structured and strategic approach to business planning.

Once you have mapped out the PESTEL framework, it becomes a foundational tool for strategic development. The insights derived from analyzing macro-environmental factors will inform and shape your business strategies, ensuring they are as responsive to current and future external conditions as possible.

If you’re gearing up to align a company’s strategies or simply aiming to enhance your decision-making process, starting with a PESTEL analysis is a prudent move. Armed with a deeper understanding of your operational environment, you’ll be better positioned to make informed, strategic decisions. For a practical guide and resources on how to conduct a PESTEL analysis, check out this step-by-step guide —it’s an investment in knowledge that pays the best interest for your business’s future. Also make sure to check out examples of PESTEL analysis here .

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Amazon PESTLE Analysis: An Overview for E-commerce Giant

• Updated on December 16, 2023

PESTLE analysis is one of the best known strategic business analysis tools. This article is a PESTLE case study , where we’ll go through the Amazon PESTLE analysis to see how this Political, Economic, Sociological, Technological, Legal and Environmental analysis of the e-commerce giant.

A PESTLE analysis is a framework that lets you understand the external environment surrounding your business. This wider realization of business strategies and their impacts can help your business to correct past mistakes and make the accurate decisions in the future. The effect of a (or multiple) PESTLE analysis (or analyses) can be a “wide opener event” for your company.

Due to the fact that you will be categorizing, researching and analyzing various types of external factors affecting your business, the analysis itself will require time, attention and effort. You are going to go through possible threats and opportunities facing your business.

These threats can help you realize to take immediate action and eliminate them. On the other hand, realizing untouched and unexploited opportunities can open new doors for you and your business. While you can minimize any threat’s impact, you can also maximize the impact of business opportunities whether they are financial, organizational or even social.

Useful PESTLE Tools

The exact categories of a PESTLE analysis are Political, Economic, Social (or Sociocultural), Technological, Legal and Environmental (or Ecological). If you are an owner of a business, a potential future CEO or a start up founder, you can conduct your own PESTLE analysis for your business as well!

The best and easiest way to do it is to list the factors in a spreadsheet in Microsoft Excel. Here, you can find an Excel template that provides you a simple yet professional looking design in order to conduct your own analysis. And it is completely free to use, download it now!

– This image is from Someka’s PESTLE Analysis Excel Template –

Perhaps, you are wondering how to start a PESTLE analysis. Here is a blog post all about it! The history of the concept, the different versions of the acronyms and their changing outcomes, how a PESTLE analysis can advance your business into the next stage, the pros and cons of the analysis, the comparison between a SWOT analysis and a PESTLE analysis and also a PESTLE analysis example of one of the biggest companies in the world are all in the blog post!

There is also an instruction section for you to start and conduct your analysis in seven easy steps. So, you can download the template and whilst reading the blog post, you can create your own PESTLE analysis step by step.

Similar “Threats” and “Opportunities”

If the PESTLE concept seems familiar with all the terms such as “threats” and “opportunities”, you are correct. A SWOT analysis lists the strengths, weaknesses, opportunities and threats of a company without categorizing them. It is a very general ‘all in’ analysis for someone to read and get a general idea of a company.

A PESTLE analysis can be more detailed and actually direct and specific on the factors that it depicts because they are categorized accordingly. Below, you can find the PESTLE analysis of the biggest ecommerce company in the world: Amazon.

Amazon PESTLE Analysis

Amazon.com , Inc. (or shortly Amazon) was founded by Jeff Bezos in Bellevue, Washington on July 5 th , 1994. The company started as an online marketplace for only books . However, as it grew, it expanded into selling electronics , furniture , jewellery and just about everything .

Let’s discover Amazon Pestle Analysis now!

Political (External) Factors

Being the biggest ecommerce company in the whole wide world forces Amazon to keep good and healthy relations with different countries. This means Amazon has to comply and obey the ‘suggestions’ or much more strict regulations of various governments. But that does not mean Amazon does not have dependent stability in and with some of the biggest countries and biggest Amazon buyers.

For example:

Amazon is a big force in the United States and that is an incredible opportunity which not many companies have in their hands.

Even though Donald Trump has benefited Amazon Inc. by cutting its taxes and helping the company to pay an incredible $0 in federal taxes in 2019, their relationship has not been perfect.

Trump does not like (at least he did not like when he was the President) American companies operating and manufacturing their products overseas. He focused on trade protectionism and put new regulations in order to keep ‘American jobs’ in the United States. Amazon’s operations, foreign imports and the number of tariffs was threatened by the administration. Good news for Amazon, Trump’s term as the

President has ended. Bad news for Amazon, Joe Biden won the Presidency.

Biden’s Labor Agenda

A company such as Amazon which pushes against its warehouse workers’ wishes to form unions can clash with the new President who promises to be “the most pro-union President” ever. Biden proposed various reforms regarding workplace conditions advancements and broaden the worker protections. He has policies planned to give more power and authority to workers in his new labor agenda.

Amazon has also its concerns over Biden’s determination on antitrust issues, breaking up monopolies and properly taxing the big tech companies. It is said that the Biden administration will be tougher on these issues than the previous two administrations (in which Biden was the Vice President in Obama’s term).

In fact, Amazon entered the Chinese retail market quickly. It was the most popular ecommerce company in the country. And then, services such as Alibaba’s Taobao and JD.com became popular and took the reins.

Additionally, Amazon has to compete with the giants as well as other local and smaller companies such as Pinduoduo and VIP.com. Amazon has a tough competition in China and it has struggled quite a bit.

So much that Amazon has actually shut down its marketplace in China . Its (Chinese) website can be accessed; however, all the products listed are imported from other countries overseas that still have a functioning marketplace for Amazon. That means China does not technically have Amazon, it only has deliveries from Amazon.

Economic Factors in Amazon Pestle Analysis

If your country’s economy flourishes, then everyone can make more money. An increase in salaries, wages, pensions and incom e can also increase the level of ‘disposable income’ for every household. Amazon can invest more in production, warehouses, storage and distribution systems in these developed markets such as the United States and majority of the European countries because they can and will steadily continue to buy.

You can buy the latest iPhone from Amazon’s website . Also, you can buy a weekly subscription of toilet papers delivered right to your house. And, you can even buy jewelry priced for hundreds of thousands of dollars as well. That is what makes Amazon, Amazon.

Continue to grow?

Amazon can still advance its techniques, operations and systems in developing markets. There is an enormous potential regarding financial gain for Amazon in some of the countries in Europe, Asia and Africa which do not have Amazon as their most popular ecommerce company. Amazon has conquered the United States as the ‘leader in online retail’ but there are a lot of countries in which Amazon is not placed as the most used ecommerce website among customers and citizens.

New tax laws can diminish Amazon’s profit significantly, if the new tax regulations are forced on Amazon. Warren’s taxation plan for Amazon was to introduce a 7% corporate tax which could create 698 million dollars. Even though Warren did not take the office, it is reported that Warren still gets in touch with Biden regarding a number of issues.

Social (or Sociocultural) Factors

The number of people who are buying products online are gradually increasing = An opportunity

The easier it gets for everyone to shop online, the more people are going to do it. It is an inevitable feature of the world wide web that so often gets people addicted to it. In addition to that, every new generation who gets their own smartphones or smart devices buy products online. And the most popular platform to buy your product from is Amazon.

