Read this link----http://rapidbi.com/pestle/Introduction-to-the-PESTLE-analysis-tool.

html
This factsheet gives introductory guidance. It:

introduces the concept and history of PESTLE analysis examines the model, process and possible applications considers its pros and cons and offers some dos and donts provides two example case studies.

Introduction
PESTLE stands for - Political, Economic, Sociological, Technological, Legal, Environmental. PESTLE analysis is in effect an audit of an organisation's environmental influences with the purpose of using this information to guide strategic decision-making. The assumption is that if the organisation is able to audit its current environment and assess potential changes, it will be better placed than its competitors to respond to changes.

The concept
To help make decisions and to plan for future events, organisations need to understand the wider meso-economic and macro-economic environments in which they operate. (The meso-economic environment is the one in which we operate and have limited influence or impact, the macro-environment includes all factors that influence an organisation but are out of its direct control). An organisation on its own cannot affect these factors, nor can these factors directly affect the profitability of an organisation. But by understanding these environments, it is possible to take the advantage to maximise the opportunities and minimise the threats to the organisation. Conducting a strategic analysis entails scanning these economic environments to detect and understand the broad, long term trends. A PESTLE analysis is a useful tool for understanding the big picture of the environment in which an organisation is operating. Specifically a PESTLE analysis is a useful tool for understanding risks associated with market (the need for a product or service) growth or decline, and as such the position, potential and direction for an individual business or organisation. A PESTLE analysis is often used as a generic 'orientation' tool, finding out where an organisation or product is in the context of what is happening outside that will at some point affect what is happening inside an organisation. The six elements form a framework for reviewing a situation, and can also be used to review a strategy or position, direction of a company, a marketing proposition, or idea. Completing a PESTLE analysis can be a simple or complex process. It all depends how thorough you need to be. It is a good subject for workshop sessions, as undertaking this activity with only one perspective (that is, from just one persons view) can be time consuming and miss many critical factors. We all see things differently and harnessing the knowledge of several people will ensure the process is robust and meaningful.

Political factors, are how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as

tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads). Furthermore, governments have great influence on the health, education, and infrastructure of a nation.

Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. For example, an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor). Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers). Technological factors include ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation. Environmental factors include weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance.Furthermore, growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones. Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.

The PESTLE model

The PESTLE model provides users with a series of headings under which users can brainstorm or research key factors:

Political: what is happening politically in the environment in which you operate,

including areas such as tax policy, employment laws, environmental regulations, trade restrictions and reform, tariffs and political stability. Economic: what is happening within the economy, for example; economic growth/ decline, interest rates, exchange rates and inflation rate, wage rates, minimum wage, working hours, unemployment (local and national), credit availability, cost of living, etc. Sociological: what is occurring socially in the markets in which you operate or expect to operate, cultural norms and expectations, health consciousness, population growth rate, age distribution, career attitudes, emphasis on safety, global warming. Technological: what is happening technology-wise which can impact what you do, technology is leaping every two years, how will this impact your products or services, things that were not possible five years ago are now mainstream, for example mobile phone technology, web 2.0, blogs, social networking websites. New technologies are continually being developed and the rate of change itself is increasing. There are also changes to barriers to entry in given markets, and changes to financial decisions like outsourcing and insourcing. Legal: what is happening with changes to legislation. This may impact employment, access to materials, quotas, resources, imports/ exports, taxation etc. Environmental: what is happening with respect to ecological and environmental aspects. Many of these factors will be economic or social in nature.

The PESTLE process

Decide how the information is to be collected and by whom (often a team approach
is much more powerful than one persons view). Identify appropriate sources of information. Gather the information - it is useful to use a template as the basis for exploring the factors and recording the information. An example of such a practical and ready-touse template created to accompany this factsheet can be found on the RapidBI website. o Go to the template Analyse the findings. Identify the most important issues. Identify strategic options. Write a report. Disseminate the findings. Decide which trends should be monitored on an ongoing basis.

