PESTLE analysis · Strategy · Market research
How to do a PESTLE analysis, with a worked example
By T. Krause
A PESTLE analysis is a fact-finding job, and a list of notes without sources won't tell you much. Here is how to do one, followed through a made-up e-bike rental from eleven rough notes to three actions and two things to watch.
To do a PESTLE analysis, write one plan and one place at the top of the page. Under six headings, political, economic, social, technological, legal and environmental, list the outside forces that could affect that plan. Check each note against a source, mark the notes that would change the plan, and give each marked note one action or one thing to watch.
The PESTLE factsheet from the Chartered Institute of Personnel and Development, known as CIPD, calls this "a broad fact-finding activity around the external factors that could affect an organisation's decisions". The important words are "fact-finding". A workshop gives you a list of things people believe. Someone still has to go and check them, so this guide spends as long on the checking as on the six headings.
We make Prompt Board, and our PESTLE analysis template opens on the first draft of the e-bike rental you'll meet below. A table on one sheet of paper works too.
What each frame asks
| Frame | What to ask |
|---|---|
| Political | What could government, or an election, change for this plan? |
| Economic | What's moving prices, wages, spending or the cost of borrowing? |
| Social | How are people's habits, ages or expectations changing? |
| Technological | What new technology could change how this gets made, sold or used? |
| Legal | Which laws and rules apply, or are about to? |
| Environmental | How do climate, resources and waste affect it? |
Two checks keep the notes in the right place.
Would it happen without you? PESTLE only covers the world outside the business. If a note stops being true once your company is gone, such as "our app is slow", it belongs in a SWOT analysis, which also has room for your own strengths and weaknesses.
Does it fit two frames? Plenty of notes do. CIPD itself lists "environmental regulations" under political and changes to legislation under legal. Our rule of thumb is that a proposal goes under political and a rule that's written or in draft goes under legal. Pick one frame, write the note once and move on, because the frame doesn't change what you'll do about it.
One plan in one city
Everything in this section is invented: the rental business, its owner, the notes, the figures and the checks. None of it is a fact about the real Hamburg, and we didn't compare any of it with the real city.
Jana wants to start an e-bike rental in Hamburg and has to decide whether to order bikes for next spring. She writes "E-bike rental in Hamburg" at the top of the board.
The first draft
In twenty minutes she and a friend who works in logistics write eleven notes. These are the eleven on the sample board in our template.
| Frame | Notes |
|---|---|
| Political | City funds bike lanes. City budget vote. |
| Economic | Fuel prices high. Tourism up 6% (sample). |
| Social | Commuters want flexible options. |
| Technological | Better batteries. App unlocks standard. |
| Legal | Parking zones for rentals. Insurance rules. |
| Environmental | Clean-air plan. Battery recycling. |
All eleven pass the first check, because each would still be true if Jana never opened. Plenty of them can't yet be checked, though. "Insurance rules" doesn't say what the rules require, and the tourism note doesn't say 6% of what.
Five notes, checked
Jana spends two evenings on the notes she thinks could decide the order. She rewrites each one so that somebody else could look it up.
| Draft note | After checking |
|---|---|
| City budget vote | Vote due in autumn. Two party programmes want to cut the bike-lane budget. |
| Tourism up 6% (sample) | Sample figure: overnight stays up 6% on last year, from a made-up tourism report. |
| Commuters want flexible options | No source found, so she labels it an assumption. |
| Parking zones for rentals | Draft rule: rental bikes may only be left in marked zones from next April. |
| Insurance rules | Every rental bike needs its own liability cover. |
The third row matters as much as the others. It's a sensible-sounding note, and it could be true, but Jana has nothing to back it. Leaving it on the board as a fact would mean building the plan on a guess. CIPD lists this among the method's disadvantages: "The data used may be based on assumptions that later prove to be unfounded."
