PESTLE and SWOT Analysis

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.



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.



Now you have the PESTLE context you can use this output to map out a SWOT analysis. SWOT stands for:

• Strengths
• Weaknesses
• Opportunities
• Threats

A traditional SWOT analysis would take the context of the PESTLE and analyse how these factors may emerge/impact.

This may be an interesting exercise but often doesn’t lead to anything apart from four lists that are filed away and forgotten.

A SWOT analysis should be a useful tool for planning and marketing strategy. Identify your strengths and weaknesses first because they may suggest some of the opportunities and threats later. There is a tendency for people to play the ‘opposites game’ whereby an opportunity might be identified and then a converse threat that ‘it might not be taken up’. This is not a threat, threats have to exist now in the present – this is a RISK associated with taking that opportunity and this should be recorded in the risk register.

A better way to map this output more directly into a project plan and/or strategy is to use a 3×3 grid, arranging your strengths, weaknesses, opportunities and threats in the labelled boxes. Then come up with some ‘mini strategies’ in the four boxes in the bottom right corner of the matrix, addressing the questions outlined.