Recently we did a 2,500 words assignment that includes PESTEL analysis.
The customer loves it. He subsequently scored 82% for his individual assignment.
While 82 is not perfect, the score is the best in class and significantly higher than the 2nd best score in class, which is 74.
It is through hard work and experience that we are able to consistently produce work at a similar level as this.
In this blog post, we will share with you some tips on how to ace your PESTEL analysis. First though, let us go through the fundamentals of it.
What is PESTEL analysis?
PESTEL analysis looks at a country’s general environment to determine whether it is favourable for a company/industry to operate in and if there are anything that the company can do to align itself towards the environment.
It is an acronym for Political, Economic, Social, Technological, Environmental and Legal.
Political: It looks at how a government can affect the economy or a certain industry. This includes:
- How stable is the government?
- Did the government introduce any new tax or duty that will affect the company/industry?
- What are the tax policies?
Economic: It looks at the health of the economy and other factors affecting it. Some examples are:
- How is the economy? Is it growing or having a recession?
- What is the inflation rate? Does it lower consumers’ buying power?
- How is the foreign exchange performing? Is the local currency raising against others?
Social: This scrutinises the social environment of the country. The culture and trends that are embraced by the society as a whole.
- Are consumers health-conscious?
- Are consumers increasingly buying through online channels?
- What is the population structure? Is it an ageing demographics?
- Is disposable income increasing?
Technological: This pertains to the technology and innovation state of the country that may affect the industry/company.
- What is the internet penetration rate?
- How are consumers using technology in a way that affects the industry/company?
- What is the mobile penetration rate?
- How fast is the internet?
Environmental: This include factors such as the climate, weather and geographical location. Increasingly, factors such as climate change, environmental awareness of the public and government’s environmental stance, are included as part of this environment.
- How is the climate in the country?
- What is the government stance on environmental issues?
- Are there many natural disasters occurring in the country?
Legal: This refers to the relevant laws that affect the industry/company.
- Employment law
- Discrimination law
- Antitrust law
Tip #1: Whenever possible, look for recent trends in the country.
Even though PESTEL analysis is in fact, looking at the current and probable short-term future environment, many students tend to miss out on mentioning trends that are occurring in the country. Through the years, we realise that PESTEL analysis that includes recent trends are almost always going to score high points.
For example, the introduction of the diesel duty of $0.10/litre in Singapore is a recent trend that may be affecting the industry you are analysing. The GST increase from 5% to 7% in 2007 is not considered recent. It may not even be considered a factor since it is implemented a long time ago and the society should have adjusted to it by now.
Make sure that your factors stay as current as possible.
Tip #2: Avoid non-relevant trends at all cost
Let’s say you are analysing the soft drinks industry in Singapore and you discover that obesity rate is rising in the country. While there is a linkage between drinking soft drinks and the rise in obesity rate, it does not really affect the industry directly.
What is more suitable to discuss on is if there are any measures that the government has placed to prevent the rising obesity rate. This may be in the form of education, by educating students on the dangers of sugar-sweetened beverages, or policies that discourage the consumption of soft drinks.
Tip #3: Not supporting claims with evidence
This usually happens when the student understands the market too well. If you are a Singaporean, you may encounter such a problem when analysing the local market.
For example, you probably think that Singaporeans are for sure getting more xenophobic and you duly list it down under ‘Social Environment’ as one of the factors.
But is there any proof to it?
Or you’d think that Singaporeans are complain kings or kiasu. Again, can you proof this with evidence?
Remember that even social stigmas must be supported by evidence.
PESTEL analysis is not difficult. But it requires a lot of effort and time to find the relevant trends that affect the industry/company. This is especially difficult if you are researching a foreign country that you have little or no knowledge on, such as Nigeria or Kazakhstan.
Nonetheless, with perseverance and the information presented in this blog post, you should be able to get it done with quality.