0:02 so you want to map out the external
0:04 environment of an organization but you
0:05 don't know where to start
0:07 best tool is your answer today I'm going
0:09 to tell you everything you need to know
0:12 about the PESTEL analysis my name is
0:14 Lars and welcome to a new episode of
0:23 business - you PESTEL best steeple desk
0:25 step or the spell it analysis they're
0:27 all different versions of basically the
0:29 same thing with the exact same goal
0:31 which is to help you analyze the
0:33 external environment of an organization
0:36 this is especially useful when starting
0:39 a new business or when entering a
0:40 foreign market or a different industry
0:43 with an existing company before I go
0:44 into the actual framework
0:47 I want to clearly define the external
0:49 environment that is being examined
0:51 because PESTEL analysis does not just
0:53 look at any external factor out there
0:55 but more specifically to macro
0:58 environmental factors in order to
1:00 explain it better let's imagine a
1:02 fictional company first of all you have
1:04 the company itself everything that
1:06 exists and happens within that company
1:09 can be considered internal think about
1:10 the organizational structure of the
1:13 company the culture the employees the
1:15 management shareholders reward systems
1:19 etc closely surrounding the company
1:21 which are there for external our
1:23 competitors suppliers distributors
1:27 customers or strategic partners this
1:29 external element so to speak are in a
1:31 direct contact with the focal company
1:34 they interact with one another it's a
1:37 two-way relationship sometimes this part
1:38 of the external environment is called
1:42 the task environment now it's very
1:44 important to realize that even though
1:47 pestle is looking at external factors it
1:49 is not looking at these factors like
1:51 mentioned before pesto looks at the more
1:54 general environment the macro
1:57 environmental factors which can have a
1:59 massive impact on a company but not the
2:02 other way around they therefore have a
2:04 one-way effect rather than an
2:05 interaction like with the task
2:07 environment if you want to look more
2:09 into the task environment I advise you
2:12 to use Porter's five forces which I will
2:13 make video
2:15 very soon so now we have that cleared up
2:18 let's go into the pestle analysis
2:20 pestle is an acronym that stands for
2:23 political economic social technological
2:26 environmental and legal factors together
2:28 they make up quite an exhaustive list of
2:30 the general environment in other words
2:32 if you look at all of these six factors
2:34 combined when scanning the
2:36 organization's environment you are less
2:38 likely to miss out on any important
2:42 macro environmental factors let's go
2:44 through all of them one by one political
2:47 these factors are all about how and to
2:49 what degree a government intervenes in
2:51 the economy or a certain industry
2:53 basically all the influences that a
2:55 government has on your business could be
2:57 classified here this can include
2:59 government policy political stability or
3:02 instability corruption foreign trade
3:05 policies tax policies etc furthermore
3:08 the government's may have a profound
3:11 impact on how a nation's education
3:13 system works how infrastructure looks
3:15 like and how the health sector is
3:17 regulated these are all factors that
3:19 need to be taken into account when
3:21 assessing the attractiveness of a
3:24 potential market economic factors are
3:27 determinants of a certain economy's
3:29 performance factors include the economic
3:32 growth exchange rates inflation rates
3:34 interest rates disposable income of
3:37 consumers and unemployment rates these
3:40 factors may have a direct or an indirect
3:42 long-term impact on a company since it
3:43 affects the purchasing power of
3:46 consumers and could possibly change the
3:48 demand and supply in the economy
3:51 therefore it also affects the way
3:53 companies price their products and
3:55 services you can imagine that in a
3:56 country where purchasing power is
4:01 relatively low prices are also lower the
4:03 social dimension this dimension of the
4:05 general environment represents the
4:07 demographic characteristics norms
4:09 customs and values of the population
4:10 within which the organization operates
4:13 this includes trends such as the
4:15 population growth rate age distribution
4:18 income levels but also attitudes towards
4:21 careers health lifestyle and possible
4:24 cultural barriers these factors are
4:26 especially important for mark
4:28 tears when targeting certain customers
4:30 in addition it also says something about
4:33 the local workforce and its willingness
4:36 to work under certain conditions some
4:38 people like to distinguish these factors
4:40 by separating social factors into
4:42 demographics and cultural or
4:45 intercultural factors that explains
4:46 these different versions of the PESTEL
4:49 analysis personally I'm fine with the
