A PESTLE (political, economic, sociological, technological, legal and environmental) analysis – also sometimes called a PESTEL analysis if the order of the legal and environmental sections are reversed – is an analytical tool similar to a SWOT (strengths, weaknesses, opportunities and threats) analysis.
It is highly flexible, as it can be used for marketing, human resources, business development or other situations and allows for a quick, easy-to-read overview of the key factors affecting an organization from the outside. This can help managers make important strategic decisions quickly and effectively.
While it is a useful tool, many people still find there are some major disadvantages of PESTLE analysis. In fact, a quick search online will show you a number of limitations of PESTEL analysis .pdf documents, videos and slideshows. Before you decide to conduct such an analysis, it's important to be aware of both the potential strengths and limitations of using PESTLE analyses.
While the PESTLE analysis considers six important external factors that may affect your company, you'll often encounter many other factors that the analysis won't take into account, most notably internal factors and your competition. If you only use the PESTLE for your strategic planning, you'll have a lot of gaps in your knowledge, which will mean your plans will be based on guesswork, and that is never a good idea.
This is why the PESTLE should be partnered with other analyses, such as SWOT and competitor analyses in order to get a fully rounded perspective before making any decisions.
One of the benefits of the PESTLE analysis is that it can be reviewed relatively quickly using bite-sized pieces of information. While small bits of information have their place, they also leave a lot of information out of the equation. Complex strategic decisions often require complex research and data, not simple bullet points, and you need to know you have enough information to make an informed decision.
Any time you complete a PESTLE analysis, your data may become outdated almost immediately afterward. That's because political, economic, social, technological, legal and environmental factors can change drastically in only a matter of hours.
While this doesn't happen frequently, it's important to keep an eye on current news so you know if your analysis is still current. If your information is outdated, you'll need to conduct a new PESTLE before you become reliant on the analysis.
A lot of the information you need to find for a PESTLE analysis isn't readily available online, and what you do find could be inaccurate since the internet is filled with unverified information. This means it can take you hours to find the right data, and you still might not find what you need or even know if what you did find is accurate.
Since each section needs to be fully researched and verified, you'll need to obtain a lot of data, which means even in an ideal setting you can expect a major time commitment. You may even need to pay to access databases or visit a library to find information in print.
Taking the time and manpower to do proper research costs money, which is why some companies choose to outsource these reports or even sections of the reports to get the proper data. The bottom line is that if the cost of the analysis (whether spent on paying an in-house or external researcher) is not worth what you're likely to get out of it, then you're better off not doing the analysis in the first place.