Marketing Theories – PESTEL Analysis

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Welcome to our Marketing Theories series. In this post we will be looking at the PESTEL Analysis in a bit more detail.

A PESTEL analysis is a framework or tool used by marketers to analyse and monitor the macro-environmental(external marketing environment) factors that have an impact on an organisation. The result of which is used to identify threats and weaknesses which is used in a SWOT analysis.

PESTEL stands for:

  • P – Political
  • E – Economic
  • S – Social
  • T – Technological
  • E – Environmental
  • L – Legal

Lets look at each of these macro-environmental factors in turn.

PESTEL Analysis

All the external environmental factors (PESTEL factors)

Political Factors

These are all about how and to what degree a government intervenes in the economy. This can include – government policy, political stability or instability in overseas markets, foreign trade policy, tax policy, labour law, environmental law, trade restrictions and so on.

It is clear from the list above that political factors often have an impact on organisations and how they do business. Organisations need to be able to respond to the current and anticipated future legislation, and adjust their marketing policy accordingly.

Economic Factors

Economic factors have a significant impact on how an organisation does business and also how profitable they are. Factors include – economic growth, interest rates, exchange rates, inflation, disposable income of consumers and businesses and so on.

These factors can further be broken down into macro-economical and micro-economical factors. Macro-economical  factors deal with the management of demand in any given economy. Governments use interest rate control, taxation policy and government expenditure as their main mechanisms they use for this.

Micro-economic factors are all about the way people spend their incomes. This has a large impact on B2C organisations in particular.

Social Factors

Also known as socio-cultural factors, are the areas that involve the shared belief and attitudes of the population. These factors include – population growth, age distribution, health consciousness, career attitudes and so on. These factors are of particular interest as they have a direct effect on how marketers understand customers and what drives them.

Technological Factors

We all know how fast the technological landscape changes and how this impacts the way we market our products. Technological factors affect marketing and the management thereof in three distinct ways:

  • New ways of producing goods and services
  • New ways of distributing goods and services
  • New ways of communicating with target markets

Environmental Factors

These factors have only really come to the forefront in the last fifteen years or so. They have become important due to the increasing scarcity of raw materials, polution targets, doing business as an ethical and sustainable company, carbon footprint targets set by governments (this is a good example were one factor could be classes as political and environmental at the same time). These are just some of the issues marketers are facing within this factor. More and more consumers are demanding that the products they buy are sourced ethically, and if possible from a sustainable source.

Legal Factors

Legal factors include - health and safety, equal opportunities, advertising standards, consumer rights and laws, product labelling and product safety. It is clear that companies need to know what is and what is not legal in order to trade successfully. If an organisation trades globally this becomes a very tricky area to get right as each country has its own set of rules and regulations.

After you have completed a PESTEL analysis you should be able to use this to help you identify the strengths and weaknesses for a SWOT analysis.

We hope that you have found the above information useful. The PESTEL analysis is taught in our CIM courses.

Please feel free to leave a comment.

 

 

Marketing Theories – Swot Analysis

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Welcome to our marketing theories series, each week we will be discussing one of the theories that we teach as part of our CIM courses. This week we will look at the tried and trusted SWOT analysis.

For those of you not familiar with this theory, SWOT stands for:

S – Strenghts

W – Weaknesses

O – Oppurtunities

T – Threats

Many of you would have used a SWOT analysis in the past, but how many know who came up with the theory?

Albert S Humphrey (1926 - 2005)

Albert Humphrey was an American business and management consultant.

During his work at the Stanford Research Institute (1960 – 1970), he produced a team method for planning which was named SOFT analysis, this has developed into what we now know as a SWOT analysis.

Enough history for now, if you want to find out more about Albert, visit his Wikipedia page.

 

The theory seems simple enough, you use it to evaluate the Strengths, Weaknesses, Opportunities and Threats that is involved in a marketing or business project. You will specify the objective for the project and then identify the internal and external factors that will have a positive as well as negative impact on the objective.

Which is it?

It is worth noting that you should set the final objective after completing the SWOT analysis. The reason for this is to ensure that the objectives are achievable and not unrealistic given the current internal and external environments.

Each organisation or business has to deal with both internal and external factors that affect them.

Users of the SWOT analysis can therefore use the first two sections (Strengths and Weaknesses) to help them identify all of the internal factors. The last two sections (Opportunities and Threats) will be used to identify all of the external factors.

Swot Analysis

When determining each of the sections it is really important that the right questions are asked. A SWOT analysis that does not produce or help towards producing realistic and achievable goals is useless. Have a look at the “sample” questions that you could ask for each section. These are just a short selection and will differ from objective to objective and from organisation to organisation. The important point to take away is that the right question will help to produce a really valuable SWOT analysis.

Strenghts (Internal factor / Positive influence)

  • What are we best at?
  • What intellectual property do we own that can help us with this objective?
  • What specific skills does the current workforce have that can contribute to this objective?
  • What financial resources do we have for reaching this objective?
  • What connections and alliances do we have?
  • What is our bargaining power with both suppliers and intermediaries?
Opportunities (External factor / Positive influence)
  • What changes in the external environment can we exploit?
  • What weaknesses in our competitors can we use to our advantage?
  • What new technology might become available to us?
  • What new markets might be opening to us?

Weaknesses (Internal factor / Negative influence)

  • What are we worst at doing?
  • Is our intellectual property outdated?
  • What training does our workforce lack?
  • What is our financial position?
  • What connections and alliances should we have, but don’t?

Threats (External factors / Negative influence)

  • What might our competitors be able to do to hurt us?
  • What new legislation might damage our interests?
  • What social changes might threaten us?
  • How will the economic cycle affect us?

As mentioned before, the above list is not comprehensive. You can also turn a threat into an opportunity or something that is a weakness today might be turned into a strength with some effort.

The SWOT analysis is taught to students in the Professional Certificate in Marketing and is used in the Assessing The Marketing Environment module together with a PEST or PESTEL analysis to produce a comprehensive audit of the internal and external environment for an organisation which they will take into the exam.

In the next post we will cover the PESTEL or PEST analysis as this is most often used alongside a SWOT analysis.

Thanks for reading and don’t forget to leave a comment.

 

Manchester Study Centre Open

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Business professionals in the Manchester area will soon be able to gain marketing qualifications through the highly-acclaimed The Professional Academy.

With its exceptional student support and study options, The Professional Academy students continuously achieve pass rates well over 80% in a range of qualifications from the Chartered Institute of Marketing (CIM) and the CAM Foundation. Most recently they have achieved 100% pass rate for the Emerging Themes and Analysis and Decision modules which form part of a very challenging Postgraduate marketing diploma.

Looking forward to the Manchester launch in April, The Professional Academy ‘s managing director – Martin Hutchins said: “We are very excited to be offering courses in the Manchester area – which is fast-becoming a hub for creative industries such as marketing and media. These in turn attract other types of business.

“The CIM qualifications are becoming an essential item to have on your CV with many employers now preferring this above even university degrees. This is due to the practical nature of these qualifications and the CIM’s continuous efforts to keep the syllabus current and applicable to the real business world.”

The Professional Academy will also provide the opportunity for sales professionals to gain an industry-recognised qualification from the only UK sales institute – the Institute of Sales and Marketing Management (ISMM). The Professional Academy has helped many companies improve their sales team knowledge and experience both in the UK and abroad; Gulf Air being one of the most recent companies coming on board.