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PESTLE and LoNGPESTLE frameworks - Coggle Diagram
PESTLE and LoNGPESTLE frameworks
An environmental scanning tool that covers political, economic, social, technological, legal and environmental factors
To make sense of the external environment, we need to use a framework or model to aid our understanding of what is going on
The PESTLE framework helps us categorise the disparate information available from analysis of the external environment
The framework requires us to categorise the information we collect about the external environment and place it into six categories
P
olitical
The degree to which a government intervenes in the economy or a certain industry in a market that organisation currently operates or is planning on operating
Factors include government policies such as relates to tax or foreign trade, the degree of political stability or existence of corruption and labour and environmental laws
Government policies also impact education systems, infrastructure and health regulations within their jursidction
E
conomic
The factors which impact on the performance of a specific economy, such as economic growth, exchange rates, inflation rates, interest rates, disposable income of consumers and unemployment rates
These factors may have a direct or indirect long term impact on an organisation since they influence the purchasing power of consumers and alter the economy's supply and demand models
Economic factors directly impact the pricing of products and services
S
ociocultural
The demographic characteristics, norms, customs and values of the population within which the organisation operates
Population trends including the population growth rate, age distribution, income distribution, career attitudes, safety emphasis, health consciousness, lifestyle attitudes and cultural barrier all form part of the sociocultural enivornement
The factors impact both marketing to target consumers and the hiring and provision of acceptable working conditions for local workforces
T
echnological
Technology innovations that either favourably or unfavourably impact operations of the industry and the market
These factors include technology incentives, the level of innovation, automation, research and development activity, technological change and the amount of technological awareness that a market possses
An understanding of these factors can influence strategic decisions on entering different markets and altering product lines
L
egal
Factors relating to laws with which the organisation needs to comply to trade both ethically and lawfully
Can include discrimination law, antitrust laws, employment laws, consumer protection laws, copyright and patent laws, and health and safety laws
Organisations operating in multiple jurisdictions will need to understand laws applicable to each
E
cological
Factors relating to the natural environemnt
These factors include ecological and environmental aspects such as weather, climate, environmental offsets and climate change
Environmental factors are becoming increasingly important due to the scarcity of raw materials, pollution targets and the growing awareness of the potential impacts of climate change, affecting both regulation and consumer choice
Once this info is gathered it can then be assessed for its potential impact upon the organisation
While an understanding of the wider impact of the external environment can be useful, one of the criticisms of the PESTLE analysis is that it can encourage organisations to take too broad a view and ignore issues that are much smaller but closer to home, these issues can still have a major impact on an individual organisations external environement
Organisations need to be able to respond appropriately to the assessments gathered in the PESTLE analysis, the PESTLE analysis for one country where a multinational organisation operates will be different from another country where the organisation operates
Some organisations adopt a LoNGPESTLE analysis whereby each of the PESTLE factors is considered at a Local, National and Global level so the results can be much more targeted than the broader PESTLE