Covid and Amazon

The pandemic caused an incredible number of stores, shops and companies to close down around the world. COVID-19 has done a lot of financial damage to local shops, average size companies and even some large corporations. But not Amazon! The pandemic actually helped Amazon immensely: Their quarterly profits doubled, its net sales has risen by 40% and Jeff Bezos became the first person to have a net worth to surpass $200 billion .

The vaccines have been created and the vaccination processes have started in various countries. However, it is not quite possible (for now) to figure out when everything will go to the ‘old normal’. That is why there are new lockdowns happening around the world (especially in Europe), quarantines do still continue and there are curfews in place in some of the countries.

And Amazon takes advantage of this situation (knowingly or unknowingly) due to the fact that it can deliver whatever you want right to your house and to your front door. This is an important factor in Amazon’s Pestle analysis .

The world stopped when the pandemic hit. Almost every institution had to close down temporarily or permanently and some of them were forced to lay off a quite amount of their employees. However, Amazon actually hired more employees . The company employed 427,300 more people between January 2020 and October 2020. Globally the number of its employees reached more than 1.2 million people.

Technological Factors

Amazon has an amazing and unique system of keeping track each of the production, distribution and delivery processes. Other than the technology it uses in its factories, Amazon is also developing and using new transportation technologies in regard to its delivery system. This means that you can see drones delivering your products right to your front door pretty soon.

So, Amazon is trying to figure out a faster way of delivery; an unmanned transportation system and a new age in technology. This can, without a doubt, change the delivery system of products. However, at the same time, it can also hurt one of the areas Amazon takes pride in.

As it was mentioned as one of the opportunities in the social factors, Amazon employs a lot of people. And it continues to hire more and more people. Changing the whole delivery system to drones can surely be the more profitable solution for Amazon. But on the other hand, it also eliminates employees.

Drone Delivery?

It is uncertain that Amazon can maintain the drone delivery system for a certain amount of time, so Amazon drivers are not going anywhere soon. But that ‘soon’ can be earlier than some of the people have thought. And even if Amazon gets rid of some of the delivery drivers, there can be protests and a lot of bad publicity in regard to the new air delivery system of Amazon.

A leak of Amazon user details can be a huge gift to cyber criminals to take control of the accounts of users. These hackers can go through all of the information a user stores in his or her account: Bank details, credit card numbers, phone numbers, detailed addresses, etc.

The other problem is phishing scams. An email sent to an unknowing user (seemingly by Amazon) informs them about the ‘opportunity to change their passwords’. The email details that their information has been leaked and their passwords have been compromised, so they need to change it.

And, in the Amazon PESTLE analysis perspective , they need to change it now. Then, an ‘Amazon customer service employee’ calls them in order to help them through the password change process. The user downloads and shares their screen with the customer service employee. So, what is the problem in this situation?

Unfortunately, the email did not come from an official Amazon email address. Also, the ‘Amazon employee’ does not work for Amazon. This is called a phishing scam. When the user gets into his or her Amazon account, the ‘customer service employee’ can look and note every detail. And (as it is not enough) they additionally charge them for the customer service they have provided.

Legal Factors

European Union formed the General Data Protection Regulation (GDPR) and in May 2018 it put an important regulation for companies operating in the countries in the European Union. It gave customers the right to demand a copy of all of their personal data from the websites they have created an account in.

This regulation also states that the data should be easy to understand for the user. The big tech companies such as Apple, Spotify, Google, YouTube and Amazon all changed their rules and complied with the new regulation. They made the user’s personal information available but there were some criticisms from the privacy campaign group “noyb” . They said that some of the data provided by the companies were “intelligible” and some of the data were not understood by the users.

Privacy issues?

Privacy issues have been on the news and caused an incredible amount of bad publicity to the ‘big tech’ companies. Perhaps the one company which took the most damage on the new privacy regulations and lawsuits was Facebook. But Amazon did not escape criticisms, lawsuits and

European Commission brought charges to Amazon as t he Commission claims the company violated European Union’s competition law . Even though Amazon denied the accusations, the Commission accused the company of using nonpublic data to give unfair advantage to big third party sellers rather than smaller ones.

These allegations, charges and lawsuits are not only happening in Europe. The United States Congress and the Federal Trade Commission also opened up investigations on Amazon’s treatment on third party sellers. After a 16 month investigation and deliberation period, the antitrust subcommittee concluded that Amazon is a monopoly force over the third party sellers present on its website.

And even though the European Union did not file legal charges for the company; the claims, the allegations and the charges brought still made the news and were covered by the reputable news outlets. That can harm a company’s image and brand, especially one of the big tech companies that had its issues with privacy and security in the past.

Environmental (Ecological) Factors

The good actions against climate change.

Amazon actually invests a lot of money into environmental and ecological programs and platforms that strive to reduce waste, diminish energy consumption and take on ecological challenges. Jeff Bezos himself donated 10 billion dollars to scientists, activists and nongovernmental organizations (NGOs) which focus their efforts to fight climate change.

These kinds of actions the company (and its founder) takes increases its popularity and the value of their brand as it supports a ‘low carbon lifestyle’. These energy saving policies also puts an emphasis on the business stability and the general sustainability of the company.

The ‘Not So Good’ Actions

These are all great efforts to fight the dangerous consequences; however, Amazon itself (its warehouses around the world, offices, vehicles, storages) emits so much carbon dioxide that it makes its efforts for climate change seem irrelevant. According to the report Amazon detailed, in 2018 the company emitted 44.4 million metric tons of carbon dioxide . That is almost equal to annual emissions of Norway.

Even though Jeff Bezos donates an incredibly large amount of money to a good cause, if the company hinders its efforts to do good to the environment, then all the donations and efforts mean nothing. The company tries to escape its responsibilities by throwing money to it. And, unfortunately, ecological issues such as climate change cannot be easily fixed only with money.

On top of that, one of Amazon’s most useful and utilized feature is Amazon Prime. The Prime subscription promises its customers a two day delivery. Therefore, its more than 100 million prime members receive their products that they ordered in a day or two. This increases the carbon emissions significantly.

FINAL WORDS FOR AMAZON PESTLE ANALYSIS

As you can see a PESTLE analysis can tell a lot of details and touch a lot of important areas of a company. Whether it is a huge company such as Amazon or your newly founded start up, a comprehensive, well researched and an accurate PESTLE analysis can be the thing your company needs. It can bring out past mishaps, controversies and mistakes to take notes on as well as future opportunities to be exploited and possible threats to carefully consider.

If you’re going to make a PESTLE analysis for your company, our PESTLE spreadsheets will help you.

You can instantly download:

• PESTLE Analysis Template – Excel Version
• PESTLE Analysis – Google Sheets Version

These templates have lots of benefits:

• Ready-to-use
• Editable and printable
• No installation needed
• Includes reference and guiding
• Sleek design
• Ready for presentations

Recommended Readings:

How to conduct PESTLE Analysis?

