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What is a PESTLE analysis and when are they used?

A PESTLE analysis (sometimes known as PEST or PESTEL analysis, most recently expanded to STEEPLED with the addition of demographic and ethical factors) is a tool used by businesses to evaluate environments in which they already operate or environments into which they may want to move in the future. A PESTLE analysis allows for businesses to consider external factors to succes and failure.

Example of using a PESTLE analysis:

The example case I will use to demonstrate the use of a PESTLE analysis is the failed move by Tesco into America under the name of "Fresh & Easy" in the early part of the 2010s. The firm made losses of around £1bn in just 6 years and closed the project in 2013.

Political - Obama has won election, country is under democrat jurasdiction. 

Economical - Mortgage rates and high unemployment rates in the states at the time. Rapidly aging population causing a slower growth in the economy, alo causes higher taxes and an increase in labour costs due to labour shortages. No purchasing power for newcomers incontrast to larger more established businesses like Walmart and Costco. 

Social - American consumers have a different style of supermarket shopping to English consumers and do not tend to use convenience stores for anything more than snacks on a long journey. American consumers are also very loyal to the already existing large nationally recognized supermarkets like WalMart, Publix and Trader Joes. Rapidly aging population. Large gap between rich and poor segments of the population. 

Technological - Self service checkouts were not widely used in the US at this time and thus alienated older consumers.

Legal - Deregulation of trade over the past decades in order to encourage competition. 

Environmental - Infastructure differences in america, larger population spread means that cars are required to go to the supermarkets that are often located on highways and out of towns. Pressure being put on the US and its businesses to be more environmentally friendly and carbon neutral.

 

In this (not thoroughly exhaustive) PESTLE analysis we can already begin to understand why social, economic and environmental factors were the main causes of the failure of the Tesco plc. expansion in North America.

Charlotte B. A Level Business Studies tutor, A Level Spanish tutor

2 years ago

Answered by Charlotte, an A Level Business Studies tutor with MyTutor


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