HOW TO WRITE PESTLE ANALYSIS FOR YOUR BUSINESS PLAN
PESTLE analysis is a method of assessing some relevant factors that could affect your business; affecting it in the area of market planning. These factors are sometimes called macro-environment which can give your business a good shape. With these analyses, it becomes easy for you to assess your business in areas such as competition, markets, sales and other situations around your business. PESTLE is an acronym which means Political, Economic, Social, Technological, Legal and Environmental factors.
While writing your business plan, you need to have perfect knowledge of each these factors. The factors are succinctly explained below:
These are factors relating to the level of government intervention in the economy. That is several government policies that make the economy behave in a certain way. Political issues should be addressed here, they include; foreign trade policy, tax policy, emerging technology e.t.c.
The following questions should be properly assessed;
- What are government policies that could impact your business?
- How could political groups influence the success of your business?
There are economic factors that you should put into consideration while preparing your business plan. Economic factors entail how businesses perform and make decisions both in the short run and the long run. There are economic issues to be considered by a business owner. They are unemployment, inflation, stock market, trade (international and local), interest rate, and consumers’ confidence. At this point, I don’t want you to lose track of the fact that the major issue we are trying to address here is, “How to write PESTLE analysis for your business”.
You might need to ask yourself the following questions under the economic factors;
- How your pricing, revenues, and costs are impacted by economic factors?
- How do economic activities affect the performance of your business?
These are social attitudes and beliefs that impact or affect your business and these factors must be properly analyzed. These beliefs range from ethical, cultural, lifestyle, religious beliefs, demographic structure, population growth, emigration, and emigration.
It is important for you to highlight the following problems/ questions;
- How do customers’ beliefs and behavior impact the performance of your business?
- What is the nature of cultural trends and how does it affect the performance of your business?
Technological factors affect the way you manufacture, distribute and market your product. That is, how these things affect how a product or value is taken to the consumers. That is means of getting a product across to the consumers e.g. Research and Design (R&D).
You can ask yourself the following questions relating to technological factors
- How will technology impact your product /services?
- What are the current technological advancements?
This is concerned with ecological influences on your business and its performance. These factors include any of those macro-environmental factors that influence businesses. Also, your business needs to be environment-friendly with its operations. For example, corporate sustainability responsibility (CSR) initiatives. An example of CSR is a reduction in carbon footprint and transition into renewable material and energy sources. A few examples of environmental factors are Tourism, Climate, Geographical Location, Pollution, e.t.c.
You need to address the following problems under environmental factors:
- How does the geographical location of your business affect the behavior of your business?
- What are the impacts of climate change on your business performance?
- What impact does pollution have on your business and the return effect on the performance of your business at large?
Legal factors are government laws that affect the business either positively or negatively. i.e, when the government introduces legislation and policies that affect how your business operates, e.g. employment laws, retirement laws, consumer protection laws, tax regulations, licenses and permits e.t.c.
Questions you answer under the legal factors;
- How does industrial regulation affect the operation of your business?
- What is the effect of labor laws on your business operation?
Read Also: 25 Reasons why you need a Business Plan
Things you should consider in PESTLE analysis
When thinking about how to write your PESTLE analysis, you should understand its purpose which is to help you identify the threats and opportunities that your business may encounter. For your business to be successful in this digital age, identify these opportunities and create new value and confidently establish new markets. You should bear in mind that your customers are very important and that the change and the value you are creating will affect your business for the better.
It is important for a business owner, whether small or large to understand the external environment and how these factors affect their decisions. It is pertinent to know that PESTLE analysis should be carried out on a regular basis. This will enable you to identify and overcome changes in those macro-environment factors and will help you find better ways to deal with those changes through updated strategic plans.
PESTLE helps you to understand the effect of external factors or elements on your business. It helps to determine the long-run effect of these factors on your business. If PESTLE is well stated and explained in your business plan, it will enable you to identify solutions to environmental problems affecting your business, give you a strategic edge over your competitors, give you a new direction for your product and help you to analyze several risks you may likely face in the market you are interested in. one of the goals of every business is to bring the owner and the employee together to achieve the predetermined objectives of the business. When you do your proper analysis of PESTLE, it will help you bring employees together, and create a strategic mindset that will help in bringing your strategy into macro-environment factors and plan accordingly.
When you learn how to write PESTLE analysis for your business, it helps your business to be profitable because it sharpens your idea of evaluating your business decision before you implement them. In this analysis, you tend to be more careful about decisions that could mar your business and reduce profit level. Because you’ve carried out a proper analysis of the external factors, your business will be guided against any form of decision that could hurt your business.
Steps to writing PESTLE analysis for your business
- Fact-finding: This means you will endeavor to make research on those factors. For you to have a good PESTLE analysis in your business plan, you must carry out a survey, gather enough information and data relating to the factors: Political, Economic, Social, Technological, Legal, and Environmental. During your period of research, you will know what usually brings about the changes in those factors, why they change, and how often they change.
- Identify the factors: another thing you should consider is identifying those factors. Get your team members, brainstorm on it and evaluate the impact of those factors on your business. While brainstorming, consider the present change and those changes that may likely occur in the future. In the same vein, there are some factors that will surface now, in present, while some will reflect in the future. Your team should be able to identify these during the research and brainstorming sessions. With this, your business will be successful because; it will help you in analyzing your competitors as well as your marketing plan.
- Measure the effect of each PESTLE component on your business: When analyzing PESTLE in your business plan, relate and measure the effect of the factors on the present behavior of your business. It will guide you on how to explore opportunities and give you solutions to the challenges your business may be facing.
- Identify Threats and Opportunities: you will need to identify how a change in the PESTLE components could be used as an advantage for your business. For example, when there is a change in labor laws, it could affect costs of labor, when there is technology advancement, it could be used to cut the cost of labor or increase process efficiency.
- Act to implement results: after you’ve obtained results from your findings of the macro-environment factors, action is needed! Your action will depend on your reason for carrying out the analysis. This analysis should be distributed to employees, investors, stakeholders. The summary of this analysis in your business plan is that if there are any risks or threats, you want to ensure that you take the necessary steps to eliminate them and develop action plans to take advantage of the opportunities.
Location of PESTLE analysis in your business plan
It is important to include PESTLE as part of your business plan. Many business owners don’t know about PESTLE, as a matter of fact, they don’t include it in their business plans. PESTLE analysis gives an edge to your business in many ways, and it is one of those areas that investors, stakeholders, and employees will look up to see in your business plan. PESTLE can be inserted before your marketing strategy when writing your business plan. PESTLE gives you advanced knowledge about things that might happen in your business in the future. For this purpose, it is beneficial to include it in your business plan.
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