An external analysis takes stock of the environment your brand is operating in. Because, if 2020 hasn’t already taught us, it’s that our businesses do not operate in a vacuum. External factors like bushfires, social justice movements, pandemics and recessions, all have an impact either directly or indirectly on our businesses, and have either a positive or negative impact on our brands.
To get a handle on these impacts, a strategic management tool like a PESTLE analysis helps you break influences down into different areas to identify potential consequences for your business.
Some things to remember:
- These are factors you cannot control
- These factors can help you understand future market performance
- They can help you identify opportunities for future growth
- They can help you identify potential threats
P – Political
(instability, other political changes, trade and tax policy, labour laws, etc.)
For example, a certain political party will have leanings towards certain types of policy, which could have a positive or negative impact on businesses. Political unrest in different markets can cause uncertainty around freedom of movement, trade and security. Tensions between nations could mean additional trade restrictions are imposed. Favourable trade relations may mean tariff exemptions.
E – Economic
(currency fluctuations, consumer confidence, price increases by suppliers, strong or weak conditions, recession, etc.)
For example, the financial collapse of 2008 and COVID-19 cause economic uncertainty and recessions which mean people lose their jobs (the flow-on effect is that they have less discretionary income, so their spending habits change) and consumer confidence decreases.
S – Social
(demographic changes, health, income, shifting attitudes and norms, protest movements, age, population shifts, cultural and lifestyle considerations, etc.)
Movements such as Black Lives Matter, MeToo and Pride are social movements seeking radical change within society at large by raising awareness and shifting perceptions. Brands need to be especially aware of changes in attitudes among their audience and employees, lest they be called out for being offensive, opportunistic, or for just general poor form.
T – Technological
(the impact of technology on your business and vice versa, innovations, new tools and systems, consumer preferences, usage trends, legislation specific to tech, etc.)
One of the most influential technological trends of the past decade is the uptake and capability of the smartphone. According to Statista, the number of smartphones in use globally in 2016 was 2.5 billion, which is predicted to increase to 3.8 billion in 2021 (a 52% increase in just 5 years). This uptake has played a significant role in the way consumers buy, communicate, socialise and spend their downtime (with opportunities for games, social media, ecommerce, retailers).
L – Legal
(legislation or regulatory changes for your industry, privacy, discrimination, consumer protections, copyright, health and safety, etc.).
A recent global impact of legislation change was the introduction of the GDPR, an EU policy change which required more stringent consumer data management within businesses, no matter their size, for anyone doing business with any EU citizen. It outlines increased protection for consumers around consent to receive marketing messages, and disclosure about tracking and how data is used online.
E – Environmental
(the impact of your business on the environment, environmental impacts on your business, climate change, consumer preferences, sustainability, trends, legislation specific to the environment (e.g. carbon taxes), etc.).
The recent Paris Agreement and increasingly horrifying environmental crises have and will continue to give rise to more businesses proactively making changes to the way they operate, to reduce their environmental impact. With a clear majority of consumers (62% in fact) stating they want to see more companies behave more environmentally responsibly, acting on environmental macro factors is good for business too.
A PESTLE analysis can form part of your annual brand and marketing planning process and can help assess macro-environmental conditions for new ventures and ideas (like new products and/or services, launching into new markets, new campaigns, etc.). And while some businesses will be more impacted by certain factors than others, the PESTLE is a useful tool for any sized brand to get a strong grasp on the bigger world they’re doing business in.
Oh and for occasionally make a cracking pesto or curry with 😉