Applications and when to use it

PESTLE analysis can be used for business and strategic planning, marketing planning, organisational change, business and product development and research reports. It can also be used from a departmental or individual perspective to look at what you deliver to whom and how you do it. To be effective a PESTLE needs to be undertaken on a regular basis. Organisations that do analyses regularly and systematically often spot trends before others thus providing competitive advantage.

Business planning
A PESTLE analysis is a useful document to have available at the start of a business planning process. It can provide the management team with background and context information about targets towards growth, new product development and brand positioning. The opportunities and threats identified can be fed into a SWOT (Strengths, Weaknesses, Opportunities, Threats) process and strategies identified to avoid or minimise the impact of the threats, and equally strategies employed to build on the opportunities presented. For more on SWOT analysis, see our factsheet on that topic. Go to our SWOT analysis factsheet

Marketing planning
As with business planning, a PESTLE analysis provides the essential element of climate within a situation analysis phase of the marketing planning process.

Product development
It is often said that there are few bad products but lots of wrong time and wrong places. As a PESTLE analysis provides a view of what is occurring in the external world, this will help when making the decision to enter or leave an area of product development. For example, portable tape recorders are excellent devices, but a PESTLE analysis might show that that, socially and technologically, MP3 technology is more acceptable. Equally from an environmental point of view the manufacture of tapes requires the use of heavy chemicals and would be increasingly taxed and rejected by society.

Organisational change
When looking at changing one function or department a PESTLE analysis can be a powerful tool for understanding the context in which the change is occurring and the potential areas of focus. Best used in association with a SWOT analysis, a PESTLE will provide information about potential opportunities and threats around labour changes, for example skills shortages. Using the PESTLE to look at factors outside of the function but still inside the organisation can highlight factors such as:

Political: who is in what position, their power, vision, goals and directions etc. Economic: financial implications, productivity etc. Socially: what is and is not acceptable within the culture. Technological: new computer systems or other new technology. Legal: changes to employment law, recruitment, visas etc. Environmental: the space available, what can or cannot be moved where etc.
In this situation, a PESTLE analysis can be thought of more an as audit. It is best used at the data capture phase as part of a pre-planning process of any strategic intervention. While using the tool internally can add some value, it will focus on factors which can be changed, that is they are in the control of the organisation, if not the function concerned. So while it may be a useful framework, it should be used with caution in this context.

Research reports
A PESTLE analysis can also be used as a framework for looking outside the organisation to hypothesise what may or may not happen. It is a useful framework to use to ensure that some

of the basic factors are not overlooked or ignored. Used in a similar way to that of business planning but the application of the data is different.

Advantages and disadvantages of using a PESTLE analysis

Advantages
Simple framework. Facilitates an understanding of the wider business environment. Encourages the development of external and strategic thinking. Can enable an organisation to anticipate future business threats and take action to
avoid or minimise their impact. Can enable an organisation to spot business opportunities and exploit them fully.

Disadvantages
Some users over simplify the amount of data used for decisions it is easy to use
scant data. To be effective this process needs to be undertaken on a regular basis. The best reviews require different people being involved each having a different perspective. Access to quality external data sources, this can be time consuming and costly. The pace of change makes it increasingly difficult to anticipate developments that may affect an organisation in the future. The risk of capturing too much data is that it may make it difficult to see the wood for the trees and lead to paralysis by analysis. The data used in the analysis may be based on assumptions that subsequently prove to be unfounded (good and bad).

Examples
A PESTLE analysis can be carried at different levels depending on the context. Two case studies are offered below to illustrate what a PESTLE analysis might look like in two different situations: a more detailed level, using a soft drinks manufacturer as an example, and a simpler level, using a childrens charity by way of example.

Case study 1: a detailed PESTLE analysis

What follows is a summary of the findings, not the data collection phase, of a PESTLE analysis using a soft drink manufacturer called Soft Drink Co.

Political
The government plays a role within the operation of manufacturing these products in terms of regulations. There are potential fines set by the government on companies if they do not meet a standard of laws. The following are some of the factors that could cause Soft Drink Co's actual results to differ materially from the expected results described in their underlying company's forward statement:

Changes in laws and regulations, including changes in accounting standards,

taxation requirements, (including tax rate changes, new tax laws and revised tax law interpretations) and environmental laws in domestic or foreign regulations.