Amazon Swot Analysis

Walmart SWOT Analysis

Related Posts

PESTLE analysis

Discover what PESTLE means, and use our PESTLE analysis template and example to explore the external influences on your organisation

A PESTLE analysis studies the key external factors (Political, Economic, Sociological, Technological, Legal and Environmental) that influence an organisation. It can be used in a range of different scenarios, and can guide people professionals and senior managers in strategic decision making.

On this page

• What is a PESTLE analysis?
• How to do a PESTLE analysis
• PESTLE analysis tips
• What is a PESTLE analysis used for?
• Advantages and disadvantages of a PESTLE analysis
• Useful contacts and further reading

It is a broad fact-finding activity around the external factors that could affect an organisation’s decisions, helping it to maximise opportunities and minimise threats. It audits six external influences on an organisation: 

• Political: Tax policy; environmental regulations; trade restrictions and reform, tariffs, political stability.
• Economic: Economic growth/decline; interest, exchange, inflation and wage rates; minimum wage; working hours; unemployment (local and national); credit availability, cost of living.
• Sociological: Cultural norms and expectations; health consciousness; population growth rates; age distribution; career attitudes; health and safety.
• Technological:  New technologies are continually emerging (for example, in the fields of robotics and artificial intelligence), and the rate of change itself is increasing. How will this affect the organisation’s products or services?
• Legal: Changes to legislation impacting employment, access to materials, quotas, resources, imports/exports, and taxation.
• Environmental:  Global warming and the increased need to switch to sustainable resources; ethical sourcing (both locally and nationally), including supply chain intelligence.  Pandemics and other emergencies.

By analysing these factors, organisations can assess any risks specific to their industry and organisation, and make informed decisions.  It can also highlight the potential for additional costs, and prompt further research to be built into future plans. 

PESTLE analysis is part of the  core knowledge on enabling change  and the  core behaviour commercial drive  in the CIPD Profession Map.

What is a PESTLE analysis and how does it work?

A PESTLE analysis is a management framework and diagnostic tool.  The outcome of the analysis will help you to understand factors external to your organisation which can impact upon strategy and influence business decisions.

The PESTLE tool: PESTLE is an acronym for:

P = Political E = Economic S = Social T = Technology L = Legal E = Environmental Let’s look at each of these factors more closely,

POLITICAL: When looking at Political factors you will need to take into account your countries government policies and political stability.  Other factors will include tax implications, industry regulations and global trade agreements and restrictions.

ECONOMIC: Economic factors will include exchange rates, economic growth or decline, globalisation, inflation, interest rates and the cost of living, labour costs and consumer spending.

SOCIAL: Social factors look at trends such as lifestyle factors, cultural norms and expectations such as career attitudes and work-life balance.  It also concerns itself with consumer tastes and buying habits as well as population demographics.

TECHNOLOGY: Technology has grown exponentially. How is your business responding to technological innovation in your products and services?  Other technological advancements will impact on data storage, disruptive technologies such as smartphones, social networking, automation robotics and the increasing shift towards AI artificial intelligence?

LEGAL: Shifts in the Legal landscape are constantly changing especially here in the UK. Employment labour law and employment tribunal decisions impact upon working practices continuously. It is also important to keep up to date with all changes in legislation and of course Health and safety regulations.

ENVIRONMENTAL: Does your business have a direct impact on the environment? Political sanctions now govern carbon emissions and a move towards sustainable resources such as wind turbines and recycling. This area also covers CSR corporate social responsibility and ethical sourcing of goods and services which in turn has a direct impact on procurement and your businesses supply chain management.

Next steps: Once you are clear on the main overarching factors included in a PESTLE analysis the next challenge is to relate this in real terms into the industry sector you work in.

Good luck. 

Follow these steps:

• Identify the scope of the research. It should cover present and possible future scenarios, and apply to the industry and areas of the world in which the business operates. 
• Decide how the information will be collected and by whom. Identify more than one person to gather data to bring diverse evidence and perspectives.
• Identify appropriate sources of information. You may find some areas of PESTLE are a bigger focus to your industry than others but exploring information for all of them will give you a wider view of the external environment.
• Gather the information – you can use the template below. 
• Analyse the findings. 
• Mark each item in terms of importance in relation to potential risk to the organisation. 
• Identify the business options to address the issues.
• Write a discussion document for all stakeholders. 
• Disseminate and discuss the findings with stakeholders and decision makers. 
• Decide what actions need to be taken, and trends to be monitored. 

To be effective, a PESTLE analysis needs to be done regularly. Doing so can help organisations to spot trends early, and provide a competitive advantage.

You can download a PESTLE analysis template below. We’ve also created an example based on a fictitious retail sector organisation which shows how PESTLE factors have been analysed and interpreted.

Some useful tips for carrying out a PESTLE analysis:

• Collaborate - multiple perspectives can identify more risk.
• Use expertise and resources within the organisation.
• Use PESTLE analysis alongside other techniques, such as  SWOT analysis ,  Porter's Five Forces , competitor analysis, or scenario planning. 
• Incorporate a PESTLE analysis into an ongoing process for monitoring changes in the business environment.
• Avoid collecting vast amounts of detailed information without analysing and understanding your findings appropriately.
• Don’t jump to conclusions about the future based on the past or present.

By auditing the external environment, a PESTLE analysis can detect and understand broad, long-term trends. This can support a range of business planning situations, such as:

Strategic business planning

It provides contextual information about the business direction, its brand positioning, growth targets, and risks (such as another pandemic) to productivity. It can help determine the validity of existing products and services and define new product development.

Workforce planning

It helps to identify disruptive changes to business models that may profoundly affect the future employment landscape. It can identify skills gaps, new job roles, job reductions or displacements.

Marketing planning

It provides the ‘climate’ element in the situation analysis phase of the marketing planning process. It can help prioritise business activities to accomplish specific marketing objectives within a set timeframe.

Product development

By monitoring external activity, it can help inform whether to enter or leave a route to market, determine if a product or service still fulfils a need in the marketplace, or when to launch a new product.

Organisational change

It helps recognise the context for  change , and is most effective when used in association with a  SWOT analysis  to understand opportunities and threats around labour changes, such as skills shortages or current workforce capabilities. 

People strategies, reports and projects

It can be used as a framework to look outside the organisation to hypothesise what may happen in future and what should be further explored. It can ensure that some basic factors are not overlooked or ignored when  aligning people strategies to the broader organisation strategy .

Advantages:

• It’s a simple framework.
• It facilitates an understanding of the wider business environment. 
• It encourages the development of external and strategic thinking. 
• It can enable an organisation to anticipate future business threats and take action to avoid or minimise their impact.
• It can enable an organisation to spot business opportunities and exploit them fully.

Disadvantages:

• Some PESTLE analysis users oversimplify the amount of data used for decisions – it’s easy to use insufficient data.
• The risk of capturing too much data may lead to ‘paralysis by analysis’. 
• The data used may be based on assumptions that later prove to be unfounded. 
• The pace of change makes it increasingly difficult to anticipate developments that may affect an organisation in the future.
• To be effective, the process needs to be repeated on a regular basis.

Books and reports

Morrison, M. (2013)  Strategic business diagnostic tools: theory and practice . CreateSpace Independent Publishing. (Chapter 3: PESTLE).

