PESTEL Analysis

The standard tool for analyzing the macro environment. Six dimensions capture the external forces that shape every industry — from politics to law.

Public domain / MBA classic Various sources

What is PESTEL?

PESTEL (sometimes PEST, STEEP, or STEEPLE) is an acronym for six categories of external influences: Political, Economic, Social, Technological, Environmental, and Legal.

Unlike Porter's Five Forces, which analyze industry competition, PESTEL looks at the macro environment — the big trends and forces that shape an industry from the outside.

The six factors

  • Political: government policy, trade barriers, tax policy, political stability
  • Economic: economic growth, interest rates, inflation, unemployment, exchange rates
  • Social: demographics, education, shifting values, health awareness, lifestyle trends
  • Technological: R&D activity, automation, digitalization, technology transfer
  • Environmental: climate change, resource scarcity, environmental regulation, ESG requirements
  • Legal: employment law, consumer protection, data protection (GDPR), antitrust, compliance

Environment analysis

Rate the influence of each factor on your industry (1 = low, 5 = very high)

How strongly do political factors (regulation, taxes, trade policy) influence your industry?

Low High 3

How strongly do the business cycle, interest rates, inflation, and exchange rates affect your business?

Low High 3

How relevant are demographic change, shifting values, and consumer behavior for your industry?

Low High 3

How quickly is technological innovation changing your business model?

Low High 3

How strongly do climate change, sustainability, and environmental regulation affect your company?

Low High 3

How strongly do laws, employment law, data protection, and compliance constrain your scope of action?

Low High 3

Inspiriert von Public domain — PESTEL Analysis

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Trivia

  • PESTEL started as PEST (without E and L) — Francis Aguilar introduced the original idea as ETPS in his 1967 book "Scanning the Business Environment".
  • The order of the letters varies by source: PEST, STEP, STEEP, PESTLE, STEEPLE — at the core they all mean the same thing.
  • PESTEL is often used together with SWOT: PESTEL for external macro factors, SWOT for connecting them with internal strengths and weaknesses.
  • Some variants add a seventh factor: Ethics (STEEPLE) or Demographics.