Before launching any new project or service, it is always prudent that organizations analyze their external marketing environment. PESTEL analysis is a useful measure to monitor the macro-environmental (external marketing environment) factors that can impact an organization.
PESTEL analysis analyzes the Political, Eonomic, Social, Technological, Environmental, and Legal aspects of an organization. It is a very important tool for measuring market growth, market position and direction in which a business is moving.
Let us try to understand the importance of PESTEL analysis taking an example of a healthcare center.
Political factors include Taxation policies, foreign trade regulations, political stability, labor laws, environmental laws, etc. Organizations need to adjust their marketing policy with current and anticipated future legislation.
In the healthcare sector, political focus and pressure on healthcare will lead to cutbacks which is a loss to the business.
Economic factors include economic growth, inflation, currency exchange rate, interest rates, etc. Economic factors can be of macro-economic and micro-economic factors.
Macro-economic factors deal with the demand in economy, i.e. government’s interest rate, budget –expenditure, tax policies.
Micro-economic factors are about public expenditure. These factors are of people’s income and expenditure. Micro economic factors influence more on B2C organizations.
Overall, economic factors impacts on organization’s business and profit.
In the healthcare sector, an increase in buying groups will lead the organization to should introduce value added processes
Social factors take into consideration attributes such as demographic population, income distribution, lifestyle changes, social mobility, attitude towards leisure and spending, etc. These factors directly affect the shelves of product. Social analysis helps in understanding the customer view and what drives them.
In the healthcare sector, an increase in customer awareness can raise expectations for price transparency which in turn puts pressure on customer service.
Technological factors can remove the barriers to enter into a market. It helps to bring new innovations such as business process automation. For example, one can find innovative ways to manufacture in order to attain economies of scale and less turnaround time which directly affects the cost and performance. In addition, technology can facilitate uniform information sharing.
In the healthcare sector, new technologies in social media will urge the organizations to create new e-Models.
Legal factors include company laws, labor laws, remuneration laws, consumer’s rights and laws etc. It is very important that companies understand what to do and what not to do for successful trade. If an organization trades globally, then this is a very significant area to take care, as each country has its own set of legal rules and regulations.
In the healthcare sector, if there is increase in litigation, then the organization’s quality becomes key
Environmental factors have become a really challenging issue due to many constraints and scarcity. These factors include environmental issues like rate of carbon emission, climate change, habits, diseases, decrease in raw material, pollution targets, customer demand for ethically sourced product and from sustainable source.
In the healthcare sector, environment agendas and community awareness will make the organizations to search for ecofriendly options to market.
It is important to notice that four out of the six paradigms in PESTEL analysis considerably depending on the type of business. For example, consumer organizations are keener towards social factors, while political factors play a vital role in defense industry.