Boost your employer brand and attract and retain the best talent by becoming a CIPD People Development Partner
Find out moreMembership
Become a member
- Join through studying a qualification
- Join through Experience Assessment
Renew your membership
Come back into membership
Upgrade your membership
Manage your membership
- Manage your details and preferences
- Get your invoice or receipt
- Get proof of membership
- Login help
Membership grades
- Student Member
- Foundation Member
- Associate Member
- Chartered Member
- Chartered Fellow
- Academic member grades
- Affiliate Member
Membership fees
Member benefits
Student hub
Experience Assessment
Make your HR or L&D experience count
Find out moreProfessional qualifications
Get an internationally recognised qualification
Find out moreKnowledge hub
Cost-of-living crisis: Help for employees
Remote and hybrid working
Coronavirus [COVID-19] hub
Tackling racism in the workplace hub
Let's talk menopause
Topics A - Z
- Employment law
- Managing the employment relationship
- Getting, developing and keeping the right people
- Strategy and planning
- Organisational culture and behaviours
- Changing context of work
Practical guidance A - Z
Latest research and guidance
CIPD Podcasts
Business publications and journals
HR and L&D archive database
HR-inform: practical HR and employment law resources
CIPD Bookshop
Student hub
All you need to know about being a CIPD student as well as access to a wide range of resources
Find out moreCIPD Bookshop
Browse and purchase our range of textbooks, toolkits and e-books
Find out moreCIPD HR-inform
The essential companion for busy HR professionals
Find out moreNews, views and policy
CIPD News
Views on the world of work
- CIPD Viewpoint
- CIPD Lab
- Now and for the future
- People at work
In a Nutshell
CIPD podcasts
Campaigns
- Flex From 1st
- One Million Chances
Policy engagement
- Policy consultations
- EU briefings
- CIPD Voice
CIPD Press releases
Blogs
Gain insight on issues that matter to HR and L&D
Find out moreCOVID-19 hub
Access resources to support your response to the pandemic
Find out moreAbout us
Who we are
- Our purpose and vision
- Our Royal Charter
- Our leadership team
- Our governance
- Our history
- Annual report
Media centre
- Press releases
- Media spokespeople
Contact us
What we do
- Supporting careers in HR and L&D
- Building the best HR teams around the world
- Professional standards
- Code of Professional Conduct
- Championing better work and working lives
Working with us
- Our values
- Life at the CIPD
- Job vacancies
CIPD Trust
Future of the profession
Our profession plays an important role in ensuring work benefits everyone. Help shape its future
Find out moreAnnual Report
Learning together, leading together – investing in our whole community
Find out more- Other CIPD Websites
- CIPD Community
- CIPD Asia
- CIPD Middle East
- CIPD Ireland
- People Profession
- CIPD Learning Hub
People Management PM jobs
- Home
- Knowledge hub
- Strategy and planning
- Organisational design and development
- PESTLE analysis
Share
6 Dec 2021PESTLE analysis
Discover what PESTLE means, and use our PESTLE analysis template and example to understand the external influences on your organisation
On this page
On this page- Introduction
- What is a PESTLE analysis?
- How to do a PESTLE analysis
- PESTLE analysis tips
- What is a PESTLE analysis used for?
- Advantages and disadvantages of a PESTLE analysis
- Useful contacts and further reading
- Explore our related content
- Video transcript
Introduction
A PESTLE analysis studies the key external factors [Political, Economic, Sociological, Technological, Legal and Environmental] that influence an organisation. It can be used in a range of different scenarios, and can guide people professionals and senior managers in strategic decision-making.
See the full A-Z list of all CIPD factsheets.What is a PESTLE analysis?
It is a broad fact-finding activity around the external factors that could affect an organisation’s decisions, helping it to maximise opportunities and minimise threats. It audits six external influences on an organisation:
- Political: Tax policy; environmental regulations; trade restrictions and reform; tariffs; political stability
- Economic: Economic growth/decline; interest, exchange, inflation and wage rates; minimum wage; working hours; unemployment [local and national]; credit availability; cost of living
- Sociological: Cultural norms and expectations; health consciousness; population growth rates; age distribution; career attitudes; health and safety
- Technological: New technologies are continually emerging [for example, in the fields of robotics and artificial intelligence], and the rate of change itself is increasing. How will this affect the organisation’s products or services?
