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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

·          Inflation


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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