4:51 social category since it combines all
4:54 factors related to the people but feel
4:55 feel free to adapt it in a way that
4:58 suits you of course technological
5:00 factors these factors pertain to
5:02 innovations in technology and the
5:04 regulations surrounding technology that
5:06 may affect the operation of the industry
5:08 in the market favorably or unfavorably
5:11 think about technology incentives the
5:14 level of innovation automation R&D
5:17 activity technological change and the
5:19 amount of technological awareness that
5:22 the market possesses these factors may
5:24 influence decisions to enter or not
5:27 enter certain industries to launch or
5:29 not launch certain products or to
5:32 outsource production activities abroad
5:34 by knowing what is going on technology
5:36 wise you may be able to prevent your
5:38 company from spending a lot of money on
5:40 developing a technology that would
5:43 become obsolete very soon due to
5:45 disruptive technology called changes
5:47 elsewhere environmental factors have
5:50 come to the forefront only relatively
5:52 recently they have become important
5:54 due to the increasing scarcity of raw
5:57 materials pollution targets and carbon
5:59 footprint targets set by governments and
6:01 pressure from NGOs like for example
6:05 Greenpeace it is important to mention
6:07 that you shouldn't be confused about the
6:10 term environmental here since we also
6:12 use that to indicate all external
6:15 factors combined environmental simply
6:16 has a double meaning here and in this
6:19 context we use it to address ecological
6:22 aspects such as weather climates
6:24 environmental offsets and climate change
6:28 basically the well-being of our planet
6:30 growing awareness of the potential
6:32 impacts of climate change is affecting
6:34 how companies operate and what kind of
6:37 products they offer this has led to many
6:39 companies getting more and more involved
6:40 in practice
6:42 such as corporate social responsibility
6:45 and sustainability so finally the legal factors
6:46 factors
6:49 although these factors may have some
6:51 overlap with political factors they
6:53 include more specific laws such as
6:56 discrimination laws antitrust laws
6:59 employment laws consumer protection laws
7:01 copyright and patent laws and health and
7:04 safety laws it is clear that companies
7:06 need to know what is and what is not
7:07 illegal in order to operate successfully
7:11 and rightfully even organization trades
7:13 globally this becomes especially tricky
7:15 since each country has its own set of
7:17 rules and regulations in addition you
7:19 want to be aware of potential changes in
7:21 legislation and impact it may have on
7:23 your business in the future so recommend
7:25 it is to have a legal advisor or an
7:27 attorney to help you with this kind of
7:30 things so all of these factors combine
7:32 to give a good overview of the general
7:35 environment out there which factors are
7:37 most important for your business might
7:40 vary based on the country and industry
7:42 you are in as you might be able to
7:44 imagine environmental and ecological
7:46 factors are more important to the oil
7:48 and automotive industry now for example
7:52 the software industry so if you want to
7:54 bring PESTEL into practice and actually
7:57 use it properly I recommend you to
7:59 calculate weighted averages of the
8:03 available options you have imagine you
8:05 are a European company and you're
8:07 thinking of entering the South American
8:11 markets but you don't know which country
8:13 to enter first what you could do is
8:15 select a number of peso factors that are
8:19 most important to your business let's
8:21 say we want to look at the economic
8:24 growth corruption and how intellectual
8:28 property is protected give them a
8:30 weighting of their importance relative
8:33 to the other factors and assign grades
8:36 for each factor per country in the end
8:38 you are able to give each option the
8:41 weighted average great and compare them
8:44 to each other so you might be wondering
8:47 where to get the data from you will
8:49 actually be surprised how many of the
8:51 factors that I have just mentioned in
8:53 this video are already meant
8:56 measures and given a score even
8:59 something as corruption for example is
9:01 measured by the corruption perception
9:04 index there are many helpful websites
9:07 where these factors are quantified per
9:09 country and of course I'm here to help
9:12 you out so I included some useful links
9:14 in the description down below if you
9:17 like business-related stuff feel free to
9:19 subscribe to not miss out on any of our
9:21 future videos and if you have any
9:24 question on the subject please ask them
9:25 below in a comment section because I
9:28 will try to answer as many as I can and
9:30 of course I highly encourage all of you
9:32 to help each other out as well and get
9:35 the discussion going thanks for watching
9:37 and don't forget alone we are smart
9:40 together we are brilliant see you next time