Five notes marked
The template's third step asks which notes would help or hurt the most, and which are likely to change soon. Jana colours five.
| Note | Why she marks it |
|---|---|
| Parking zones for rentals | Decides where bikes can stand, and it starts in April |
| Insurance rules | A cost on every bike, so it feeds straight into the price |
| Commuters want flexible options | Her weekday income depends on it, and it's unproven |
| City budget vote | Could cut the bike lanes her customers would ride on |
| Clean-air plan | A stricter plan could make car trips harder and rentals more attractive |
The other six stay on the board as background. "Better batteries" is real progress, but any rival can buy the same battery. "Fuel prices high" helps her, though nothing about it changes how many bikes she should order.
Act or watch
Each marked note gets one line.
| Note | Act or watch |
|---|---|
| Parking zones | Act. Draw the launch area around the draft zones before ordering. |
| Insurance rules | Act. Get two quotes before setting a price. |
| Commuters | Act. Ask 30 commuters at two stations before the order goes in. |
| Budget vote | Watch. Check the bike-lane budget again after the vote. |
| Clean-air plan | Watch. Read each update to the plan. |
The analysis doesn't tell Jana whether to go ahead, and it can't. It gives her three jobs to finish before she commits money and two things to watch. Rival rental firms don't appear anywhere on the board, because PESTLE doesn't ask about them, so a competitor analysis is the natural next step.
Where to check each frame
These are places to start, and your country and sector will add others.
| Frame | Where to look |
|---|---|
| Political | Council minutes, government announcements, party programmes |
| Economic | The national statistics office, the central bank, your trade association |
| Social | Census data, published surveys, your own conversations with customers |
| Technological | Trade press, suppliers, standards bodies |
| Legal | The official text of the law, your regulator, a lawyer for anything you'd act on |
| Environmental | Environment agencies, local climate plans, your suppliers' waste rules |
Write the source and its date on the note. A figure with a date tells the next reader whether it's stale, and it tells you what to look up when you repeat the analysis.
CIPD also suggests using "more than one person or team to gather data to bring diverse evidence and perspectives". On a small team, one person can take the political and legal frames and another the economic and social ones.
How much is enough
CIPD names two opposite failures. One is too little: "it's easy to use insufficient data". The other is too much, which it calls "paralysis by analysis".
We stop researching a note once we know whether it changes the decision. Jana doesn't need a report on battery chemistry, because no answer would change her order. She does need to know what the parking rule says, down to the wording, because that decides where her bikes can stand.
The same factsheet says the analysis "needs to be done regularly". For a one-off plan like Jana's, the watch list sets the timing. For a business that's already running, we'd repeat it once a year as part of planning and sooner if a watched item moves.
Where the name comes from
Wikipedia's article on PEST analysis says the framework "was developed in 1967 by Francis Aguilar", citing his book Scanning the Business Environment, and that it has also been called ETPS. We haven't read the book, so that credit is Wikipedia's. The same article lists PESTLE among several similar frameworks. We didn't find a source naming who first added the legal and environmental letters, so we can't tell you.
Frequently asked questions
What does PESTLE stand for?
Political, economic, social, technological, legal and environmental. CIPD's factsheet writes the S as sociological, which means the same thing here.
What is the difference between PESTLE and PESTEL?
Only the order of the letters. Both cover the same six areas.
What is the difference between PESTLE and SWOT?
PESTLE looks only outside the business. A SWOT looks outside and inside, and it adds your own strengths and weaknesses. You can do PESTLE first and carry its marked notes into the opportunities and threats of a SWOT analysis.
Can a small business use a PESTLE analysis?
Yes. Keep it to one page and one decision, and research only the notes that could change that decision. Jana's example covers eleven notes, and she checks five of them.
Do all six frames need the same number of notes?
No. CIPD says "some areas of PESTLE are a bigger focus to your industry than others". Jana's Social frame has one note. Still look at every frame once, because the empty one may be the one nobody thought about.
Do your own
Write your plan and your place in the title, then give everyone twenty minutes on the six frames. Open the PESTLE analysis template to start from Jana's first draft, replace her notes with yours, and share the board link. Before you act on any note, add its source and its date.