The players in a market (whether on the demand or supply side) are constantly being influenced by their environment. The latter influences their decisions. There are several types of environment: technological, institutional, socio-economic and cultural. The PESTLE model aims to circumscribe this environment to better define the strategic approach.
Market Analysis Through the Technological, Institutional, Socio-Economic and Cultural Environment
The Technology Environment must be perfectly known and mastered by the actors of a market, as its evolutions can change the deal in a very short time. All other technological change represents both a threat but also an opportunity for a given market player.
PESTLE Model and Three Types of Environments
The institutional environment represents the entirety of public institutions, laws and regulations. Regulating the exchanges and transactions in a given market. The most important laws from a marketing perspective are those that regulate the structure of the markets but also those that ensure the protection of consumers.
The socio-economic environment is about the demographic, economic and social factors that influence a market: unemployment rates, crises and recessions, population fertility, and labour force change.
Finally, the cultural environment constitutes the set of traditions, values, and beliefs, but also thought movements that influence a consumer throughout their life.
Limitations of Theoretical Approaches to Environmental Scanning and the Pestle Model
Traditional marketing approaches often overlook the political dimensions of a market and more globally, of a country. Indeed, it is necessary to be constantly on the lookout for political decisions taken in terms of taxation or social protection, the latter has a direct impact on the purchasing power of consumers in a given market.
Of course, the posture of a country with respect to free trade or, conversely, protectionism, is to be watched very closely (reversals are more common than one would think). A country’s stability should be analysed with care.
Another dimension to be considered is the ecological dimension: available resources, climate change, and pollution risks are to be taken into account; as is the ecological footprint of the products consumed in the market under study.
Of course, environmental scanning is also (and especially) about competitive scanning, a point not covered in this definition.
Trends and Innovations
If we place ourselves at the level of strategic analysis of a company, the PESTLE (Political, Economic, Sociological, Technological, Environmental and Legal) is an effective model to identify the factors positive or negative that can influence a market and, beyond that, the companies operating in that market.
The PESTLE model is attributed to American Francis Aguilar, a professor at the Harvard Business School in the 1960s.
Tools and Methods in Environmental Analysis
One of the first methods of analysing one’s environment is a documentary analysis and in particular the scouring of the press and online blogs.
You can also conduct semi-directive interviews or use the Delphi method. The Delphi method proceeds by iteration. It aims to collect initially, through an open-ended questionnaire, the opinions of individually interviewed experts.
It is necessary to communicate the results of the first questionnaire to each respondent. In order to obtain their reaction and response to a second questionnaire. The Delphi method organises a minimum of three rounds of opinion. Its objective is to reach as broad a consensus as possible within the group. Beware, however, of the drop-out rate of participants, which can be high because of the number of rounds.
Don’t forget social media listening tools such as Digimind, Linkfluence or Radian 6.
Of course, the direct approach through the contacts you can make on LinkedIn, for example, works very well and allows you to post questions. You can also ask questions in discussion forums or in online focus groups with experts or professionals.