Should management move beyond PESTEL analysis?

In my recent encounters consulting for businesses, I have frequently come across companies that question whether the PESTEL analysis is still useful as a management tool. While the components of this framework are useful to business operations, I’ve come to believe that managers require – and would appreciate – a tool that allows for greater engagement; a tool that allows them to manage competency, foresee trends and scan environments in real-time for swift organisational change and sustainable growth and competitiveness.

What is PESTEL analysis?

PESTEL analysis is a framework used by managers to analyse the macro-environmental factors that have an impact on business operations. PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal. The tool is used in a structured or tabulated manner to provide managers and key team members with a clear understanding of a situation within an organisation. However, the PESTEL analysis model has been criticised in recent years and many managers have begun using extended versions of this method, such as STEEPLE or STEEPLED (Social, Technological, Economic, Environmental, Political, Legal and Ethical), that include Ethics and Demographic factors.

Does PESTEL analysis help modern business operations?          

The PESTEL analysis framework has been used since the late 1960s, having originated as PEST and thought to be created by Francis Aguilar, a professor at Harvard University in the United States. However, as workplaces have changed over time, the conceptual and tabulated form of the PESTEL analysis no longer serves the purposes of real 21st-century business environments.

Unlike in previous decades, business operations and processes are no longer static and now comprise various other factors besides those accounted for in the PESTEL analysis framework. The framework, through its structured format, anticipates that a business organisation is static. It does not account for the integrated relationships between the components of environment, legal practices, political and social cultures, economics and technology – as well as other factors such as age, gender, ethics and ethnicity – that are now found in business operations.

Is PESTEL analysis still relevant?

Scanning and scenario- and strategy planning – key aspects of PESTEL analysis – are still relevant. However, with the forecast of another year of slow global economic recovery, it makes sense that managers question whether the current form of PESTEL analysis is adequate in helping them understand market opportunities for growth and respond swiftly and effectively to threats. These doubts sprout from the realisation that internal organisational challenges are a key factor to unsustainable business operations.

But there is hope. Through the foundation of PESTEL analysis, the structures of business operations need to change to a platform of implementation. By expanding the PESTEL analysis framework to include the multi-levelled and three-dimensional aspects of modern business operations, managers will be able to achieve sustainable and more competitive performance and growth within their organisations.

Are you using the correct management tools for your business operations? Learn more about PESTEL analysis and other management frameworks  that affect business operations with USB-ED’s Management Development Programme, which will take your management skills to greater heights.

Related articles

You have disabled JavaScript on your browser.
Please enable it in order to view this website.