Turner, S. (2002)  Tools for success: a manager’s guide . London: McGraw Hill.

Journal articles

Dobbs, M.E. (2014) Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review . Vol 24, No 1, pp32-45.

CIPD members can use our  online journals  to find articles from over 300 journal titles relevant to HR.

Members and  People Management  subscribers can see articles on the  People Management  website.

Blank PESTLE template PDF

Completed pestle example pdf.

This factsheet was last updated by Michelle Battista: Learning Community and Content Curator, CIPD

Michelle oversees the CIPD learning communities and the curation and presentation of learning to support professional development. 

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How To Do A Pestle Analysis In 6 Steps

A PESTLE analysis is a tried-and-true approach for identifying macro-environmental factors that might impact an organization.

This type of assessment can help teams with strategic decision-making, business analyses, and navigating periods of change. 

But, if you’re doing strategic planning for a large organization, division, or multiple SBUs, performing a PESTLE analysis quickly, accurately, and consistently can be challenging to get right.

This article will cover everything you need to know to complete a PESTLE analysis for your organization, including when you should do it, and how to combine it with other strategic frameworks.

• PESTLE, PESTEL or PEST analysis is a strategic framework used to identify macroenvironmental influences on an organization of a business.
• The PESTLE framework divides external influences into six sections: Political, Economic, Social, Technological, Legal, and Environmental.
• Pros: PESTLE is simple to understand and use, making it a good framework for businesses of all sizes.
• Cons: The validity of PESTLE assessment largely depends on the quality and amount of information available to an organization.

⚠️ Go beyond the forecast! Understanding external factors is crucial, but strategic advantage comes from action. Cascade Strategy Execution Platform bridges the gap between analysis and execution. Talk to our experts to transform your PESTLE insights into an actionable plan for navigating change and seizing opportunities.

When Should You Do a PESTLE Analysis?

While it may not be needed for all strategy-related activities, every company has multiple use cases for PESTLE analyses. Here are a few common examples:

• Strategic planning: PESTLE is a useful starting point for most strategic decision-makers and it can help lay the groundwork for more in-depth research. 
• Reviewing market position : Companies can use PESTLE to better understand shifts in market position over time and contextualize organizational growth, decline, or stagnation.
• Marketing planning: PESTLE can offer marketing teams valuable insights into external factors that impact marketing, PR, and advertising projects.
• Product development: PESTLE is helpful for understanding consumer sentiment from various angles and can assist organizations that want to know how products should be designed, changed, or marketed.
• Organizational change: Whether an organization is changing direction, restructuring, or expanding, a PESTLE analysis, combined with other strategic frameworks , can provide valuable information about external factors that will impact transformation initiatives.

What Are the 6 Elements Of PESTLE?

A PESTLE or PESTEL analysis divides macroenvironmental elements into six categories, each of which can impact an organization differently. Here are the six PESTLE factors:

Political factors

Political factors relate to the political interactions between governments, countries, and various political actors. 

For example:

• Diplomatic relations between countries
• Political stability and continuity
• How governments operate
• The prevalence of civil society
• The potential for political unrest
• Foreign trade policies

Economic factors

These encompass the key economic elements within the business environment that can impact your organization.

• Exchange rates
• Interest rates
• Economic growth rates
• Corporate taxation rates
• Unemployment rates

Social factors

Social factors or sociocultural factors define group consumer behavior and thinking. They can include quantitative, such as average age, and qualitative data, such as opinions.

• Demographics
• Education levels
• Social views
• Age distribution
• Disposable income
• Cultural stability

Technological factors

Technological factors are tech-related developments, shifts, and patterns that could directly or indirectly impact your business. This can include broader global or regional conditions.

• Internet connectivity
• Specific technologies, like automation
• Advancements in your industry
• Intellectual property
• Rate of technological change
• Research and development lifecycles

Legal factors 

Legal factors are current laws, regulations, and bills that may affect the organization’s operations and future plans. 

• Competitive regulations
• Health and safety regulations
• Government policy
• Tax policies
• Antitrust laws
• Import/export laws

Environmental factors

Environmental or ecological factors look at the impact of businesses on the environment and how the environment might affect the business.  

• Natural disasters
• Weather patterns
• Consumer health
• Climate change
• Resource availability

How Do You Do a PESTLE Analysis Step By Step?

While there is no clearly defined way of doing a PESTLE analysis from start to finish, a systematic planning process and approach can increase efficiency and impact.  

Here are six steps to do a PESTLE analysis the right way.

1. Prepare for your analysis 

Before you begin, lay the groundwork to ensure accuracy, quality, and focus. The saying “measure twice, cut once” will pay dividends down the line.

Create a founding document that answers these questions:

• Why — The reason you’re conducting a PESTLE analysis.
• What — The scope, goals , and initiatives.
• Who — The key people needed in the analysis process. 
• Where —  Where are we going to look for information?
• When — The deadlines for the data and final insights.

Answering these questions will explain how to approach your PESTLE analysis. 

Finally, organize a meeting with involved team members and stakeholders to present the plan, communicate success metrics, and get feedback.

2. Collect data for your PESTLE analysis

Gather the information you need to fill out your PESTLE diagram. This may require primary research and consultation with external industry experts. You will likely need various types of data and information.

But don’t get bogged down in data and research. A PESTLE analysis is meant to speed up traditional research by focusing your efforts.

To streamline the process, concentrate on one area at a time and address them sequentially according to the acronym. That way, team efforts can be focused, and progress tracking can be easier.

3. Complete a PESTLE diagram

It’s time to make sense of your research by putting the collected information into a PESTLE diagram. 

Remember that PESTLE analysis aims to cut through the noise and provide a clear idea of the external environmental influences to consider.

Divide the factors and segment them appropriately, making them easy to understand for the rest of the team. For example, if you are listing social factors, divide this list into sub-sections, such as consumer behavior, cultural norms, and work-related matters.

4. Interpret and evaluate your results

Use this information to interpret the macroenvironmental factors that can impact your organization's future plan and come up with strategies to handle them. 

Remember, not all factors will have the same impact and importance to your organization. You can use tools like a risk matrix to assess the probability of occurrence and impact on your organization. This will help you to focus your efforts and prioritize strategic initiatives . 

Add additional context to your analysis by including data from other strategic frameworks you’re using, such as a 7S Model , Porter’s Five Forces, or GE Matrix . 

Each strategic framework offers a different perspective to help with:

• Understanding how macroenvironmental factors intersect and interact.
• Spotting missed opportunities and threats for your business.
• Determining how your organization is best-equipped to handle potential issues.

5. Put together an action plan

Use insights from your PESTLE diagram and other strategic analyses to create an action plan that addresses identified risks, threats, and opportunities. 

For example, the rising logistical cost (a combination of technological and economic factors) of moving products to particular markets could be handled in a number of ways, such as: 

• Shifting the organization’s growth focus to other markets.
• Insourcing key parts of the logistics chain.
• Revising the organization’s pricing strategy.
• Developing internal capacities to build components.
• Outsourcing production to a third party in another country.
• Lobbying governments to reduce trade tariffs and excise fees.

Once your plan is in place, start executing .

