The PESTEL framework is a template businesses use to look at how various external factors will affect their practices. PESTEL is an acronym that stands for political, economic, social, technological, environmental, and legal.

This framework grew out of the earlier PEST analysis, an approach that evolved as companies began to focus more of their energies on environmental and legal factors. People write PESTEL analysis and PESTLE analysis interchangeably. They are the same—the only difference is how you decide to write the acronym.

With the PESTEL framework, companies can gain a [competitive advantage](https://www.masterclass.com/articles/what-is-competitive-advantage) as they more deeply commit to corporate social responsibility (or CSR). This type of analysis can power a company’s individual economic growth and inform a business as to how it can better adapt to and follow external legal standards and social mores.
The PESTEL framework helps you understand your overall business environment. These are the macro-environmental factors it tracks:

1. __Political factors__: Complete political stability from one administration to the next is hard to guarantee. By taking changing political factors into account, businesses can prepare to alter their own practices should new employment laws, foreign trade policies, deregulation actions, or trade restrictions arise. Similarly, they can watch for any incentives and subsidies the government might offer them to expedite certain processes.
2. __Economic factors__: The broader economy has a powerful influence over both companies and consumers. Inflation rates, tariff and tax policy, exchange rates, [gross domestic product](https://www.masterclass.com/articles/what-is-gdp) (GDP) growth, and more all affect how companies can operate since they directly affect the disposable income levels and purchasing power of their customers. 
3. __Social factors__: Broader cultural factors and social trends greatly impact businesses. For example, if the age distribution of a society is skewing younger rather than older, companies that tailor their products to older generations might need to adapt to survive and thrive. [Social movements](https://www.masterclass.com/articles/social-movements)—whether they reflect a broader health consciousness or calls for greater consumer protection—can also help you decide how to adapt your company’s practices to contemporary norms.
4. __Technological factors__: From one year to the next, technological change proves constant—and new technology opens the door into new markets. Keep an eye on automation trends, data protection laws, and [innovations](https://www.masterclass.com/articles/why-innovation-is-essential-for-business-success) both inside and outside of your industry. Use this sort of external analysis to further your internal research and development goals.
5. __Environmental factors__: In an era of ecological crises and climate change concerns, it’s more important than ever for businesses to pay attention to environmental issues as they arise. This facet of PESTEL analysis informs companies as to how they can reduce their [carbon footprint](https://www.masterclass.com/articles/ways-to-reduce-your-carbon-footprint), respond to natural disasters, and increase their sustainability.
6. __Legal factors__: This PESTEL factor differs from its political counterpart because it focuses on current laws rather than potential ones. In order to maintain both integrity and profitability, a company must observe all relevant intellectual property and antitrust laws. Adhering to antidiscrimination laws is also essential. 
PESTEL analysis (standing for political, economic, social, technological, environmental, and legal) can set your company up for success. Here are three tips for using the PESTEL model to help you with business planning: 

1. __Combine the analysis with others__. The PESTEL framework takes a broad look at external trends, allowing you to adapt your business to them. In other words, it helps you spot a wave on the horizon. Take what you’ve learned about interest rates, policy shifts, and more and combine it with other forms of analysis to predict market trends even more concretely. Try out a [SWOT analysis](https://www.masterclass.com/articles/how-to-use-swot-analysis-to-make-business-decisions) or consider using [Porter’s Five Forces](https://www.masterclass.com/articles/how-to-use-porters-five-forces-analysis-to-create-a-business-strategy) to complement the PESTEL model in your strategic planning.
2. __Revise your findings__. If you read enough PESTEL analysis examples from your company over time, you’ll learn they shift in their focus as often as the trends in each of the core six factors do. Demographics, trade policies, and social expectations change constantly. Update your PESTEL findings regularly based on new data about any of the six factors.
3. __Understand the limitations__. Even with the most ironclad understanding of government policies, economic trends, and technological news, you might still find the results surprising. It’s completely normal—nothing is totally predictable. Raw materials might not show up on time, the [stock market](https://www.masterclass.com/articles/what-is-the-stock-market) might take an unexpected dip, or the unemployment rate might rise due to unforeseen circumstances. In any case, remember the PESTEL framework can help prepare you as much as possible for a world of constant flux.
Get the [MasterClass Annual Membership](https://www.masterclass.com) for exclusive access to video lessons taught by business luminaries, including Howard Schultz, Chris Voss, Robin Roberts, Sara Blakely, Daniel Pink, Bob Iger, Anna Wintour, and more.
The PESTEL framework allows a company to take a well-planned look at various factors of its external environment. By gathering data about political shifts and economic trends, businesses gain a greater understanding of how to adapt their strategic management and decision-making processes to the world around them. 

The PESTEL framework allows a company to take a well-planned look at various factors of its external environment. By gathering data about political shifts and economic trends, businesses gain a greater understanding of how to adapt their strategic management and decision-making processes to the world around them. 

PESTEL Framework: The 6 Elements of a PESTEL Analysis

The PESTEL framework is a template businesses use to look at how various external factors will affect their practices. PESTEL is an acronym that stands for political, economic, social, technological, environmental, and legal.This framework grew out of the earlier PEST analysis, an approach that evolved as companies began to focus more of their energies on environmental and legal factors. People write PESTEL analysis and PESTLE analysis interchangeably. They are the same—the only difference is how you decide to write the acronym.With the PESTEL framework, companies can gain a <a href='https://www.masterclass.com/articles/what-is-competitive-advantage' target='_blank' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/what-is-competitive-advantage","linkCopy":"competitive advantage","category":null}'>competitive advantage</a> as they more deeply commit to corporate social responsibility (or CSR). This type of analysis can power a company’s individual economic growth and inform a business as to how it can better adapt to and follow external legal standards and social mores.

