The current rate of change, economic instability and local, national and international governmental policy changes means that many business owners and leaders are reflecting on the strength of their strategy and watching the headlines closely to see if minor, radical or any changes at all are required to achieve the desired results this financial year and beyond.
Analysts are changing their minds one day to the next, interest rates are stable yet forecasts are showing a housing value down turn so what does this all mean for your business?
To check viability of the strategy, going back to basics is best so start at the top – look at the big picture and complete a high level review of the market you operate in as this will highlight the areas within which you may need to focus. Often used in five year plans and rarely translated well into operational strategies, but a powerful tool when well constructed is PESTEL analysis.
PESTEL analysis stands for Political, Economic, Social, Technological, Environmental and Legal analysis. It gives an overview of the different macroenvironmental factors that impact on the success of your company’s strategy and brings to light any areas you may need further analysis of or more detailed operational strategies.
The assumption is that the organisation that is aware of the environment and forecasted developments, is the one ready to respond to those and is therefore ahead of the competition.
While PESTEL is most often used for business strategy it can also be used for a review of a more specific market for example, launching a new product or brand, reviewing an acquisition, analyzing a new market for entry.
The depth of the research into each of the 5 elements of PESTEL will obviously impact the quality of the outcome but below are some suggested questions for consideration after you firstly define what context the review is for ie: business strategy, a specific product or new market.
- What are the key political factors likely to affect the industry?
- What are the important economic factors?
- What social and demographic trends affect the industry?
- What technological innovations are likely to occur?
- What current and impending legislation may affect the industry?
- What are the environmental considerations?
For each of these elements it is recommended that you:
- Identify the critical areas that affect your business
- Understand what the situation is today and what is forecast in the future
- Consider all scenarios as to how they may affect your business and develop operational strategies to maximize growth or minimise loss
- Establish ongoing “Environmental Forecasting” reporting and ensure key decision makers receive and review this
Finally, don’t put the PESTEL review away only to be looked next year at the annual strategy review, instead agree a formal review schedule, perhaps quarerly. During this review, determine if there are any fundamental changes required to your direction as the market shifts, and then refine strategies as required to ensure you’re always one step ahead.