6. Review and monitor external signals

New technology can disrupt an industry, diplomatic relations can sour, and customer sentiment can shift. 

Any strategy that doesn’t evolve and adapt won’t have an actual impact. Make sure that revision and monitoring are fundamental parts of your strategic processes.

You need to treat strategy, execution, and analysis as complementary elements if you want to create an adaptive strategy and successfully manage disruptions.

💡Tip: Use a strategy execution platform like Cascade to speed up and improve strategic business planning and execution. With Cascade, you can plan, measure, and report on strategic initiatives all in one place. By bringing your team in, you can collaborate on shared goals without spending time in meetings to keep everyone aligned.

PESTLE Analysis Example: Starbucks

Starbucks is well known across the world with 32,000 locations in over 80 countries. Here’s an example of how a PESTLE analysis might look for this global coffee brand:

• Political awareness and activism in different countries. 
• Political sentiment towards ethical sourcing strategies and conformance to “Fair Trade” practices.
• The possibility of war or conflict in regions that have Starbucks locations.
• Sanctions and diplomatic relations between the U.S. and other countries.
• Economic recessions or booms in specific countries.
• Fluctuating exchange rates impacting supply chain activities.
• The average income of Starbucks customers.
• Operational costs in different cities, states, and countries.
• Consumer behavior in response to economic conditions.
• Changing consumer preferences and buying habits around coffee.
• Specific preferences based on region, culture, and history.
• Age groups of people who drink Starbucks coffee.
• Changing work patterns (remote vs location-based work).

Technological

• The increased use of at-home coffee brewing equipment.
• The shift towards digital avenues of marketing and interaction.
• The growing use of e-commerce globally.
• Technological innovations in coffee agriculture and processing methods.
• Infringement on the Starbucks logo, color scheme, and other copyrights.
• Varying tax obligations in different regions.
• Customs, tariffs, and import requirements.
• Compliance with specific workplace legislation.
• Health and safety regulations in factories, stores, and other facilities.

Environmental

• Farming and processing impacts, such as water usage and carbon footprint.
• The effect of single-use packaging, such as paper and plastic cups, and straws, on the environment.
• Extreme weather and natural disasters in areas where Starbucks coffee is farmed.

📚 Recommended reading: 

Strategy study: How Starbucks Became Everyone's Cup Of Coffee

What Are PESTLE Advantages?  

• Provides additional context for business direction and strategic planning .
• It helps strategic planners quickly identify external threats and opportunities.
• Organizations can use PESTLE to better understand the impact of different risks on their business strategy.
• It can be combined with other strategic analyses , such as SWOT, to accurately identify an organization's position in the market.

What Are PESTLE Disadvantages?  

• If efforts aren’t focused, research and data collection can become overwhelming.
• PESTLE shouldn’t be considered a one-off task and should be done repeatedly.
• External factors can rapidly change, meaning a PESTLE analysis has a limited validity window. 
• The accuracy of PESTLE relies on the quality and amount of data available to an organization.

PESTLE vs SWOT Analysis: How To Use Both?

Take your strategic analysis further by combining PESTLE with a SWOT analysis . SWOT can help interpret the data from a PESTLE analysis by contextualizing it with your business’s unique strengths and weaknesses.

Both analytical frameworks have their place in strategic planning. However, using both will give a complete picture of your business’s position, potential, and risks.

Turn Insights Into Results With Strategy Execution Software 🚀

A PESTLE analysis can identify macroenvironmental factors that can impact organizations. But strategic planners need more than analytics and insights to execute a business approach that will actually have an impact.

And, if your processes are fragmented, uncoordinated, and stuck in the planning phase, you won’t reap the full benefits of PESTLE or any strategy planning tool .

That’s where Cascade comes in. Cascade’s strategy execution platform is purpose-built to help businesses spend less time planning and more time executing what matters.

Get started for free or schedule a call with a Cascade expert to see how you can hit more goals and deliver business results faster. 

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Your toolkit for strategy success.

Unilever PESTEL Analysis

Before we dive deep into the PESTEL analysis, let’s get the business overview of Unilever. Unilever is one of the world’s leading suppliers of fast-moving consumer goods in food, home care, and personal care. 

Founded in 1929 due to a merger between the British soapmaker Lever Brothers and the Dutch margarine producer Margarine Unie, Unilever has become a global powerhouse in the FMCG (Fast Moving Consumer Goods) sector.

Here is an overview of Unilever’s business:

• Products and Brands : Unilever’s portfolio includes a wide range of products across diverse categories. Some of its most recognizable brands include Dove, Axe/Lynx, Ben & Jerry’s, Lipton, Magnum, Hellmann’s, Knorr, Sunsilk, and Surf, among others.
• Global Presence : Unilever operates in over 190 countries, and its products are used by billions of consumers daily. The company’s operations are often divided into regions: Europe, the Americas, Asia, Africa, and the Middle East.
• Beauty & Personal Care : This is the largest segment and includes skincare, haircare, deodorants, and oral care products.
• Home Care : This includes laundry detergents, household cleaning products, and related offerings.
• Foods & Refreshment : This segment comprises a diverse range of food products, including soups, bouillons, sauces, snacks, mayonnaise, salad dressings, spreads, and ice cream.

Financial Performance of Unilever in 2023

Turnover decreased 0.8% to €59.6 billion, and the underlying operating profit was €9.9 billion, up 2.6% versus the prior year.

Business Strategies that set FMCG giant “Unilever” a class apart

Here is the PESTEL analysis of Unilever

A PESTEL analysis is a strategic management framework used to examine the external macro-environmental factors that can impact an organization or industry. The acronym PESTEL stands for:

• Political factors: Relate to government policies, regulations, political stability, and other political forces that may impact the business environment. 
• Economic factors: Deal with economic conditions and trends affecting an organization’s operations, profitability, and growth. 
• Sociocultural factors: Relate to social and cultural aspects that may influence consumer preferences, lifestyles, demographics, and market trends.
• Technological factors: Deal with developing and applying new technologies, innovations, and trends that can impact an industry or organization. 
• Environmental factors: Relate to ecological and environmental concerns that may affect an organization’s operations and decision-making.
• Legal factors: Refer to the laws and regulations that govern businesses and industries. 

In this article, we will do a PESTEL Analysis of Unilever.

PESTEL Analysis Framework: Explained with Examples

Political 

• Trade Regulations and Tariffs : Unilever operates in over 190 countries, so changes in trade policies, such as the imposition of tariffs or trade barriers, can have significant implications on its supply chain and distribution strategies.
• Political Stability : Countries with political unrest or instability can affect Unilever’s operations. For instance, civil strife, sudden regime changes, or political violence can disrupt the company’s manufacturing, distribution, or sales processes in those regions.
• Government Policies : Governmental policies related to health, safety, and quality standards can impact Unilever’s product formulations. For instance, certain countries may restrict specific ingredients in personal care or food products.
• Taxation Policies : Changes in tax regulations or corporate tax rates in countries where Unilever has significant operations can influence its financial performance.
• Regulation on Advertising and Promotion : Governments may impose regulations on how certain products (like foods with high sugar content or skincare products) are advertised or promoted. This can affect Unilever’s marketing strategies.
• Environmental Regulations : Political decisions related to environmental conservation can affect Unilever, especially given the company’s sustainability objectives. For example, regulations related to plastic packaging or waste management can impact Unilever’s operations.
• Foreign Relations and Geopolitical Issues : Political relationships between countries can affect Unilever’s operations, especially in regions with geopolitical tensions. For instance, strained relations between countries could affect trade and business operations.
• Regulations on International Investment : Some countries may have restrictions or policies encouraging or discouraging foreign investments. This could influence Unilever’s decisions to set up factories and distribution networks or even to enter or exit specific markets.
• Labor Laws : Political decisions related to labor, such as minimum wage regulations, worker rights, and union-related policies, can impact how Unilever manages its workforce in different countries.

