A Systematic Approach To Horizon Scanning Using PESTLE

Using PESTLE the useful future planning tool

Most organisations when developing strategy will have a variation of the PESTLE model in place to enable them to “horizon scan”.  This activity will inform their decision-making for the future, or future planning. The plan is to take each aspect of PESTLE and look at the future through a particular lens.  This helps to focus on each aspect and bring all elements to be considered in plans to the fore.

PESTLE is an acronym

1. Political

Understanding the political landscape such as the direction of governmental policy, including monetary, employment or environmental laws and regulations is essential.  This might include wider political issues, either continental or global.

2. Economic

Taking into account the economic situation and forecasts is essential. Economic issues might impact salary costs, taxation, lending and index linking.

3. Sociological

Understanding the demographics which impact you or your business.  These could include issues like people working for longer, and changes in the ways people live, for example, the housing shortage or advances in health care.

4. Technological

Understanding the possibilities from a technological point of view is essential to developing strategy.  For example, younger people engage online completely differently than older people.  You might need to adjust your plans to make sure your customer or employee engagement plans are in line with these changes. Technological advances like the “Internet of Things” will considerably change our paradigm on physical goods.

5. Legal

Legal issues can include employment or trading laws, or anything affecting legally how a company operates.

6. Environmental

This can include things like “Green issues”, or the tension between artificial products or supplies which can affect the environment.

These are the most common factors which will impact businesses or organisations and inevitably need to be considered when developing future planning.

Part of the process of using PESTLE is to identify appropriate authorities and research or other appropriate sources of information which will inform decision-making.  Analysing the information and aligning it with the impacts on an organisation is vital.

Scenarios using PESTLE

Below are scenarios where leaders or teams might find PESTLE analysis particularly useful:

1. Entering New Markets

When a company considers expanding into new geographic locations or market segments, PESTLE analysis is invaluable. Leaders can assess the political stability of a new country, understand its economic landscape, gauge social and cultural differences, evaluate technological readiness, consider legal implications, and be aware of environmental regulations. This comprehensive understanding helps in making informed decisions about whether to enter a market and how to tailor strategies to local conditions.

2. Launching New Products or Services

Before launching a new product or service, it’s crucial to understand the external factors that might affect its success. PESTLE analysis helps in identifying the current trends and future expectations in the market. For instance, understanding technological advancements can provide insights into consumer expectations and potential future competition. Similarly, legal changes, like new data protection laws, can significantly impact the product’s development and marketing strategies.

3. Strategic Planning and Risk Management

In strategic planning, PESTLE analysis is used to ensure that the organization’s strategy aligns with the external environment. It helps in identifying potential risks in the business environment, allowing leaders to develop contingency plans. For example, a change in government policy or economic downturn can be anticipated and strategies can be adapted accordingly.

4. Mergers and Acquisitions

During mergers and acquisitions, understanding the external environment of the target company is crucial. PESTLE analysis provides insights into potential regulatory hurdles, economic conditions, and cultural challenges that might affect the success of the merger or acquisition. It helps in evaluating the feasibility and potential value of the deal.

5. Sustainability and Corporate Responsibility Initiatives

For companies looking to enhance their sustainability and corporate social responsibility, PESTLE analysis can identify external environmental and social trends that are important to stakeholders. This can guide the development of initiatives that are not only compliant with current regulations but also resonate with societal values and expectations.

6. Crisis Management

In times of crisis, such as political upheaval or a global pandemic, PESTLE analysis helps leaders understand the rapidly changing external environment. It enables them to make quick, informed decisions about how to navigate the crisis, mitigate risks, and take advantage of any emerging opportunities.

7. Competitive Analysis

To stay ahead of competitors, businesses must understand the broader context in which they operate. PESTLE analysis helps in identifying the external factors that are influencing competitors and the industry as a whole. This knowledge can be used to anticipate market shifts and adapt strategies accordingly.

In conclusion, PESTLE analysis is a versatile tool that can be applied in various scenarios where understanding the external environment is crucial. It aids leaders and teams in making strategic decisions, managing risks, and seizing opportunities in a complex and ever-changing business landscape.

The benefits of understanding and using PESTLE for leaders, managers, employees and job candidates are enormous.  The skill of horizon scanning can be a valuable one and while some people are naturally inclined to consider future planning and therefore PESTLE, for others it’s less of a preference and this is where the model can be particularly effective.