Table of Content
Introduction to PESTLE Model
PESTLE Model is a strategic model that the organizations use to identify the macro-environment factors facing the organization. It is a broad fact-finding model that evaluates the external market factor and their impact on the decisions within the organization. The PESTLE Model is an acronym for Political, Economic, Social, Technological, Environmental, and Legal Factors.
Thus, the PESTLE Model looks at the external environment and reviews the impact of different external factors on the operations of the organizations. The understanding of the external market factors through the use of the PESTLE Model helps to identify the opportunities and prevent threats to the organization.
The need for the PESTLE Analysis Model
You must be pondering how PESTLE Analysis helps the organization to strategically plan the business objectives? The results of the PESTLE Model helps to determine different scenarios and external factors that may impact the operations of the organization which further helps the organizations to strategically plan various business operations.
The PESTLE Model is used to ensure a better understanding of the wider business environment and encourages the organization to sport various business opportunities and prevent business threats. Besides this, the use of this model also helps to determine various business threats and take various actions to minimize threatening issues.
The PESTLE Model is an appropriate model which can be used by the organization to engage in a range of planning situations. The PESTLE Analysis model also helps to structure the business situations and identify changes in the macro-environment.
How to apply the PESTLE Analysis?
The PESTLE Analysis can be done through strategic planning and thinking of the external business situations. The first step in the application of the PESTLE Analysis model is identifying the external factors under the appropriate PESTLE heading to determine the factors that affect the business operations.
- The first factor in the PESTLE Model is the political factor which helps to evaluate the political situation of the organization by considering taxation policies, trade restrictions, political stability, fiscal policies, etc.
- The second factor in the PESTLE Analysis model is the economic factor which helps to evaluate the economic factors such as GDP, employment rate, exchange rate, inflation, etc.
- The third factor in the PESTLE Model is the social factor that considers the societal aspects of the chosen market which include the cultural norms, health, and safety, health consciousness, demographic factors, consumer trends, etc.
- The fourth factor in the PESTLE Model is the technological factor which is one of the crucial factors in the business analysis. The technological factor includes consideration of the new technologies, new technology-led processes, etc.
- The environment factor is the fifth factor in this model that is becoming increasingly important due to increasing importance for environmental sustainability. You can evaluate the impact of the environmental factor on the organization by focusing on factors such as natural resources, pollution, sustainability, ethical sourcing, carbon emissions, etc.
- The last factor in the PESTLE Model is the legal factor which overlaps with the political factors but you need to consider that the Legal factors mainly focus on the laws and regulations impacting the operations of the organization which includes Environmental regulation, data protection laws, Health and safety regulations, etc.
Making the list of factors impacting the operations of the organization is not enough, you need to engage in deep research regarding the external market situations in the industry to determine the impact of various external market factors on the organization and to evaluate the available opportunities and threats to the organization.
PESTLE Analysis real example
Now, let us consider Tesla PESTLE Analysis to evaluate the influence of various external market factors on the operations and strategic plans of Tesla.
|Tesla PESTLE Analysis||Details|
|Political factors||One of the main political factors that are affecting the growth of Tesla in recent times is the US-China war as Tesla had made China the centerpiece of its global strategies in the past few years but the US-China war has caused an increase in trade tensions and tariff rates between these countries. However, various government authorities in different countries are supporting the growth of electric vehicles which is a positive factor for the growth of Tesla. As per the CNBC report, the Federal government is also offering up to $ 7500 in tax credits to the customers who purchase an electric plug-in vehicle. Furthermore, the FAME II program is also implemented by the Indian government to support demand for electric buses and generate demand for 55000 Electric Four Wheeler Passenger Cars.|
|Economic factors||The economic factors are not favorable for the growth of Tesla in the current times due to declining economic growth and negative impacts of COVID-19 on the demand pattern of the customers. As per the World Bank, the US GDP rate has declined by 3.486 percent as a result of the impacts of COVID-19. However, the rising fuel prices are causing a surge in demand for electric vehicles with a shift in customer preferences from fuel-based vehicles to EV vehicles.|
|Social factors||The customers in current times are becoming more sustainability-conscious which is one of the main factors for the growth of the electric car industry. The customers also prefer to buy electric vehicles due to the modern and healthy lifestyle associated with the use of electric cars that features speed, convenience, comfort, style, and sustainability.|
|Technological factors||The important factor that is influencing the growth of the electric vehicle industry in the current times is technological innovation. Smarter technologies have facilitated the development of new batteries such as Graphene-based technologies and Lithium-ion batteries which help to quickly charge vehicles. Moreover, the important factor for the growth of Tesla is the launch of fully self-driving cars. However, the company currently lacks the necessary hardware to facilitate fully autonomous driving and the company is also criticized for using untrained customers for validating the beta software.|
|Legal factors||Every business organization is required to comply with various laws and regulations and so does Tesla. However, a Tesla Model 3 crashed into a police patrol car in Florida which has caused a lawsuit against the company by Texas cops.|
|Environmental factors||We all know that global warming is one of the major problems faced at a global level that is causing sustainability behavior among customers. The use of Tesla cars does not cause GHG emissions and also helps to reduce fuel consumption. The possible future growth scenario for Tesla is a significant rise in the demand for electric vehicles with a fall in the overall demand for fuel-based vehicles.|