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What are the external factors that could affect your business, both now and in the future? Taking stock of these issues can inform your strategy and decision-making.
One of the most effective ways to identify potential threats to your business is to carry out a PESTLE analysis.
Read on to find out the PESTLE analysis meaning, how to do one, and why they’re important.
The PESTLE analysis definition is an activity which helps you to understand the external challenges facing your business.
Why is PESTLE analysis important? Because these factors can influence your business strategy and impact future decisions such as expansion, recruitment, and product development.
A successful analysis will relate the potential impact of external factors to your business and the sector you operate in.
PESTLE is an acronym. Here’s an overview of what each letter stands for:
A PESTLE analysis can be useful for businesses of all sizes, from companies just starting out to those looking for funding such as venture capital.
The purpose of PESTLE analysis is to inform you about what's happening in the world around your business, and use that to plan for the future.
Here are some of the things you can use a PESTLE analysis to plan for:
A PESTLE analysis is a research project, so it could be worth putting a team together to complete it, with one person responsible for bringing everything together.
You could give each person in the team an area to research, playing to their individual strengths such as legal matters or technology.
You’ll then need to gather the information on each area of PESTLE. Here are some of the key points to consider:
Once you’ve gathered all the research together, you’ll need to analyse the findings. These are the steps you’ll need to take:
A PESTLE analysis allows you to explore external factors influencing your business that are outside of your control.
By understanding what's going on around your business, you can make strategic management decisions that can minimise risks and help your company to grow.
For example, a PESTLE analysis could help a clothing business to decide whether they should launch their services in a particular country. If the analysis finds that the country has low economic growth and an unstable political situation, it could be best to wait until conditions improve before entering that market.
If a catering business uses plastic coffee cups and its research shows that consumers want cups made from more sustainable materials, they can start planning for how to replace their existing cups and consider the factors that could influence the replacement.
Meanwhile, an accountancy firm may use a PESTLE analysis to prioritise the risk of cyber threats if they’ve seen an increase in ransomware attacks and fraudulent tax returns.
Do you have any unanswered questions about creating a PESTLE analysis? Let us know in the comments below.
Conor Shilling is a Copywriter at Simply Business with over two years’ experience in the insurance industry. A trained journalist, Conor has worked as a professional writer for 10 years. His previous experience includes writing for several leading online property trade publications. Conor specialises in the buy-to-let market, landlords, and small business finance.
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