Topic 1.3 · PESTEL Factors and the Business Environment
PESTEL Factors and the Business Environment
Political, economic, social, technological, environmental and legal factors shape which businesses can succeed in a market and which careers exist there.
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Learning objectives
- 1.3.ADescribe the PESTEL factors that shape markets.
- 1.3.BExplain how PESTEL factors influence business viability and career opportunities in a market.
- 1.3.CApply the PESTEL framework to evaluate the attractiveness and potential risks of a market.
Objective statements © College Board, quoted from the Course and Exam Description.
No business operates in a vacuum. Forces outside its control shape what customers want, what it costs to operate, and what is even legal. The PESTEL framework organizes these external forces into six categories.
| Factor | What it covers | Examples |
|---|---|---|
| Political | Policies and political dynamics | Trade policy, taxes, subsidies, mandates, bans, political stability |
| Economic | The state of the economy | Economic stability, household income, inflation, unemployment, interest rates |
| Social | Trends in society and culture | Demographics, cultural norms, lifestyle trends, population growth |
| Technological | Available technology | Internet access, automation, the pace of innovation |
| Environmental | Physical environmental conditions | Geography, natural resources, waste policies, consumer environmental views |
| Legal | Specific laws and regulations | Employment law, consumer protection, health and safety, IP protection, antitrust |
Key terms
- PESTEL
- A framework for analyzing the external business environment: Political, Economic, Social, Technological, Environmental and Legal factors.
- Political factors
- Policies and political dynamics such as trade policy, taxes, subsidies, mandates, bans and political stability.
- Economic factors
- Conditions in the economy such as stability, household income, inflation, unemployment and interest rates.
- Social factors
- Trends in society and culture such as demographics, cultural norms, lifestyle trends and population growth.
- Technological factors
- Availability of technology such as internet access, automation and the rate of innovation.
- Environmental factors
- External environmental conditions such as geography, natural resources, waste policies and consumers' environmental views.
- Legal factors
- Specific laws and regulations such as employment, consumer-protection, health and safety, environmental, intellectual-property and antitrust laws.
- Business viability
- A business's ability to survive and succeed over time, which depends partly on PESTEL conditions.
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