Using the Pestel Analysis Tool

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Sometimes known as the STEP analysis, PESTEL stands for Political, Economic, Social, Technical, Environment and Legislative. It is a great tool for any size organization who would like to have a simple to use tool for understanding the external forces influencing their market and performance. If you would like a good tool for external forces, I would recommend using this one.

PESTEL is a strategic planning tool; it helps you see the landscape beyond your own market. This is important because as we are seeing in the stock markets, what happens in China, does impact what happens on Main Street. The PESTEL is great for ensuring you don’t thinking yourself into a vacuum. There are times when an organization thinks itself too internally and forgets to understand the power of the outside forces. PESTEL helps to remind people, there are forces out there, directly and indirectly, impacting how your business performs.

A PESTEL can be used with other tools such as a SWOT analysis, helping you understand in some cases, why a particular service or product is performing the way it is. For example, say you have a product that has seen significant decline in the past few years in terms of sales volume in your traditional markets. A SWOT analysis may reveal that the market has matured and their tastes have changed to the point they are out growing your product. A PESTEL may indicate that external forces that created the change in your traditional market have created opportunities in new markets outside your traditional market. Economic growth and legislative changes may have created an opening in new geographic areas that now give you access to new markets that do want your product. There are thousands of variables that can help you see this.

A PESTEL can be used in Scenario based forecasting. These are your “what if” situations. You can take the PESTEL data and forecast future trends and develop a more global and typically better forecasting...
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