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                                  PESTEL Framework Theory

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                                  The PESTEL framework is designed to provide managers with an analytical tool to identify different macro-environmental factors that may affect business strategies, and to assess how different environmental factors may influence business performance now and in the future.  


                                  The PESTEL Framework includes six types of important environmental influences: political, economic, social, technological, environmental and legal. These factors should not be seen as independent factors. Factors such as technological advances may probably affect the social and economic conditions in different markets.


                                  Below, some characteristics in each environmental factor are listed, which may give business managers guidance to, which factors may be of importance to a company's strategy. The list is however far from complete, and it only gives managers some preliminary inspiration to, which factors may be of relevance for handling business strategies. Many factors, that are not included below, may have an effect on business success, and each company must evaluate for themselves, which key drivers of change will potentially have strategic and competitive consequences.


                                  Political factors

                                            Stability of government

                                            Social policies: (e.g. social welfare etc.)

                                            Trade regulations: (e.g. the EU & NAFTA)

                                            Tax policies

                                            Entry mode regulations


                                  Economic factors

                                            Disposable income of buyers 

                                            Credit accessibility

                                            Unemployment rates

                                            Interest rates



                                  Social Factors

                                            Population demographics: (e.g. aging population)

                                            Distribution of Wealth

                                            Changes in lifestyles and trends

                                            Educational levels


                                  Technological factors

                                            New innovations and discoveries

                                            Pace of technological innovations and advances

                                            Pace of technological obsolescence

                                            New technological platforms (e.g. VHS and DVD)


                                  Environmental factors

                                            Environmental protection laws

                                            Waste disposal laws

                                            Energy consumption regulation

                                            Popular attitude towards the environment


                                  Legal factors

                                            Employment regulations

                                            Competitive regulations

                                            Health and safety regulations

                                            Product regulations


                                  The key for business managers is therefore to discover the main drivers of change that may affect business strategies, and to discover the factors most likely to influence the performance of the business.


                                  In conducting a PESTEL analysis, business managers may create strategies that take several macro-environmental factors into consideration, so that the strategy formulation process will be as sensitive to current and future environmental factors as possible.

                                  Date Created: 2009-09-13
                                  Posted by: Admin
                                  PESTEL Framework Theory

                                  Related resources:

                                  What is Michael Porter's 5 forces?
                                  Internationalization of Multinational Corporations?
                                  Global strategies for MNCs: Christopher A. Bartlett?& Sumantra Ghoshal?
                                  What is the Balanced Scorecard?
                                  What is the BCG Matrix??
                                  What is a SWOT analysis?
                                  What is Michael Porter's Diamond Model?
                                  Exploring Corporate Strategy
                                  Johnson, Gerry. Scholes, Kevin Richard Whittington: (2006); Prentice Hall

                                  Online MBA, Online MBA Courses, PESTEL Framework, PESTEL, Environment, Environmental factors, business strategy, Strategy development, strategy formulation


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