• Global Economic Conditions : Economic downturns, recessions, or global economic crises can affect consumer spending habits. During economic downturns, consumers might switch to cheaper alternatives, which could affect sales of some of Unilever’s premium products.
• Currency Exchange Rates : Given its global operations, fluctuations in exchange rates can significantly impact Unilever’s earnings. A stronger or weaker currency can influence the cost of importing raw materials and sales profitability in foreign markets.
• Interest Rates : Changes in interest rates in different countries can impact Unilever’s financing decisions and costs. Higher interest rates can increase borrowing costs, whereas lower rates might present expansion opportunities.
• Inflation Rates : High inflation in a country can increase raw materials, production, and labor costs. It also affects consumer purchasing power, which might impact sales.
• Consumer Purchasing Power : A rising middle class and increasing disposable income in emerging economies can lead to greater demand for Unilever’s products. Conversely, economic challenges can decrease this power, leading to reduced sales.
• Employment Rates : High employment rates often correlate with higher consumer confidence and spending, benefiting companies like Unilever. Conversely, high unemployment can lead to decreased consumer spending.
• Raw Material Prices : The costs of raw materials, such as agricultural commodities for food products or chemicals for cleaning products, can fluctuate based on global economic conditions. Such fluctuations can impact Unilever’s cost structure and profitability.
• Competitive Landscape : Economic conditions can influence the competitive environment. During challenging times, there might be price wars, new entrants looking for market share, or even consolidation in the industry.
• Economic Policies : The economic policies of countries, such as fiscal policies, monetary policies, or trade policies, can impact how Unilever operates in specific regions.
• Emerging Markets Dynamics : The growth rates and economic conditions in emerging markets, like India, China, or Brazil, can provide opportunities for expansion and growth for Unilever. However, they also come with unique economic challenges and volatilities.

Unilever SWOT Analysis

Sociocultural

• Changing Consumer Preferences : As societal values change, so do consumer preferences. For instance, there’s a growing trend towards natural, organic, and environmentally friendly products. If Unilever doesn’t adapt to these changes, it might lose market share to niche brands that cater to these preferences.
• Health and Wellness Trends : Increased awareness about health and well-being can influence purchasing decisions. There’s a rising demand for healthier food options, skincare products without harmful chemicals, and sustainable products.
• Cultural Nuances : Unilever operates in over 190 countries, each with its own cultural norms and traditions. What’s acceptable or popular in one culture might not be in another. For instance, beauty standards, dietary habits, and cleanliness norms can vary widely.
• Demographic Changes : Factors like aging populations in certain countries or young populations in others can influence product demand. For example, an aging population might increase the demand for certain healthcare or wellness products.
• Gender Norms and Roles : Changing perceptions about gender roles, especially in traditionally conservative societies, can impact the demand for specific products. For example, increasing acceptance of men’s grooming and skincare products in certain cultures can open up new markets for Unilever.
• Lifestyle Changes : As lifestyles change, so do consumption habits. For instance, the rise of urban living might increase the demand for convenience products. Similarly, increasing travel might boost the demand for travel-sized personal care items.
• Ethical and Social Responsibility Concerns : Modern consumers, especially younger generations, often prefer brands that uphold ethical values, support social causes, or have sustainability initiatives. Unilever’s commitment to sustainability, therefore, not only aligns with its corporate responsibilities but also caters to this consumer preference.
• Influence of Social Media : The power of social media influencers and online communities in shaping consumer perceptions and trends cannot be understated. A positive or negative review by a key influencer can significantly impact product sales.
• Family Dynamics : Changes in family structures and dynamics, such as increasing numbers of single-person households or dual-income families, can influence product preferences and consumption habits.
• Education and Awareness : Higher levels of education and awareness in societies can lead to increased demand for quality products and products that align with modern values (e.g., cruelty-free products).

Technological

• E-Commerce and Online Retail : The rise of e-commerce platforms offers a new avenue for sales. Unilever must ensure its products are readily available online and manage logistics efficiently in this digital sales environment.
• Data Analytics and Consumer Insights : Advanced data analytics tools allow companies to understand consumer preferences, habits, and buying patterns in more detail. This data can be leveraged for product development, targeted marketing campaigns, and inventory management.
• Digital Marketing : With consumers spending more time online, digital advertising and marketing techniques (like social media marketing, influencer collaborations, and content marketing) become essential tools to reach potential customers effectively.
• Supply Chain Management Systems : Technological advancements in supply chain management can lead to more efficient and cost-effective processes, reducing waste and ensuring timely delivery of products.
• Product Innovation : Technologies related to product formulation, research, and development can lead to innovative products that cater to evolving consumer needs. For instance, advancements in biotechnology might lead to new skincare formulations.
• Sustainable Technologies : Given Unilever’s commitment to sustainability, investing in technologies that reduce environmental impact (like eco-friendly packaging solutions) is crucial.
• Smart Manufacturing and Automation : Using automation, AI, and Industry 4.0 principles in manufacturing can improve efficiency, reduce costs, and increase production capacities.
• Digital Communication Tools : Technologies like chatbots for customer service, augmented reality for virtual product trials (e.g., virtual makeup testers), or mobile apps for loyalty programs can enhance the customer experience.
• Blockchain : Blockchain technology can be used in the supply chain to ensure transparency and traceability of products, especially for claims like “organic” or “ethically sourced.”
• Internet of Things (IoT) : In the context of consumer goods, IoT can lead to smart appliances that influence product formats. For example, smart fridges might suggest recipes based on their contents, indirectly influencing food product preferences.

Environmental

• Sustainability Initiatives : Unilever has made several commitments towards sustainability. Consumer preferences are also shifting towards products and brands that prioritize sustainability. Addressing this through sustainable sourcing, reducing waste, and other eco-friendly practices can impact Unilever’s brand image and operations.
• Climate Change : Changes in global climate patterns can affect the supply of raw materials, especially agricultural commodities. This might result in price fluctuations or the availability of essential ingredients for Unilever’s products.
• Water Usage : Many of Unilever’s products, especially in the personal care and home care segments, require significant water usage. Given the global concern over water scarcity, there’s a push for products that need less water or companies that adopt water conservation techniques in their manufacturing processes.
• Packaging Concerns : The environmental impact of packaging materials, especially plastics, is significant. To minimize its environmental footprint, Unilever needs to consider alternative packaging solutions that are biodegradable or recyclable.
• Regulations and Compliance : Many countries enact stricter environmental regulations concerning emissions, waste management, and sustainability. To avoid legal issues and potential backlash, Unilever must ensure compliance with these regulations across its global operations.
• Biodiversity : Sourcing certain natural ingredients can impact biodiversity, especially if not done sustainably. Ethical and sustainable sourcing is crucial to ensure that ecosystems are not harmed.
• Carbon Footprint : There’s a growing emphasis on reducing carbon emissions. Unilever’s manufacturing and transportation operations need to consider strategies to reduce their carbon footprint.
• Energy Consumption : Adopting renewable energy sources and optimizing energy use in manufacturing units can lead to operational cost savings and align with global sustainability goals.
• Consumer Awareness : Modern consumers are more informed about environmental issues. This awareness can influence their purchasing decisions, pushing them towards eco-friendly products and brands.
• Waste Management : Efficient waste management, especially in manufacturing units, is essential to reduce environmental impact and ensure compliance with local regulations.

