PESTEL analysis - Financial definition
Financial acronyms
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Concise definition of the term PESTEL analysis
A PESTEL analysis is a strategic framework used in business and marketing to assess and evaluate the environment in which a business operates. PESTEL stands for Political, Economic, Social, Technological, Environmental, and Legal factors.
Comprehensive definition of the term PESTEL analysis
By analyzing these key factors, businesses can gain insights into the external forces that may affect their operations, enabling them to make informed decisions and develop effective strategies to navigate changes and opportunities in their operating environment.
Historically, it was called a PEST analysis, which stood for Political, Economical, Social, and Technological. Over time, the framework evolved to include environmental and legal factors as well.
Political factors in a PESTEL analysis refer to the influence of government policies, regulations, and stability on an organization or industry. These factors can encompass government stability, taxation policies, trade regulations, and political ideologies.
The economic factors in a PESTEL analysis encompass the evaluation of economic conditions and trends, such as inflation, exchange rates, economic growth, and overall stability, which can influence an organization's financial performance and decision-making.
Social factors in a PESTEL analysis encompass the cultural, demographic, and societal aspects that influence how people behave and their preferences, affecting consumer behavior and market trends.
Technological factors in a PESTEL analysis encompass the impact of advancements and innovation on an organization, including digital disruption, technological infrastructure, and the pace of technological change.
In a PESTEL analysis, the environmental factors refer to the ecological and sustainability aspects that impact an organization, including factors related to climate change, environmental regulations, and ecological trends.
Legal factors in a PESTEL analysis refer to the laws, regulations, and legal constraints that can impact an organization's operations, compliance requirements, and potential legal risks.