9 Importance of PESTLE Analysis To Your Organization [Explained]

Importance of PESTLE Analysis

Everything is not in the control of an organization. You can control the internal elements (strengths and weaknesses) of your business but you can not control factors that are outside of your business. Conducting a pestle analysis can be of great importance to your organization in the following ways.

Exploit Opportunities

Every business aims to exploit as many opportunities as and as effectively and efficiently as possible. Since the external environment brings different opportunities to businesses.

Conducting a pestle analysis helps to identify the likely opportunities in the market. After knowing the potential opportunities you can develop better plans aligning with your internal strengths factors. As such, you can be prepared early, which increases the likelihood of effectively exploiting upcoming opportunities.

Mitigate Threats

Threats and challenges are naturally occurring events to a business. Every firm tries to mitigate the threats. Along with identifying upcoming opportunities the pestle analysis also helps to identify the upcoming threats and challenges your business may face.

There are various threats businesses may face coming from the factors like politics, economy, competition, technology, legal, and environmental factors. By identifying the likely threats, a manager can design necessary strategies that could help in mitigating the probable threats and challenges.

Product Development or Abandon

It is commonly said when a business launches a new product without studying the factors of pestle analysts – it is wasting its time, resources, and investment. It is very crucial you conduct a careful pestle analysis before reaching a decision on whether to develop a new product or abandonment of existing products.

Pestle analysis will offer you crucial information on customers’ needs, wants preferences, what products customers are using, what they are ignoring, the competitive nature, customers’ spending habits, their income level, market trends, and so forth.

Such information gives you a clear answer to your question will people purchase my new product? Or, should I abandon my existing product?

Competitive Advantage

Pestle analysis is also called a competitive business tool. To achieve competitive advantage it is necessary that you have information about competitors’ products, their prices, service level, how they satisfy customers, and most importantly why customers like their products.

A pestle analysis also offers you a lot of information about your competitors. By which you can make better products and marketing strategies than the competitors. As such you can better serve the customers than competitors, achieve higher customer satisfaction, and realize the competitive advantage.

First Mover Advantage

Companies can get the first mover advantage from the pestle analysis. As it provides insightful information on potential trends and opportunities you can early get information on what types of products the marketing is seeking to consume.

As such you can get the first mover advantage by launching the new product to the market. For this, it is necessary to take action and deliver new products to the market before the competitors.

Helps in Strategic Planning

The immense information provided by pestle analysis about the external environment also aids in business planning. It provides the necessary contextual information to top management that is useful in deciding the company’s direction, profit objectives, brand positioning, growth targets, and overall objectives of the organization.

Also Read: What is Planning?

In addition, they highlight the areas to concentrate on and set the direction for future actions taken by its top management. It aids in systematically addressing the company’s deficiencies and maximizing its assets.

Managing Workforce

Managing the workforce is necessary to get the most from the employees. The landscape of employment and the complexity of tasks are increasing. A pestle analysis also helps to identify the business model trends that may have an impact on your workforce.

In fact, the skill which is productive today might not be the same in the future. Due to the dynamic and uncertain nature of external factors people have to update their skills and knowledge. As such, it is necessary for you to regularly train your employees, keep them updated with the recent working culture, and make them competitive.

Helps To Embrace Change

Organizational change is necessary – a business model or structure that you are in today might not be the successful in the future as it is now. Understanding the context for change and concentrating on the areas to make that change successful can be accomplished with the help of a PESTLE study.

Keeps Up To Date

In these modern days, one of the effective ways to do business is to be up to date with happening outside and inside the organization. One of the importance of pestle analysis is that it gives past, recent, and future information about its factors such as politics, economy, social, technology, legal, environmental, and global (which is the latest addition).

And, to be updated with market trends it is necessary that you regularly conduct the pestle analysis and distribute the information to all of your organizational members.

Read Next: What is Business Environment?