• Regulatory Compliance : Different countries have varying regulations related to product standards, health and safety, labeling, advertising, and quality. Ensuring compliance with these standards across different markets is critical for Unilever.
• Intellectual Property (IP) Rights : Protecting patents, trademarks, and copyrights is vital for a company with numerous proprietary products and brand names. Additionally, Unilever needs to ensure it does not infringe on the IPs of others.
• Labor and Employment Laws : Different countries have diverse labor laws regarding working hours, wages, benefits, and workers’ rights. Adhering to these laws is crucial for Unilever’s operations in various regions.
• Trade and Tariff Regulations : As a global entity, Unilever must navigate international trade laws, customs duties, and tariff regulations that could impact its supply chain and distribution.
• Antitrust and Competition Laws : Given its significant market presence, Unilever needs to be cautious about potential anti-competitive behavior, monopolistic practices, or actions that could be perceived as limiting competition.
• Environmental Laws : Many countries have strict environmental regulations concerning emissions, waste disposal, water usage, and sustainability. Unilever must ensure its operations align with these environmental laws.
• Data Protection and Privacy : With the increasing importance of data in marketing and operations, adhering to data protection regulations like the GDPR in Europe is crucial for Unilever.
• Advertising and Promotion Laws : Countries may have specific rules about how products can be advertised, especially if they pertain to health claims, children’s advertising, or potentially misleading information.
• Taxation Laws : Given its operations across numerous countries, Unilever must navigate the complex web of international taxation laws, ensuring it pays the correct taxes in each jurisdiction and adheres to regulations related to profit repatriation, transfer pricing, and more.
• Contract and Commercial Laws : Engaging with suppliers, distributors, and other stakeholders requires contracts. Adherence to contract laws and international commercial laws is vital for smooth business relationships.

Check out the PESTEL Analysis of Global Businesses

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The pestel analysis for consulting.

As aspiring consultants entering the dynamic world of consulting, it is crucial to arm yourselves with effective tools and frameworks to navigate the complexities of the business landscape. A powerful tool that aims at the macro-level is the PESTEL analysis, which enables consultants to assess and understand the external factors that impact organizations .  This article delves into the intricacies of the PESTEL analysis, its six key sections, and provides an example of how it can be applied in the consulting industry.

Understanding the PESTEL Analysis 

PESTEL is an acronym that stands for Political, Economic, Social, Technological, Environmental, and Legal factors. It is a framework used to analyze and monitor external macro-environmental factors that can have a significant influence on organizations and industries.

The following list explains each of the factors and gives you an overview of what you need to keep in mind:

• P olitical Factors - Navigating the Political Landscape: Political factors encompass the political environment in which an organization operates . This includes government policies, regulations, political stability, trade policies, taxation, and legal frameworks. By assessing these factors, consultants can gain insights into potential opportunities and risks associated with political changes and government decisions.
• E conomic Factors - Assessing Economic Conditions: Economic factors focus on the economic environment and its impact on organizations . This includes factors such as economic growth, inflation rates, interest rates, exchange rates, unemployment levels, and consumer spending patterns. By analyzing these factors, consultants can understand the economic landscape, identify market trends, and assist clients in making informed business decisions.
• S ocial Factors Understanding Societal Influences: Social factors delve into the social and cultural aspects that shape consumer behavior, market trends, and business operations. Factors such as demographics, cultural norms, lifestyle changes, consumer attitudes, and social values come into play. Consultants can leverage this analysis to help clients understand customer preferences, target specific market segments, and align their strategies with societal shifts.
• T echnological Factors - Embracing Technological Advancements: Technological factors revolve around the advancements and innovations that impact industries and organizations . This includes technological infrastructure, research and development, automation, digitalization, disruptive technologies, and intellectual property. By staying abreast of technological changes, consultants can assist clients in leveraging emerging technologies, optimizing operations, and driving innovation.
• E nvironmental Factors: Embracing Sustainability and Climate Considerations: Environmental factors encompass the ecological and environmental aspects that organizations must address. This includes sustainability practices, climate change, environmental regulations, renewable energy, waste management, and resource scarcity. By incorporating environmental considerations into their strategies, organizations can meet societal expectations, mitigate risks, and create sustainable business models.
• L egal Factors - Navigating the Legal Landscape: Legal factors encompass the legal framework and regulations that organizations must adhere to. This includes employment laws, consumer protection regulations, intellectual property rights, health and safety standards, and industry-specific regulations. By understanding the legal landscape, consultants can guide clients in compliance matters, identify legal risks, and support them in developing strategies that align with the legal framework.

Applying PESTEL Analysis in the Consulting Industry 

Let's consider a case where a consulting firm is assisting a global technology company in entering a new international market. By conducting a PESTEL analysis, the consultants can gain insights into various aspects:

• P olitical:  They assess the political stability, trade policies, and regulations of the target market , providing crucial information for market entry strategies.
• E conomic:  They analyze the economic conditions , including GDP growth, exchange rates, and consumer spending patterns, to evaluate the market's potential and economic risks.
• S ocial:  They identify cultural nuances, demographic trends, and consumer preferences , enabling the client to tailor their products and marketing strategies accordingly.
• T echnological:  They assess the technological landscape, including infrastructure and digital readiness , to guide the client in adopting suitable technologies and addressing potential challenges.
• E nvironmental:  They evaluate environmental regulations, sustainability expectations, and market demand for eco-friendly solutions , enabling the client to align their operations and offerings accordingly.
• L egal:  They analyze the legal framework, including compliance requirements and intellectual property protection, assisting the client in navigating legal complexities and ensuring regulatory adherence.

The PESTEL analysis serves as a vital tool for consultants in understanding the external factors that shape industries and organizations. By analyzing the political, economic, social, technological, environmental, and legal landscape, consultants can provide valuable insights to clients, facilitate informed decision-making, and drive strategic success . As graduates embarking on a consulting career, mastering the PESTEL analysis will prove invaluable in helping clients thrive in an ever-evolving business environment.

