Conducting PESTLE Strategic Marketing Analysis

Once a comprehensive list of factors have been compiled as explained in the article "The PESTLE Strategic Marketing Analysis Technique: Compiling the List of External Factors" by the same author, the next step is to use it to determine how, when and how much these factors will influence the nature of the business and the impact they will have on the company, the market and the competitors.

According to Thompson (2002) any organization has is subjected to powerful environmental forces that will impact and affect the choices made by managing meaningfully. Some companies consider the most powerful factors to be their customers; other think it is their competitors, yet others believe that their suppliers' actions are crucial. To correctly determine the environmental factors that will affect a company one needs to objectively assess all the dimensions and record these factors in a PESTLE list.

The list will contain factors that are classified into six main categories as follows: Political factors, Economic factors, Sociological factors, Technological factors, Legal factors and Environmental factors. It is important to ensure that the list is comprehensive and all-inclusive. If one tries to conduct a PESTLE analysis with an incomplete list of external factors the result can be disastrous for the company who implements the outcome as critical items may have been missed.

The correct and accurate evaluation of the impact of each of the factors will provide the company with an accurate picture of the external environment.

Step Two: Identify Implications of External Factors

In this step the implications for each of the factors that have been identified and recorded by any of the divisions of the company are determined. The process normally involves dividing the implications into categories that have implications for the Company, for the partners or stakeholders, for the customers and clients, for the public and specific communities for affiliates, suppliers and other associated organizations as well as for any other relevant group.

Step Three: Decide the Relative Importance of the Implications

In order to objectively determine the relative importance of the implications identified during step two above the impact of each of the implications needs to be determined first. This is done by determining the impact in terms of time and by type. The dynamics of the impacts are also determined and recorded.

Impact in Time

When considering the impacts in time the team needs to consider the affect the implications will have at different times from the current into the future. It is normal to consider periods of around six months duration, however in some mature industries it is more useful to work with twelve month periods while very dynamic industries may require monthly periods to be considered.

Impact by Type

It should be noted that impacts may have different kinds of affects. The most popular categorization methodology is to use positive and negative impacts. In some cases these are further categorized into direct and indirect impacts. It may also be categorized as financial-, strategic-, market- and operational impacts. Each industry has different key success factors and this will influence the categorization of the impacts.

Impact by dynamics

When determining the impact by dynamics one will consider the significance and importance of the implication increasing, decreasing or remaining unchanged over time. Here it is important to critically analyze trends over different time periods to get to a suitable answer. If one merely align the time periods used to determine the trend lines with that selected during the impact in time step one may not produce the correct results.

Relative Importance Determination

The norm is to make use of a five point scale in determining the relative importance of the implications of the external factors. A wide variety of scales are available for this purpose, however the most popular are to use terms such as critical, very important, important, significant and unimportant as guidewords for each of the five levels. Irrespective of what the guidewords are that one uses, each of these should be clearly defined and where possible, linked to a quantitative measure.

The following are examples of non quantitative definitions that can be used for these guidewords. An item that is classified as of critical importance will threaten the continuing existence of the company or seriously compromise its existence. It may also require the review of the company mission or core values. On the other end of the scale an item that is classified as unimportant is such that it does not affect the company in any important way.

Recording the Results

For most marketing managers it is important to have evidence of the factors they considered when making decisions. Recording the results of a PESTLE analysis can go a far way to provide such written evidence. The recording does not have to be in the form of long essays. Most PESTLE analysis reports are in the form of a table that reflects the outcome of the analysis.

Conclusion

The PESTLE analysis technique is a scrutiny of the external macro environment in which a business operates to provide executives with the big picture. The factors considered are often beyond the control or influence of a business, however they are of extreme importance when determining the marketing mix (4P's), deciding on product development strategies or conducting strategy planning.

Whatever the specific focus of the analysis PESTLE is a useful tool to use when one needs to understand the environment in which a company operates. It provides the company with potential threats that may be faced but more importantly it also provides insight into opportunities that are available to be exploited. If used correctly the prioritized list of opportunities could be used to successfully inform the strategic direction of the company.

© Carl Marx