 Changes in the non-alcoholic business environment. These include, without

limitation, competitive product and pricing pressures and their ability to gain or maintain share of sales in the global market as a result of action by competitors. Their ability to penetrate developing and emerging markets, which also depends on economic and political conditions, and how well they are able to acquire or form strategic business alliances with local packaging firms and make necessary infrastructure enhancements to production facilities, distribution networks, sales equipment and technology.

Economic
Last year the economy was strong and nearly every part of it was growing and doing well. However, things changed. Most economists loosely define a recession as two consecutive quarters of contraction, or negative GDP growth. Due to low interest rates it can use the borrowing on research of new products or technology. As researching for new products would cost less the Soft Drink Co will sell its products for less and the people will spend as they would get cheap products from Soft Drink Co. Before the terror attacks on 7 July, the UK was starting to see the economy recover slightly and it is only just recently that they achieved the economic levels. Consumers are now resuming their normal habits, going to the high streets, car shopping, and eating out at restaurants. However, many are still handling their money cautiously. They believe that with lower inflation still to come, consumers will recover their confidence over the next year.

Sociological
Many people are practicing healthier lifestyles. This has affected the non-alcoholic drink industry in that many are switching to bottled water and diet colas instead of beer and other alcoholic drinks. The need for bottled water and other more convenient and healthy products are important in the average persons day-to-day life. Consumers from the ages of 37 to 55 are also increasingly concerned with nutrition. Since many are reaching an older age in life they are becoming more concerned with increasing their longevity. This will continue to affect the non-alcoholic drink industry by increasing the demand overall and in the healthier drinks.

Technological
The effectiveness of company's advertising, marketing and promotional programs. The new technology of internet and television which use special effects for advertising through media. They make some products look attractive. Introduction of cans and plastic bottles have increased sales for Soft Drink Co as these are easier to carry and you can bin them once they are used. As the technology is getting advanced there has been introduction of new machineries all the time. Due to introduction of this machineries the production has increased tremendously then it was few years ago Soft Drink Co has several factories which use state of the-art technology to ensure top product quality.

Legal
With changes to the chemicals allowed in consumable drinks with the impact of upcoming EU

legislation this will impact Soft Drink Cos production. They will have less than three years to comply or be forced to remove the product from the shelves.

Environmental
With several EU countries introducing fines to manufacturers who do not use recycle-able packaging, Soft Drink Co will need to review its strategy of using plastic bottles and look towards new package technology or the use of cans.

Case Study 2: a simpler PESTLE analysis

This might result from a simpler PESTLE analysis of a childrens charity and shows only items deemed strategically important.

Political
Level of government interest in childrens based services. Big Lottery Fund priorities and objectives.

Sociological
Concerns around child obesity/lack of physical activity. Perceived danger for children restrictions on childrens freedom of movement. Increase in organised activities.

Technological
Negative impact of sedentary activities such as computer games. Impact of increased car use. Increased access to multi-media.

Economic
Costs of play schemes and including disabled children. Shift towards paid or subsidised childcare/extended schools. Competitive tendering.

Legal
Legislation Childrens Act. DDA. OfSTED.

Environment
Culture within the organisation. Culture in the community. Premises we have to use (buildings, layout and space). Impact on the environment noise, etc.

PESTLE analysis dos and donts

 DO get other people involved. DO exploit any expertise and resources that are already available within the

organisation. DO use PESTLE analysis in conjunction with other techniques, such as SWOT analysis, PRIMO-F analysis (see our SWOT analysis factsheet linked to above for more information), Porter's five forces (see Useful links and Further reading below), competitor analysis or scenario planning etc. DO incorporate your analysis within an ongoing process for monitoring changes in the business environment.

DONT try to do this on your own. DONT jump to conclusions about the future based on the past or the present. DONT get bogged down in collecting vast amounts of detailed information without
analysing your findings appropriately.