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PepsiCo PESTEL/PESTLE Analysis & Recommendations

PepsiCo is the second biggest company in the global food and beverage industry. To keep this position, PepsiCo’s strategic decision-making processes must account for the issues outlined in this PESTEL/PESTLE analysis. The PESTEL/PESTLE analysis model is a strategic management tool that identifies various external factors relevant to firms, based on the conditions of their remote or macro-environment. In PepsiCo’s case, these factors determine the company’s growth path. The global market presents challenges that threaten PepsiCo while creating opportunities for improvement. Thus, strategies and reforms based on the elements of the PESTEL/PESTLE analysis model can boost PepsiCo’s long-term growth.

PepsiCo’s long-term growth trajectory is partly dependent on how the company addresses the major issues identified in this PESTEL/PESTLE analysis. PepsiCo must develop strategies that enhance its abilities to withstand the external factors in the business environment of the international fast-moving consumer goods industry.

Political Factors Affecting PepsiCo’s Business

Governments are external factors that impose requirements on PepsiCo. This element of the PESTEL/PESTLE analysis considers the effects of governmental action on companies’ remote or macro-environment. PepsiCo must address the following political factors:

• Political stability in major economies (opportunity)
• Improved intergovernmental cooperation (opportunity)
• Government initiatives against carbonated drinks (threat)

Major economies like the United States and the European Union are politically stable, thereby presenting growth opportunities for PepsiCo. In addition, the trend of intergovernmental cooperation improves opportunities for global expansion. However, government initiatives against sweetened carbonated drinks are a threat that could reduce PepsiCo’s revenues from affected segments. In this element of the PESTEL/PESTLE analysis, PepsiCo must consider changing its products to overcome the identified threat about carbonated drinks.

Economic Factors Important to PepsiCo

PepsiCo’s performance is directly linked to the economy. The influence of economic conditions on the remote or macro-environment of businesses is covered in this element of the PESTEL/PESTLE analysis. The political external factors that relate to PepsiCo are as follows:

• Economic stability of most major markets (opportunity)
• Rapid growth of developing economies (opportunity)
• Slowdown of the Chinese economy (threat)

PepsiCo has opportunities for growth and expansion based on the economic stability of developed countries like the United States, as well as the high growth rates of developing economies, such as those in Asia. However, the current slowdown of the Chinese economy threatens PepsiCo’s potential international growth, considering that China is among the biggest economies in the world. This element of the PESTEL/PESTLE analysis shows that PepsiCo must ensure market diversification to achieve stable international growth.

Social/Sociocultural Factors Influencing PepsiCo’s Business Environment

Many of PepsiCo’s consumers follow sociocultural trends. This element of the PESTEL/PESTLE analysis identifies the impact of social conditions and changes on companies’ remote or macro-environment. The following are notable sociocultural external factors relevant to PepsiCo’s business:

• Higher health consciousness (threat & opportunity)
• Increasing busy lifestyles (opportunity)
• More discriminating attitudes about product quality (opportunity)

Higher health consciousness is a threat to PepsiCo because of concerns about the sugar, salt, and fat content of its products. However, this external factor also presents the opportunity for the company to improve its products to address such concerns. PepsiCo can also take advantage of the busy lifestyles of consumers, especially in urbanized and industrializing markets around the world. People with these lifestyles are more likely to purchase ready-to-eat food products like those of PepsiCo. The company has the opportunity to continue enhancing product quality to maximize revenues, with regard to consumers’ increasingly discriminating attitudes about product quality. Based on this element of the PESTEL/PESTLE analysis, PepsiCo must align its products and marketing strategies to changes in consumer behaviors.

Technological Factors in PepsiCo’s Business

PepsiCo’s business is partly dependent on technologies. The link between technological change and companies’ remote/macro-environment is examined in this element of the PESTEL/PESTLE analysis. The technological external factors significant to PepsiCo are as follows:

• Moderate R&D investments in the food and beverage industry (opportunity)
• Improving knowledge management systems (opportunity)
• Increasing automation in business (opportunity)

Based on moderate research and development (R&D) investments in the industry, PepsiCo can boost its own R&D investments to improve its competency in this business aspect. Also, PepsiCo can exploit the benefits of knowledge management systems to support its various business processes, such as product innovation and strategic decision-making. In addition, an increase in the number of automated processes in the company can enhance business performance. This element of the PESTEL/PESTLE analysis indicates that PepsiCo must include new technologies as tools to improve business competitiveness.

Ecological/Environmental Factors

PepsiCo’s supply chain and brand image are linked to environmental concerns. This element of the PESTEL/PESTLE analysis considers the ecological trends and issues that affect consumers, employees, and companies’ remote or macro-environment. The following ecological external factors are significant to PepsiCo:

• High focus on business sustainability (opportunity)
• More complex expectations and standards on waste disposal (opportunity)
• Climate change (threat & opportunity)

Consumers are now pushing companies like PepsiCo to improve their sustainability standing. In relation, PepsiCo can improve its waste disposal strategies, such as recycling, to gain more support from customers. On the other hand, climate change poses a threat to PepsiCo’s supply chain. However, the company can further diversify its global supply chain to minimize risk exposure to climate change. Based on this element of the PESTEL/PESTLE analysis, PepsiCo must improve its environmental impact to attract and retain customers, and to stabilize its supply chain.

Legal Factors in the Consumer Goods Industry

PepsiCo and its competitors are subject to legal requirements. Such requirements and regulations are evaluated in this element of the PESTEL/PESTLE analysis in terms of their effect on the industry’s remote or macro-environment. The legal external factors relevant to PepsiCo’s business are as follows:

• Regulation on GMO ingredients (opportunity)
• Health and product safety regulations (opportunity)
• Moderate rate of regulatory change (opportunity)

Genetically modified organisms (GMOs) are now increasingly regulated worldwide, particularly in Europe. PepsiCo has the opportunity to reduce its use of GMO ingredients to satisfy these regulations. Similarly, the company can improve products to address regulations about product safety and health effects. The moderate rate of regulatory change gives an opportunity for PepsiCo to grow with the expectation that its current strategic decisions will satisfy regulatory requirements in the long term. In this element of the PESTEL/PESTLE analysis, it is shown that PepsiCo can focus on product innovation to comply with regulations.

PepsiCo’s PESTEL/PESTLE Analysis – Recommendations

PepsiCo remains one of the strongest companies in the food and beverage industry. This PESTEL/PESTLE analysis indicates that the company has many opportunities and a number of threats regarding its growth and international expansion. The following are some of the key points that PepsiCo must address based on the results of the analysis:

• Expansion in developing economies
• Product innovation to address concerns on quality and health effects
• Business sustainability
• Supply chain diversification
• Derqui, B., Fayos, T., & Occhiocupo, N. (2022). The virtuous cycle of trust. Unveiling clues to successful innovation in the Fast Moving Consumer Goods industry. European Journal of Innovation Management, 25 (6), 1036-1056.
• Martinez-Contreras, R. M., Hernandez-Mora, N. C., Vargas-Leguizamon, Y. R., & Borja-Barrera, S. M. (2022). PESTEL Analysis and the Porter’s Five Forces: An Integrated Model of Strategic Sectors. In Handbook of Research on Organizational Sustainability in Turbulent Economies (pp. 292-314). IGI Global.
• PepsiCo, Inc. 2022 Annual Report .
• PepsiCo, Inc. – Our ESG Approach .
• U.S. Department of Commerce – International Trade Administration – Consumer Goods Industry .
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