PESTEL model

The PESTEL model is a document mapping the political, legal and economic environment of a company. The model must be set up according to a clear methodology, analyzing fixed areas.

The PESTEL model is an analysis methodology that helps to describe the macro environment of the enterprise accurately. It means a guide along which we can form a complete picture of the world in which we work. It is sometimes compared or rather contrasted with SWOT analysis. Considering here that the SWIT analysis maps the strengths and weaknesses of a company, while the PESTEL model examines the conditions of the environment in which the company operates. 

PESTEL is an abbreviation made up of the English names of the main topics. These 

• Political factors, 
• Economic factors, 
• Socio-cultural factors, 
• Technological factors, 
• Environmental factors, 
• Legal factors.

By examining these together, we can set up the PESTEL model. 

It is clear that these factors can vary from country to country and even from region to region. In the EU, for example, the legal system is quite harmonized, but even so, there may be different rules on which the success of the entire business may depend. 

One country requires such a permit, another does not. In one member state, a punitive tax is levied on the salty ropi that we would produce, in the other there is no such tax....and this line could be continued. 

There can be many socio-cultural differences even within a country. For example, skilled labor is rare everywhere these days, but in some parts of the country it is easier to find such employees than in others, but there is, say, no highway to get there. 

It is also important to note that many regulations change from time to time. For example, tax or environmental protection regulations change quite often, which affects many businesses very sensitively, from car washes to agricultural companies. Therefore, it is advisable to review our PESTEL model at least annually. So it is not enough to do it once and follow it for years and decades. 

The PESTEL model is one of the most important documents that can be created before foundation of a business/company, for strategy creation and when preparing a business plan. With the business, we risk time, energy and, not least, a lot of money. That's why before we start, it doesn't hurt to methodically map the terrain where we will work with a cool head. If, however, we did not do this before establishing a company the company, then perhaps it is not too late to outline these factors even after the fact.