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A PESTEL analysis examines the external business environment facing a firm in 6 main areas; Political factor, Economic factors, Sociological factors, Technological factors, Environmental factors and Legal factors.Thus, for effective strategic planning, analysis of the external factors is the most important step before performing an analysis of the business' intrinsic strengths and weaknesses through a SWOT analysis.
A PESTEL analysis examines the external business environment facing a firm in 6 main areas; Political factor, Economic factors, Sociological factors, Technological factors, Environmental factors and Legal factors. Though a single organization is normally unable to directly affect the external factors facing it, a conglomeration of companies can exert some pressure on these factors, particularly any political factors through the intelligent use of political lobbying. Proper understanding of these factors allows the organization to highlight areas of business opportunity when combined with proper understanding of the business’ strengths, and also potential threats to the business when combined with a proper understanding of the firm’s weaknesses (Baines et al, 2011). Thus, for effective strategic planning, analysis of the external factors is the most important step before performing an analysis of the business’ intrinsic strengths and weaknesses through a SWOT analysis.
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