How to Do a PESTLE Analysis for Your Service Business
If you operate a service organization, it’s important to have a thorough understanding of the factors that affect your business. Beyond market forces and customer expectations, you must also consider how external factors will impact the way you deliver on customer expectations for maximum uptime, and how you interact with the broader community.
One of the most important steps to take as a service organization is what’s known as a PESTLE analysis. This can help you better understand the external influences on your business and how you can prepare for them.
Here’s how a PESTLE analysis can help your service business.
What Does PESTLE Mean?
PESTLE stands for Political, Economic, Social, Technological, Legal and Environmental. Each topic represents a factor that can affect your business. In this case, many of these are external factors that are beyond your scope of control.
Conducting a PESTLE analysis is an important step when making major strategic decisions about your business. For example, if your goal is to break into a new geographical location, you should conduct a PESTLE analysis to determine what factors in the market will impact your business.
You should also consider doing a PESTLE analysis regularly. Laws and regulations change often, and social and economic factors can change even faster.
In most cases, a PESTLE analysis takes three steps:
- Identify the most important categories impacting your business.
- Research the effects of each category on your business.
- Create a report on your analysis that can be referenced by stakeholders when making decisions.
Here, we’ll explore what each part of a PESTLE analysis is and why it’s important to your service organization.
Political Analysis
The political analysis is a summation of how a government and its laws will impact your organization. For example, states in the US have different labor laws and tax structures, so the government you might be used to working under in one state will differ in the next.
Similarly, you must consider the rules and regulations of the Federal government, no matter which state you operate in. The same is true of foreign governments if you intend to operate internationally.
Some important political influences to consider are taxes, minimum wage laws, the presence of labor unions, environmental policies and even political stability.
Economic Analysis
An economic analysis is a deep dive into the market factors that affect your business in a specific market. This analysis can also include an internal financial analysis, including a listing of your company’s debt obligations, revenue and more.
Externally, you can examine interest rates, rates of inflation, customer or client income rates and macro-economic factors like GDP loss or growth.
Social Analysis
A social analysis is an exploration of demographics among your customers as well as the cultural norms in the markets you intend to operate. For example, if you intend to operate in another country, you must have a thorough understanding of that country’s cultural norms so you can avoid offending your customers.
Similarly, it pays to understand how societal attitudes are changing. In recent years, there has been an emphasis on diversity and sustainability.
Some other social factors to consider are population changes, religious influences, public health initiatives and privacy concerns.
Technological Analysis
Your technological analysis should give you information about your competitors’ technology implementations and how your company’s tech deployment compares. If you are using legacy systems or outdated equipment, you risk falling behind the rest of the market as they move toward digital transformation.
Some technology topics to consider in your analysis are automation trends, tax incentives for technological improvement, emerging solutions, software updates, new communication tools and data privacy technologies.
Legal Analysis
Your legal analysis focuses on the laws that affect your company directly. Although laws vary by location, it is your responsibility to comply with local laws in all the markets in which you operate. Without doing so, you could risk fines or worse.
For example, consumer protection laws mandate that companies take reasonable precautions to protect their customers’ data and personal information. You must also comply with safety regulations that are put in place to protect your employees and the customers they serve.
Other laws to consider are antitrust laws, advertising laws, employment laws, licensing laws and environmental laws.
Environmental Analysis
Most environmental analyses focus on the impact your business could have on the surrounding ecology. If you operate a business that produces pollution, you must ensure your practices align with pollution regulations.
It’s also important to understand the cultural aspects of how company’s impact on the environment. For example, customers and partners may be more willing to work with a company that is taking steps to limit its carbon footprint.
Still, your environmental analysis shouldn’t just include insights about how your company impacts the environment and how you can stay compliant with environmental laws. You should also consider the opposite: How the environment can impact your company.
Climate, weather patterns and geography can all impact your business. Inclement weather can harm your service operations, especially if your technicians work outside or must travel long distances to reach a service site. Similarly, major disasters like hurricanes can have a significant impact on supply chains.
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