What Is the PESTEL Framework?

The PESTEL framework helps you understand your overall business environment. These are the macro-environmental factors it tracks:<ol class="mc-m-4"><li class="mc-my-4"> 1. Political factors: Complete political stability from one administration to the next is hard to guarantee. By taking changing political factors into account, businesses can prepare to alter their own practices should new employment laws, foreign trade policies, deregulation actions, or trade restrictions arise. Similarly, they can watch for any incentives and subsidies the government might offer them to expedite certain processes. </li><li class="mc-my-4"> 2. Economic factors: The broader economy has a powerful influence over both companies and consumers. Inflation rates, tariff and tax policy, exchange rates, <a href='https://www.masterclass.com/articles/what-is-gdp' target='_blank' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/what-is-gdp","linkCopy":"gross domestic product","category":null}'>gross domestic product</a> (GDP) growth, and more all affect how companies can operate since they directly affect the disposable income levels and purchasing power of their customers. </li><li class="mc-my-4"> 3. Social factors: Broader cultural factors and social trends greatly impact businesses. For example, if the age distribution of a society is skewing younger rather than older, companies that tailor their products to older generations might need to adapt to survive and thrive. <a href='https://www.masterclass.com/articles/social-movements' target='_blank' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/social-movements","linkCopy":"Social movements","category":null}'>Social movements</a>—whether they reflect a broader health consciousness or calls for greater consumer protection—can also help you decide how to adapt your company’s practices to contemporary norms. </li><li class="mc-my-4"> 4. Technological factors: From one year to the next, technological change proves constant—and new technology opens the door into new markets. Keep an eye on automation trends, data protection laws, and <a href='https://www.masterclass.com/articles/why-innovation-is-essential-for-business-success' target='_blank' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/why-innovation-is-essential-for-business-success","linkCopy":"innovations","category":null}'>innovations</a> both inside and outside of your industry. Use this sort of external analysis to further your internal research and development goals. </li><li class="mc-my-4"> 5. Environmental factors: In an era of ecological crises and climate change concerns, it’s more important than ever for businesses to pay attention to environmental issues as they arise. This facet of PESTEL analysis informs companies as to how they can reduce their <a href='https://www.masterclass.com/articles/ways-to-reduce-your-carbon-footprint' target='_blank' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/ways-to-reduce-your-carbon-footprint","linkCopy":"carbon footprint","category":null}'>carbon footprint</a>, respond to natural disasters, and increase their sustainability. </li><li class="mc-my-4"> 6. Legal factors: This PESTEL factor differs from its political counterpart because it focuses on current laws rather than potential ones. In order to maintain both integrity and profitability, a company must observe all relevant intellectual property and antitrust laws. Adhering to antidiscrimination laws is also essential. </li></ol>

6 Elements of the PESTEL Framework

PESTEL analysis (standing for political, economic, social, technological, environmental, and legal) can set your company up for success. Here are three tips for using the PESTEL model to help you with business planning: <ol class="mc-m-4"><li class="mc-my-4"> 1. Combine the analysis with others. The PESTEL framework takes a broad look at external trends, allowing you to adapt your business to them. In other words, it helps you spot a wave on the horizon. Take what you’ve learned about interest rates, policy shifts, and more and combine it with other forms of analysis to predict market trends even more concretely. Try out a <a href='https://www.masterclass.com/articles/how-to-use-swot-analysis-to-make-business-decisions' target='_blank' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/how-to-use-swot-analysis-to-make-business-decisions","linkCopy":"SWOT analysis","category":null}'>SWOT analysis</a> or consider using <a href='https://www.masterclass.com/articles/how-to-use-porters-five-forces-analysis-to-create-a-business-strategy' target='_blank' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/how-to-use-porters-five-forces-analysis-to-create-a-business-strategy","linkCopy":"Porter’s Five Forces","category":null}'>Porter’s Five Forces</a> to complement the PESTEL model in your strategic planning. </li><li class="mc-my-4"> 2. Revise your findings. If you read enough PESTEL analysis examples from your company over time, you’ll learn they shift in their focus as often as the trends in each of the core six factors do. Demographics, trade policies, and social expectations change constantly. Update your PESTEL findings regularly based on new data about any of the six factors. </li><li class="mc-my-4"> 3. Understand the limitations. Even with the most ironclad understanding of government policies, economic trends, and technological news, you might still find the results surprising. It’s completely normal—nothing is totally predictable. Raw materials might not show up on time, the <a href='https://www.masterclass.com/articles/what-is-the-stock-market' target='_blank' class='mc-text--link' data-mc-segment-trigger='true' data-mc-segment-event-type='Article Page Click' data-event-obj='{"textTag":"p","href":"https://www.masterclass.com/articles/what-is-the-stock-market","linkCopy":"stock market","category":null}'>stock market</a> might take an unexpected dip, or the unemployment rate might rise due to unforeseen circumstances. In any case, remember the PESTEL framework can help prepare you as much as possible for a world of constant flux. </li></ol>

3 Tips for Completing a PESTEL Analysis 

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The PESTEL framework allows a company to take a well-planned look at various factors of its external environment. By gathering data about political shifts and economic trends, businesses gain a greater understanding of how to adapt their strategic management and decision-making processes to the world around them.

The PESTEL framework allows a company to take a well-planned look at various factors of its external environment. By gathering data about political shifts and economic trends, businesses gain a greater understanding of how to adapt their strategic management and decision-making processes to the world around them. 


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PESTEL Framework: The 6 Elements of a PESTEL Analysis