What is PESTLE analysis?
PESTLE Analysis is considered as a framework that is used for the detailed analysis and monitoring of macro-environmental factors of an enterprise those might have a profound impact on the overall performance of the organization. This tools or technique is used by the business entrepreneurs at the time when they think of establishing new venture in foreign market. PESTLE analysis is composed of analysis of different key factors such as- Political factors, Economical factors, Social factors, Technological factors, Legal factors and Environmental factors etc.
From detailed research over the concept of PESTLE analysis, it could be stated that the macro-environment factors directly impact the strategic planning of an enterprise on the basis of factors like- trade barriers, new laws, demographic change and tax changes etc. The macro environmental factors put long term impact on the overall performance rate of an enterprise. By analyzing the external business environment, the enterprises could minimize the threats and maximizes the opportunities simultaneously.
This given article is based on the idea that how to conduct PESTLE analysis and how this analysis better guide the entrepreneurs about the possibility of establishing a new business in foreign country.
1. POLITICAL FACTORS
Political factors are directly related with the government policies of the organization, funding, grants and initiatives, trading policies of the enterprise, elections & political trends, corruption, local commissioning processes, lobbying & pressure groups, instability in overseas markets, government term and change, and bureaucracy. All these factors are necessary to be known to the business entrepreneur if he is planned to open a new business venture in foreign countries. He should be aware of business set-up laws of the country and trading policies etc. else the newly established venture in foreign country might failed to generate the expected revenue rate. This also has been researched that the enterprises should be eligible to respond to the current as well as anticipated future legislation to better adjust their marketing policies significantly.
2. ECONOMICAL FACTORS
Economical factors are the direct determinants of performance of an economy that significantly impacted the enterprise and also have resonating long term impacts. The direct impact of economic factors is on the purchasing behavior and purchasing power of customers that significantly impact the overall revenue rate of the enterprise. The economical factor in context with PESTLE analysis includes- foreign exchange rate, inflation rate, economic growth patterns, and interest rate etc. Economic factors of the country are directly accountable for the foreign direct investment that significantly relies on some specific enterprises those are undergoing from PESTLE analysis.
3. SOCIAL FACTORS
Social factors in context with PESTLE analysis includes different cultural aspects and beliefs those would directly impact the demand of company’s key products and also the way how an organization operates. Furthermore, the social factors include work ethic, cultural taboos, demographics, brand, technology image, ethical issues, advertising & publicity, consumer role models, buying access and trends, major events & influences etc. All these factors affect the product sales rate and business profit rate as well.
4. TECHNOLOGICAL FACTORS
Technological factors are directly associated with the technology that the organization is already using till date together with the one that it is planning to opt in order to better process its regular business operations. The technological factors include- information & communications, technology legislation in specified country, maturity & technology, emerging technologies, research and innovation, intellectual property issues and competitor technology development etc. All these specified factors help a business entrepreneur in getting proper idea about innovation of technology as well as technological growth in the market.
5. LEGAL FACTORS
Legal factors clearly demonstrate its effectiveness by its name and its focus as well. The legal factors include- changes in laws and legislation of the country, guidelines related with safety and equality of women, ethical standards for advertisement, consumer rights and health & safety guidelines etc. The enterprises need to know all concepts those are legal or those are not legal at all to trade successfully. Legal factors provide a clear idea about the key concept that what is right to do. This enforces the enterprise to work under ethical and legal boundaries so that the revenue rate of the organization and corresponding customer base could be managed more effectively.
6. ENVIRONMENTAL FACTORS
Today, the scarcity of required raw materials, and pollution targets are increasing their importance of doing business more ethically and sustainably. The carbon footprint set by the government are required to be followed by the enterprises to work under the boundaries of different environment pacts set by the government of specific country where the entrepreneur wish to establish new venture deliberately. It also has been analyzed that the product and service demanding by the organization is sourced ethically from a reliable & sustainable source.
It could be summarized at the end that PESTLE analysis is essential to perform in order to make a business entrepreneur eligible to establish his new business in new country. Before establishing new business in foreign country, the entrepreneur should have complete knowledge about the laws and legislations of that country in which they are planning to operate. This would also make them eligible to pursue the business in more sustainable way.