Before starting the marketing process, an organization needs to analyze the internal, micro and macro environments of its business. The macro environment consists of four main factors, namely, Political, Economical, Social and Technological. PEST stands for these. It is sometimes referred to as STEP analysis also. Business leaders use PEST Analysis for decision making and to assess marketing and business development. (Pest Analysis: What is Pest Analysis. 2009). The concept of PEST has now been extended to PESTEL or PESTLE analysis by adding two more parameters namely the legal and environmental factors.
“ The PESTLE analysis is a more in-depth analysis of your company than the standard PEST analysis. PESTLE not only evaluates the Political, Economic, Social, and Technological factors affecting the success of your business, but also the Legal and Environmental factors. It is a crucial test for understanding the environment surrounding your business and managing it to your advantage. ” - Political: Political factors are mostly government policies and other legal issues such as tax policy, employment regulations, environmental laws, trade restrictions, tariffs, political permanence of various governments of the country etc. - Economical: These are often closely related to political factors.
Main factors in this category are the economic system of the country, the involvement of government in the free market, foreign exchange rates, the skill level of the workforce, unemployment rate, quality of infrastructure, the economic growth rate of the country, inflation and interest rate etc. - Social: Aspects in this category are chiefly religious factors, ethical issues, demographics, education, occupation, lifestyle, fashion trends and role models, leisure activities, branding, advertising and publicity, media views etc. - Technological This is by far the most important factor among the four.
It includes intellectual property issues, competing for technology development, the maturity of the technology, consumer buying mechanisms, patents and licensing, replacement technology, information, and communication etc. Research funding also falls into this.
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