- Legal: Changes to legislation impacting employment, access to materials, quotas, resources, imports/exports, and taxation
- Environmental: Global warming and the increased need to switch to sustainable resources; ethical sourcing [both locally and nationally], including supply chain intelligence. Pandemics and other emergencies.
By analysing those factors, organisations can assess any risks specific to their industry and organisation, and make informed decisions. It can also highlight the potential for additional costs, and prompt further research to be built into future plans.
Video: what is a PESTLE analysis and how does it work?
Play Video
Please scroll to the bottom of the factsheet to view the transcript of this video.
PESTLE analysis is part of the core knowledge on enabling change and the core behaviour commercial drive in the CIPD Profession Map.
How to do a PESTLE analysis
Follow these steps:
- Identify the scope of the research. It should cover present and possible future scenarios, and apply to the industry and areas of the world in which the business operates.
- Decide how the information will be collected and by whom. Identify more than one person to gather data to bring diverse evidence and perspectives.
- Identify appropriate sources of information. You may find areas of PESTLE are a bigger focus to your industry than others but exploring information for all of them will give you a bigger view of the external environment.
- Gather the information – you can use the template below.
- Analyse the findings.
- Mark each item in terms of importance in relation to potential risk to the organisation.
- Identify the business options to address the issues.
- Write a discussion document for all stakeholders.
- Disseminate and discuss the findings with stakeholders and decision makers.
- Decide what actions need to be taken, and trends to be monitored.
To be effective, a PESTLE analysis needs to be done regularly. Doing so can help organisations to spot trends early, and provide a competitive advantage.
You can download a PESTLE analysis template below which will help you record PESTLE information. We’ve also created an example based on a fictitious retail sector organisation which shows how PESTLE factors have been analysed and interpreted.
Blank PESTLE template PDF – available to download here.
Completed PESTLE example PDF – available to download here.
PESTLE analysis tips
Some useful tips for carrying out a PESTLE analysis:
- Collaborate - multiple perspectives can identify more risk.
- Use expertise and resources within the organisation.
- Use PESTLE analysis alongside other techniques, such as SWOT analysis, Porter's Five Forces, competitor analysis, or scenario planning.
- Incorporate a PESTLE analysis into an ongoing process for monitoring changes in the business environment.
- Avoid collecting vast amounts of detailed information without analysing and understanding your findings appropriately.
- Don’t jump to conclusions about the future based on the past or present.
What is a PESTLE analysis used for?
By auditing the external environment, a PESTLE analysis can detect and understand broad, long-term trends. This can support a range of business planning situations, such as:
Strategic business planning
A PESTLE analysis provides contextual information about the business direction, its brand positioning, growth targets, and risks [such as another pandemic] to productivity. It can help determine the validity of existing products and services and define new product development.
Workforce planning
A PESTLE analysis can help to identify disruptive changes to business models that may profoundly affect the future employment landscape. It can identify skills gaps, new job roles, job reductions or displacements.
Marketing planning
A PESTLE analysis provides the ‘climate’ element in the situation analysis phase of the marketing planning process. It can help prioritise business activities to accomplish specific marketing objectives within a set timeframe.
Product development
By monitoring external activity, a PESTLE analysis can help inform whether to enter or leave a route to market, determine if a product or service still fulfils a need in the marketplace, or when to launch a new product.
Organisational change
A PESTLE analysis helps understand the context for change, and is most effective when used in association with a SWOT analysis to understand opportunities and threats around labour changes, such as skills shortages or current workforce capabilities.
People strategies, reports and projects
A PESTLE analysis can be used as a framework to look outside the organisation to hypothesise what may happen in future and what should be further explored. It can ensure that some basic factors are not overlooked or ignored when aligning people strategies to the broader organisation strategy.
Advantages and disadvantages of a PESTLE analysis
Advantages:
- It’s a simple framework.
- It facilitates an understanding of the wider business environment.
- It encourages the development of external and strategic thinking.
- It can enable an organisation to anticipate future business threats and take action to avoid or minimise their impact.
- It can enable an organisation to spot business opportunities and exploit them fully.
