Cayenne Consulting

Your PESTEL Will Expose the Good & Bad of Your Next Big Opportunity

Part 1 of 7

Going International? Do Your PESTEL Analysis First

PESTEL is an acronym for an often utilized analysis that considers the external macroeconomic influences on a business and its products or services: Political, Economic, Social, Technological, Environmental, and Legal. We refer to these as external factors because they fall outside the firm’s control.

If your business is U.S. based, you may not have heard of a PESTEL analysis nor prepared one because, broadly speaking, there is more macroeconomic stability in the U.S. than in other countries. However, many U.S. companies that are considering overseas expansion or perhaps exporting products abroad will often prepare a PESTEL.

PESTEL analyses are frequently requested by bankers and investors when considering a loan or investment. Think about it: would you want to make a loan to a company located in a country where there are foreign exchange controls that make it difficult to repatriate your money when the loan comes due? How should bankers and investors consider loans and investments to businesses with significant operations in countries where it has become clear that the government is moving from democracy to authoritarianism? It might be challenging to raise capital for a new oil refinery when the political, social, and environmental factors suggest that the future is in clean energy.

If you are finding this PESTEL article of interest, you will find a separate and detailed discussion of each of the six factors that make up a PESTEL analysis as well as anecdotes of how these external factors have affected the business decisions of our clients, bankers, and investors. This article is the first in the series; what follows is a brief overview of each PESTEL factor:

This list barely scratches the surface of the topics that might be considered when performing a PESTEL analysis. For a complete list, see B2U for a list of nearly 100 different PESTEL topics.

We recently completed a successful 3-month engagement for a banking client located in East Africa. The purpose of the engagement was to prepare a 5-year plan for growth to be submitted to the bank’s Board of Directors. Our work included a PESTEL analysis at the request of the bank’s external auditor.

We are often asked if a PESTEL analysis is used as a standalone document or if it is incorporated in a company’s business plan. It can be both. You are always welcome to contact us if you would like assistance with your PESTEL analysis or business plan.

Other Articles in the PESTEL Analysis Series

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