Curt Fowler | Fowler & Company | Fowler, Holley, Rambo & Stalvey
There are a lot of issues in business that could sneak up on us and cost us dearly. A PESTLE analysis is designed to help you avoid oversights that could cost you some backside.
We have been talking about answering the three questions required to create a great strategic plan. Those are: Where are you now? Where are you going? And how will you get there? Last week we talked about gathering information from and about your team members, leadership, customers and suppliers. This week we want to determine where we stand within our external environment. The tool we will use for this examination is called a PESTLE analysis.
PESTLE stands for Political, Economic, Social, Technological, Legal and Environmental. These topics are not something most of us think about day to day. That is what makes a PESTLE analysis so great. It forces us to look at things in our external environment that could have massive impacts on our business. These are issues and opportunities we would probably overlook or not see coming without a tool like the PESTLE analysis. Let’s go through each category of a PESTLE analysis to show you how it is done. Let’s use Starbucks as an example.
Political – In this section, we look at how governmental policy could affect the business and our strategies for success. How could governmental policy affect Starbucks? Foreign trade policy would be a biggie for them. We don’t grow much coffee in the United States, so most of Starbucks’ product is imported. How likely is our government to change its policy around the taxation of imported products? How will immigration policies change the availability of Starbucks’ workforce? How will the policies of other governments where Starbucks operates and sources from affect the company?
Economic – How could economic factors distress Starbucks’ performance? Clearly, Starbucks coffee is not the cheapest way to get a caffeine high. How could a recession change the buying habits of Starbucks’ customers? How could Starbucks be ready with options to keep its customer’s buying? How could changing interest rates affect the cost of Starbucks’ capital structure?
Social – How could social factors like cultural trends, demographic changes, and changing buyer preferences move Starbucks’ market? Are fewer people going out for coffee or more? Are more consumers demanding that workers throughout the supply chain get paid a living wage? How do different demographic cohorts (Gen-X, Millennials, etc.) perceive the brand and consume the product? How will demographic changes affect its markets?
Technological – I finally figured out how to use the Starbucks app last week! I couldn’t figure out how to have a “business” Starbucks card and a “personal” card on the same app. Thanks to a very kind and patient barista, I now know! How will Starbucks leverage artificial intelligence to know when to send just the right advertisement to my smartphone? How can Starbucks leverage technology to move more people through its stores and drive-throughs during peak hours? Small improvements in throughput can have huge impacts on the bottom line for the company.
Legal – Funny story. I wrote a blog post about how great Starbucks’ training program is. Thankfully, I did not violate any of Starbucks’ copyrights in the post. But, I got a very nice, and incredibly formal letter delivered to me via Fed-X asking me to amend the article to state that I am in no way affiliated with Starbucks. I gladly complied. So, Starbucks has a team of lawyers watching out for brand infringement. What about changing employment laws across all the countries they work in? By the way, I am in no way affiliated with Starbucks. I wanted to state that one more time.
Environmental – How will changes in environmental laws and preferences change Starbucks’ marketplace? What effect will global warming have in the countries where its coffee is produced? What is the environmental impact of the production of its coffee? How might environmental laws change and what would the affect be on Starbucks? As you can see, there are a lot of things that can dramatically impact a company like Starbucks and your company too!
Use the PESTLE analysis to make sure you are looking ahead and planning for the changes that could occur in your industry.
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Curt Fowler is President of Fowler & Company and Director at Fowler, Holley, Rambo & Stalvey . He is dedicated to helping leaders create and achieve a compelling vision for their organization. He is a syndicated business writer, keynote speaker and has an MBA in Strategy and Entrepreneurship from the Kellogg School. He is also a CPA and a pretty good guy as defined by his wife and four children.