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Using models to help strengthen your business …

Today we are going to look at PESTLE Analysis to understand how you can minimise the risks your business faces, eliminate threats and maximise opportunities …

PESTLE Analysis can help minimise risks, eliminate threats and maximise opportunities!

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Do you have a business plan? Have you carried out the general assessments in order to understand exactly where your business sits in the market? Do you know what risks from external factors may affect you and your business? PESTLE Analysis is a framework used to scan your organisation’s external macro-environment.

“But why would you want to bother with that, you may ask?”

So many people start a business because it’s something they are really good at, or the products are ones they particularly like, frequently without any strategy or planning. Probably, they have not even thought about the market and if there is a place for them in it.

Take the time to conduct a PESTLE Analysis as it gives a bird’s eye view of the whole environment from many different angles that you should keep track of while contemplating on specific ideas, plans and strategies.

To begin with, there are a number of crucial questions you need to ask while carrying out this analysis to keep you moving forward and to give you an idea of what things to keep in your mind:

• What is the political situation of the country and how might it affect my business?

• What are the prevalent economic factors and situation may affect my business?

• How much impact does culture have in the market and how may that affect my business?

• What technological innovations are likely to pop up and affect the market structure?

• Are there any current legislations that regulate the industry or can there be any change in the legislations for the sector that I am working in?

• What are the environmental concerns for the industry sector?

So what next? Ideally, you should be considering all the factors from both the view of threats to your business, and also from the view of opportunities that may be open for you to realise greater potential.

It can be helpful to create a matrix to capture this information and allow further analysis:

• Political Factors – Factors that may determine to what extent the Government may influence specific industry sectors or the economy:

  • Government stability

  • Tax regulations

  • Trade restrictions

  • Dominant political ideology

  • Bureaucracy issues

  • Fiscal policy

• Economic Factors – Factors that determine of your economic performance which will directly impact your profits:

  • Inflation

  • Taxes & duties

  • Exchange rates

  • Finance credit

  • Cost of living

  • GDP

• Social Factors – Factors around personal attitudes, core values and beliefs together with demographics:

  • Social mobility

  • Education

  • Ethics & religion

  • Historic issues

  • Demographics

  • Attitude & beliefs

• Technological Factors – Factors including the rate of the rapid technological changes and innovation and how that may impact on your business:

  • Rate of change

  • Research & development

  • Production efficiency

  • Quality

  • Pricing

  • Intellectual property

• Legal Factors – Factors, internally and externally, that when changed will affect your business, cash flow and profitability:

  • Taxation

  • Employment

  • Advertising

  • Heath & safety

  • Compliance

  • Regulatory bodies

• Environmental Factors – Factors that may include geographical, and global changes in addition to aspects such as tourism and agriculture and how that may impact your business:

  • Infrastructure

  • Energy availability & cost

  • Disposal of materials

  • Legislation

  • Cynical weather

  • Ecological consequences

Once you have completed the PESTLE Analysis matrix, then it’s time to begin to use the information gathered, understanding the potential threats to the business’ ongoing profitability and to assist in identifying future difficulties you may likely face so that action can be taken to help avoid and eliminate their effects.

It is important for you to decide which trends should be monitored on a regular ongoing basis and how best to incorporate this information into your strategic planning. And who is going to be responsible for keeping the PESTLE Analysis up to date?

The results of your PESTLE Analysis should feed into a SWOT Analysis as it helps to determine the threats and opportunities represented by macro-environment forces that the organisation usually cannot control.

“Would you like to know more?”

If you’d like to talk to me about PESTLE Analysis, coaching for you and your business or need someone to ask those bloody difficult questions then do get in touch. Call me on 01280 700405 or click here to send over an email enquiry and let’s see how I can help you.

Until next time …

KATH BONNER-DUNHAM