The PESTEL method is a tool for analyzing the company’s macro-environment. It is particularly useful for identifying opportunities and threats within the SWOT matrix. Let’s see how it works !

What is the PESTEL analysis?

The PEST or PESTEL analysis  makes it possible to monitor the risks and opportunities that the company and its market could encounter. The particularity of this matrix is its global vision of the environment.

It consists in studying the influence of environmental factors on the life of the company. It is therefore an approach of the company in its ecosystem, based on 6 categories of external factors, positive or negative, that have an impact on the company. The first letter of each of them is the acronym “PESTEL”.

 

• The Political environment
• The Economic environment
• The Socio-cultural environment
• The Technological environment
• The Ecological environment
• The Legal environment

The political environment

The political environment covers the influences that emanate directly from political power, whether national or supra-national (EU or WTO).

Among the main factors are:

• Government stability;
• The risk of nationalization;
• The level of social protection.

The economic environment

The economic environment represents the macroeconomic situation of a given country or area. This will take into consideration:

• The GDP growth rate;
• Price evolution (inflation);
• Interest rates;
• The exchange rate
• The unemployment rate.

The socio-cultural environment

The socio-cultural environment reflects the situation and characteristics of the population – and therefore of consumers.

We will be interested in particular:

• Demographic criteria (average age, birth rate, etc.);
• At the level of education;
• Social and geographical mobility;
• To new social practices, to fashions.

The technological environment

The study of the technological environment aims to take stock of technological advances and innovation in a given sector.

It includes:

• The evolution of business research and development spending;
• New patents filed;
• The latest scientific discoveries with technological applications;
• The obsolescence rate of current technologies.

The ecological environment

The ecological environment involves everything related to the protection of the planet, including:

• Environmental protection laws;
• Rules in favour of sustainable development;
• Zero waste trend.

The legal environment

The legal environment represents the company’s regulatory framework (laws, branch agreements, internal regulations, etc.).

We find there for example:

• Labour law;
• The regulation of trade and commerce;
• Tax laws.

How to use the PESTEL analysis?

1. You must make a list of the various factors that can influence the macroeconomic environment of your company.
2. It is necessary to extract current and future structural trends.
3. The analysis of this information should make it possible to highlight the different scenarios of environmental change through which you can adapt your development strategy.

Once you have identified all the macro-environmental factors for each category, you need to make an inventory of the factors:

• Which represent an opportunity for your company, i.e. they could offer you prospects for growth and evolution;
• They represent a threat and can therefore harm your business or even the survival of your company.

These opportunities and threats should then be put in perspective with the strengths and weaknesses you have identified in your SWOT analysis, in order to establish a viable strategy.

SWOT stands for Strengths, Weaknesses, Opportunities and Threats, and helps a company develop its marketing strategy. Here is what a SWOT is and how to build it.

Who created the SWOT matrix?

The SWOT analysis was created by Albert Humphrey, an American management consultant. His work at Stanford University led him to develop this tool in the 1960s.

What is the purpose of SWOT analysis?

This analysis allows an organization, a product range or a brand to put all:

• external data : market and environment
• internal data : related to the company, product or brand

into perspective.

The SWOT analysis also highlights the main facts that have a strong impact on the organization, product or brand in question.

SWOT analysis makes it possible to develop a company’s marketing strategy and evaluate the success of a project, by jointly studying different data, such as the company’s strengths and weaknesses, but also competition or potential markets.

SWOT analysis allows a general development of the company by crossing the two types of data: internal and external. The internal information taken into account will be the strengths and weaknesses of the company. External data will focus on threats and opportunities in the vicinity.

When to use a SWOT matrix ?

When creating a business plan, it is essential to create a SWOT matrix. It will allow entrepreneurs to schematize the key elements concerning the company.

In the annual marketing plan, this analysis is preceded by the external and internal marketing audit and precedes the strategic recommendations: targets, positioning, objectives and resources.

It is a necessary tool whenever a company, a brand or an organization must reposition itself in the face of a market or an evolution.

How to do a SWOT analysis ?

The external diagnosis of the company

Thanks to the external diagnosis, you can evaluate opportunities and threats from the outside: market,
competition,
legislation.

You must identify the different elements that have a positive (opportunities) or negative (threats) impact on your product or business.
To help you, you can perform a PEST and 5 Porter forces analysis.

You must identify competitive advantages, global context, etc.

Your company’s environment may be favourable to it but it can also have a negative impact on your business.

The internal diagnosis of the company

The internal diagnosis makes it possible to highlight a certain number of points related to the company itself. You need to identify everything positive and negative in your company in order to classify it into strengths and weaknesses.
Identify the essential points of your business that allow you to be better than the competition
The points that concern your weaknesses and that are likely to represent a threat should be the subject of a corrective action plan in order to identify areas for improvement.

Common mistake to avoid

A common mistake is to confuse what is external with what is internal to the company.
Ask yourself whether you can act to change an identified point or not.
For example, you can fill a weakness by hiring a qualified person or by making an investment. However, you cannot solve a threat such as government regulation without questioning the products or strategy.

Example of a SWOT analysis

Usually, the SWOT matrix is represented in a table format.
On one axis the negative and positive aspects and on the other the internal or external elements.
However, it can be represented differently in the same way as the latter.

Marketing is the analysis of consumer needs and the set of actions used by organizations to influence their behaviour. It creates value for customers and adapts continuously production and the commercial system according to previously identified needs and behaviour.

Thus Marketing is a science which consists in designing the offer of a product according to the analysis of consumer expectations, and taking into account the capacities of the company as well as all the constraints of the environment (socio-demographic, competitive, legal, cultural…) in which it operates.

Marketing Mix

Marketing mix is all actions and measures to adapt to the needs and behaviours that are essentially found in the marketing mix.

The marketing mix includes all the marketing decisions and actions taken to ensure the success of a product, service, brand or brand on its market.

It is traditionally considered that marketing mix decisions and actions are taken in 4 main areas which are:

• product policy
• the pricing policy
• the communication policy
• the distribution policy

These universes of marketing mix actions are also called 4 P because of the initials of these 4 terms :

• Product,
• Price,
• Promotion,
• Place.

In the minds of many people, marketing is advertising. The above definition shows that the field of marketing is much broader.

Plan marketing

The marketing plan is the result of the company’s strategic analysis. It allows to program the different actions and objectives. Following the internal and external analysis, it determines the target, the product mix, the objectives and the budget. It is an essential tool in the context of a product launch and the control of objectives after the launch.

Online Marketing changes the game

Since the advent of the Internet, digital marketing has become a fundamental element to be integrated by brands into their strategy.
Traditional media:

• television,
• radio,
• cinema,
• billboards,
• the press

have seen their budgets reduced in favour of online marketing.

To succeed in its market and reach customers while retaining them, a company must adopt a strategic and effective marketing mix. This concept includes both online and offline marketing. This is not about marketers following their instincts or personal preferences: it is about adapting to the target and its expectations.

Marketing concepts

Marketing has led to many concepts such as:

• Inbound/Outboud Marketing
• Marketing permission
• Online marketing (SEO, SEA, Email marketing, Social Media Marketing, Marketing automation, …)
• Collaborative marketing
• Social Marketing
• Ethnic marketing
• Marketing of seniors
• Database Marketing
• Guerrilla marketing
• Direct marketing
• Mobile Marketing