Disadvantages:
- Some PESTLE analysis users oversimplify the amount of data used for decisions – it’s easy to use insufficient data.
- The risk of capturing too much data may lead to ‘paralysis by analysis’.
- The data used may be based on assumptions that later prove to be unfounded.
- The pace of change makes it increasingly difficult to anticipate developments that may affect an organisation in the future.
- To be effective, the process needs to be repeated on a regular basis.
Useful contacts and further reading
Contacts
PEST analysis [Mindtools]
Books and reports
MORRISON, M. [2013] Strategic business diagnostic tools: theory and practice. CreateSpace Independent Publishing. [Chapter 3: PESTLE].
TURNER, S. [2002] Tools for success: a manager’s guide. London: McGraw Hill.
Journal articles
DOBBS, M.E. [2014] Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review. Vol 24, No 1, pp32-45.
CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.
Members and People Management subscribers can see articles on the People Management website.
Download factsheet
This factsheet was last updated by Michelle Battista: Learning Community and Content Curator, CIPD
Michelle oversees the CIPD learning communities and the curation and presentation of learning to support professional development. Her primary focusses are the core areas of the CIPD Profession Map and Management Development.
Explore our related content
CIPD Learning Courses Discover the fundamentals of Organisation Development, contextualise your challenges and explore a range of Organisation Development approaches to strengthen your practice.Organisation Development
Factsheets Learn about the SWOT framework, the process of a SWOT analysis, and its advantages and disadvantages Factsheets Explores what organisation development is, how it has developed, and how it is conducted in today’s organisations. Factsheets Explores the benefits of workforce planning, the activities involved and the stages of the workforce planning processSWOT analysis
Organisation development
Workforce planning
Our curated learning hub, brought to you in partnership with AVADO, is packed full of practical resources to support your CPDEnhance your CPD with the Future of HR and Learning
Video transcript
A PESTLE analysis is a management framework and diagnostic tool. The outcome of the analysis will help you to understand factors external to your organisation which can impact upon strategy and influence business decisions.
The PESTLE tool: PESTLE is an acronym for:
- P = Political
- E = Economic
- S = Social
- T = Technology
- L = Legal
- E = Environmental
Let’s look at each of these factors more closely,
POLITICAL: When looking at Political factors you will need to take into account your countries government policies and political stability. Other factors will include tax implications, industry regulations and global trade agreements and restrictions.
ECONOMIC: Economic factors will include exchange rates, economic growth or decline, globalisation, inflation, interest rates and the cost of living, labour costs and consumer spending.
SOCIAL: Social factors look at trends such as lifestyle factors, cultural norms and expectations such as career attitudes and work-life balance. It also concerns itself with consumer tastes and buying habits as well as population demographics.
TECHNOLOGY: Technology has grown exponentially. How is your business responding to technological innovation in your products and services? Other technological advancements will impact on data storage, disruptive technologies such as smartphones, social networking, automation robotics and the increasing shift towards AI artificial intelligence?
LEGAL: Shifts in the Legal landscape are constantly changing especially here in the UK. Employment labour law and employment tribunal decisions impact upon working practices continuously. It is also important to keep up to date with all changes in legislation and of course Health and safety regulations.
ENVIRONMENTAL: Does your business have a direct impact on the environment? Political sanctions now govern carbon emissions and a move towards sustainable resources such as wind turbines and recycling. This area also covers CSR corporate social responsibility and ethical sourcing of goods and services which in turn has a direct impact on procurement and your businesses supply chain management.
Next steps: Once you are clear on the main overarching factors included in a PESTLE analysis the next challenge is to relate this in real terms into the industry sector you work in.
Good luck.
TopJoin the conversation
- Learn, develop and connect
- Careers
- Knowledge hub
- News and views
- About us
- Employers - working with us
- Become a member
- Experience Assessment
- Membership fees
- Rejoin CIPD membership
- Manage your membership
- Upgrade your membership
- CIPD Community
- CIPD Events
- CIPD Learning
- CIPD Bookshop
- Contact us
- Media centre
- Terms and conditions
- Privacy policy
- Cookie policy
- Social bookmarks
- Anti Modern Slavery statement
People Management
PM jobs
Copyright © The Chartered Institute of Personnel and Development 2022. Incorporated by Royal Charter, Registered Charity no. 1079797