How To Do Pestle Analysis – Quick Guide With Example


Anyone who is looking to take steps in the Business world knows it’s not an easy task to do. You might have a world-changing idea but if it cannot be executed properly then the world won’t even move an inch. To know how a Business plan can be executed, there are certain factors that require to be considered. These factors can be summarized with just one investigation, the PESTLE analysis.

Don’t know what PESTLE is? Let me explain. PESTLE stands for:

  • Political
  • Economic
  • Social
  • Technological
  • Legal
  • Environmental

A six-way perspective of an organization, PESTLE analysis helps to scrutinize all the external factors impacting the progress of a Business. These are the macro-economic factors that affect the performance and activities of your business in the future. With PESTLE analysis, you can carefully decide new ventures for your business and which areas to improve on.

To understand more about PESTLE, I’ll be explaining each of the factorsin detail. At the same time, we will analyze 2 different companies to understand how they implement PESTLE and ensure the success of their business.

Our examples of Pestle Analysis include:

  1. Microsoft Corporation: An American multinational technology company and the hub of computer technology. This company manufactures, licenses, supports and sells computers, software and other electronics as well as services.
  2. Coca-Cola: Another American Multinational Corporation that manufactures non-alcoholic beverages concentrates and syrups. It’s widely known product goes by the name of Coca-Cola itself.

 

 

Political Analysis

If you have a business, it can’t be independent on its own. Instead, it will have some political factors involved that may affect its functioning. If your company is especially multinational, the same branch in America cannot function entirely the same way as in the Middle East. The political factors include labor law, tax policies, corruption,Trade control, and Government regulation and deregulation.

Let’s understand more through our Pestle examples. For Microsoft, political factors give access to a wide range of opportunities. The company focuses on international trade agreements and increasing support for automation from the government. In this way, it increases its sales through governmental clients.However, international trade agreements also pose a threat to Microsoft as foreign firms increase their competitiveness in countries like the United States.

For Coca-Cola, however, the political factors are a little different. As a beverage company, Coca-Cola is dependent on government policies regarding sugar and caffeine consumption. It is expected to strictly adhere to labor, taxation and marketing laws of the respective country and regulations outlined by the FDA.

Economic Analysis

Probably the most important factors determine the purchasing power of consumers, the performance of the company’s economy, and possible changes in the demand and supply of the products. Some of these factors include inflation and exchange rate, price fluctuations, government’s budget deficits, etc.

In economic terms, Microsoft focuses on increasing the disposable income of the middle-class sections. It provides economic security to the under developing, as well as developed countries in which it functions. This benefit Microsoft as it can boost sale revenue and stable performance in its markets.

In contrast, Coca-Cola focuses on utilizing its budget in the right direction. Having 80+ million equity and generating 70% income from outside the USA, it caters to the preferences and tastes of consumers. However, it still has to focus on producing healthy and safer drinks.

Social Analysis

Through these factors, a company can easily target its preferred customers and organize a better workforce. During the social analysis, a company needs to know about the Population size and growth rate, Wealth distribution, social classes, and lifestyles.

Microsoft ensures a healthy macro-environment by promoting cultural diversity in its taskforce. It caters to the demand for high-quality customer services and focuses on developing the products to satisfy the leisure preferences of its customers.

In contrast, as per the Coca-Cola pestle analysis, the company generates much of its profit from urban cities.It has shifted to healthy products to cater to growing concerns about the spread of diseases, like obesity. These include products such as ‘Coke Zero’ and other low-calorie products. However, it is still not an acceptable brand,being an American product,in countries such as those in the Middle East.

Technological Analysis

These factors focus on technology and innovation. Through a technological analysis of your company, you will be able to make decisions regarding automation, research, and development, (R&D) activity and whether to launch certain products or not.

As a software company itself, Microsoft majorly focuses on the rapid innovation of its mobile technology and devices. It tends to secure online transaction processing by increasing its volume and incorporates automation in businesses.

The use of technology is equally important for the operations of Coca-Cola. It has a technological set up in Britain which ensures to provide quality products to its customers. Not only this, but it promotes its products across diverse social platforms as it has one of the highest followers base.

Legal Analysis

Just as mentioned in the political analysis, it is vital for a company to adhere to the regulations and laws of the specific countries in which they function. These laws include health and safety laws, discrimination laws, employment laws, and consumer protection laws.

Let’s understand this through our pestle analysis examples. Microsoft enhances its sale of products by ensuring consumers the safe disposal of electronic waste and following energy consumption regulations. On the other hand, it adheres to patent laws by reducing issues like computer software piracy to improve its brand image.

On the other side, Coca-Cola has made sure to secure the rights to all its previous and future products through a patented process. It also compiles to labor and taxation laws of the countries in which it operates, just like Microsoft, to continue its operations globally.

Environmental Analysis

Environmental factors have become highly crucial now for brands. By following certain guidelines and procedures, companies are able to operate without causing adverse effects on the environment. These factors include ecological aspects such as weather, and climate change which may affect industries such as tourism, farming, and agriculture.

Despite being a software company, Microsoft focuses on environmental conservation techniques as well. It makes materials available for recycling and green products more available. In this way, it is able to focus on business sustainability.

Environmental factors are more crucial in the functioning of Coca-Cola. Firstly, it ensures the availability of water certain to produce its beverages. Secondly, itconducts sustainable water management operations. Now, it is also trying to reduce its carbon footprint to near zero.

Overall

Through the PESTLE analysis of Microsoft Corporation, it is evident that it invests a considerable amount of time in analyzing its performance and ensuring it stays ahead of its competitors. It heavily focuses on its economic functioning to market itself well. In contrast, for Coca-Cola,it is important to imply with customers’ preferences to ensure its success.

By carefully understanding your business, conducting appropriate analysis and drawing correct conclusions, your business could mark in the list of top businesses of world.

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