What is PESTLE analysis & how does it work?

PESTLE analysis framework

A PESTLE analysis analyzes six factors — political, economic, social, technological, legal, and environmental. It provides a structured framework for evaluating external influences on a business.

Political factors

Several political factors affect businesses, including changes in the political climate and political threats. Government policies, leadership changes, foreign trade and relations, and tax policy can also significantly affect your brand. You also have to consider changes in regulation and deregulation.

Economic factors

Economic factors are external impacts caused by the economy. The economy's current state significantly impacts your business — from labor costs and interest rates to the health of the supply chain. It’s important to monitor the economy and analyze economic changes and how they could affect your business.

Social factors

Social factors deal with the social environment as a whole, including changes in population and demographics, social movements, and shifts in consumer behavior. The social environment guides consumer behavior and sentiments, so it’s crucial to understand how your brand can capitalize on that.

Technological factors

Changes in technology are one of the biggest factors that affect brands and businesses. When new technology emerges, it often makes simple aspects of an industry more efficient — but technology can also introduce new threats. Think about new technology, how you’re utilizing it, and what that means for your business.

Legal factors

Changes in laws — from federal to local laws — can change how your business operates. Laws change, new ones are added, and some are even abolished as time passes. Look at potential or recent legal changes and consider how they may affect your business.

Environmental factors

The environment is constantly changing, and those changes impact nearly every industry. Wildfires and other environmental events can affect the supply chain, and pollution and waste management regulations transform how businesses operate. Understanding how climate and health crises can impact your business can help you set clear and beneficial goals.