Factors in PESTEL
PESTEL analysis should be detailed, thorough and specific, with selected most important factors. It should be more focused on the variables most relevant for the analysis of the industry of the company in question. It is vital to identify the variables that matter most for the industry as the industry drivers. You need to explain how factors mentioned affect the business, direction and magnitude.
You need to assess the importance of factors in PESTEL analysis (via ranking them and listing the most relevant). There could be several different considerations, assessed based upon research and consideration, ranked by the strength of the impact they have, the most important are:
- those variables that affect the sustainability of the business (for examples technological change marked the end of the vinyl records);
- those variables that move the business from one to another stage in the business life cycle (from example: penetration rate moved the wireless telecommunication from growth in '90s to maturity in 10 years only!)
- those variables affecting the performance metrics (such as: net profit, EBITDA, sales, profit margins, EVA) if the business is sensitive to it, measured by the percentage change-reaction to the percentage change in the variable considered (for example mortgage business is sensitive to interest rates, an increase of 30Y fixed rates from 3.50% to 5.00% last summer meant an increase of new mortgage payment cost (principal and interests) by more than a third, and led to new mortgage applications dropping by half).
Other possible considerations may include: factors affecting competitive advantage or recognized business drivers in the industry under review, as affecting key industry performance metric such a for example occupancy rate in hotels or airlines.
SUNY ESC MBA PROGRAM Last modified: Friday, July 14, 2017, 5:05 PM