PESTEL analysis

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PESTEL analysis

PESTEL (also known as STEEPLE or shorter versions: STEEP or PEST), is a really helpful tool to help organisations map the external trends or forces (the drivers) that may have a positive or negative impact on their organisation.

The mnemonic PEST is widely used to help us remember the key categories or headings used when carrying out strategic analysis, that is the:

Political 

Economic

Social 

Technological factors in the external environment

Sometimes it’s represented as PESTEL (the E and the L stand for Environmental and Legal) or STEEPLE (with the addition of Ethical) or STEEP (including Economic and Environmental but without Legal).   

The shortcomings of PESTEL analysis

Like all tools, PESTEL has some shortcomings. For example:

• We feel we must produce something under each heading whether it’s relevant or not
• Once you’ve made a list under each heading you may feel so pleased and stop, when the process has only just started! 
• Sometimes organisations do the PESTEL analysis for the sake of it, rather than because they really understand the importance of bringing the external environment into the organisation’s strategic thinking. 
• Often we only look for what we know – rather than what we don’t know – so PESTEL should be about exploring new thinking as well as confirming old.

Nevertheless, PESTEL can be a useful way for organisations to start to think about what’s going on in the external environment and help identify important drivers. Using NCVO’s Third Sector Foresight’s website can help organisations look for drivers that they might not previously have considered as well as find out more about those they are familiar with. For more information email foresight@ncvo-vol.org.uk

PESTEL template

Use the following template to start to record your ideas about trends and forces. Why not also consider running a group exercise with colleagues and trustees. This kind of analysis really benefits from a number of brains exploring together! 

One way of doing this would be to have a sheet of flip chart paper for each of the categories, as in the template below. If you give everyone a pad of post-its and they write their ideas about each of the trends, forces and drivers down on separate post-its, you can do a big data collection exercise: sorting, sifting and considering implications together.

Make sure you ask the three important analysis questions:

What...

...are the key drivers, trends and forces in the external environment?

So what...

...are the implications for the organisation and key stakeholders and what are the opportunities (and threats and risks)

Now what...

...should the next steps be?

• honing the opportunities down
• creating some strategic options
• making decisions about future plans

Useful links

• The Prime Minister's Strategy Unit's Strategy Survival guide to PESTLE  includes a case study of the SU Alcohol Project
• Looking Out : written for people working in the voluntary and community sector, this guide to strategic analysis of the external environment  is designed to be used by anyone who would like to improve their knowledge and skills.

Have your say

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