PESTEL Analysis for Strategic Planning: Comprehensive Guide [Updated for 2024]

PESTEL framework helps organizations to conduct an analysis of the external factors. In this article, we’ll show how a PESTEL template can be used to formulate strategic hypotheses and present them on a strategy map. 

The five steps of the PESTEL analysis explained on the goals and initiatives of the template scorecard. Source: PESTEL Analysis Template.

Here are the key topics of the article:

• Acronym and its variations – from PEST to PESTEL and LoNGPEST
• Five Steps of PESTEL Analysis – learn how to generate strategic hypothesis
• PESTEL Template – review the starting point of the analysis
• Example of PESTEL Analysis – analysing some popular trends with PESTEL
• Advantages vs. Disadvantages – the benefits and limitations of the framework

Factors Added in 2024

The initial PESTEL template included the fundamental trends that still remain relevant. Yet, to provide better oversight of the business landscape, we’ve added some factors that represent strong trends we see in 2024 and expect to develop in 2025:

• Inflation pressure that affects consumer spending habits and corporate expenses.
• The rise of AI and the emerging need for AI governance.
• Third-party vendor validation as a sub-trend of the overall cybersecurity trend.
• Due to new regulatory pressures, strategic planning is expanding to include stakeholder management, risk management, and strategic alignment (see the updated strategy audit checklist).

PESTEL Perspectives

PEST analysis provides a framework for the review of macro-environmental factors. The original PEST acronym stands for:

• Political
• Economic
• Social
• Technological

The acronym has a number of variations that add additional external perspectives to the framework.

For example, the popular PESTEL variation adds:

• Environmental, and
• Legal

LoNGPEST focuses on different geographical scopes:

• Local + National + Global factors + PEST

Whatever variation you use, a general approach to the PEST analysis remains the same. Below, we discuss how this framework can be used during strategic planning sessions.

Five Steps of PESTEL Analysis

Here are the steps of the PESTEL process.

1. Take the first component of PESTEL – Political
2. Find trends that could potentially influence your organization in the context of this component
3. Discuss with your team the possible implications for your organization
4. Note down the relevant findings as strategic hypotheses
5. Process to the next component of PESTEL

Repeat the process every 6-12 months.

What happens with the strategic hypotheses formulated on step 4? We can use them when building a strategy map:

• We’ll need to convert those findings into strategic goals.
• Understand the cause-and-effect logic between them.
• Quantify them with leading and lagging metrics or probably KRIs (metrics of risk probability and risk impact).
• Develop action plans as an initiative for the strategic hypothesis.
• Use alignment by context to align the findings of the PESTEL analysis with goals and initiatives.

PESTEL in Ecosystem of Strategy Frameworks

PESTEL analysis is a perfect complementary tool for strategy execution frameworks like the Balanced Scorecard, Hoshin Kanri, or OKR.

With the described decomposition by external factors and clear documenting function, PESTEL analysis is placed in the business frameworks ecosystem diagram on the overlap of the strategy analysis and strategy description sectors.

Training session: 'Analysis of External Factors with PESTEL Framework' is offered as part of our ongoing learning program and included with a BSC Designer subscription.

Training sessions are delivered weekly via Zoom, providing practical insights and personalized guidance. Upon completion, participants receive an attendance certification. Explore all available training sessions here.

Implementation of the PESTEL Template with BSC Designer Software

Let’s review the PESTEL analysis template that we have in BSC Designer.

Access the Template

1. Sign up with a free plan account or login into an existing account
2. Go to the “My Scorecards” section
3. Select “New” > “New Scorecard”
4. Select “PESTEL Analysis” in the list of templates

Template Review

The framing idea of the template is:

• Conduct an analysis of the external factors.

The template is presented by six perspectives of PESTEL:

• Political. How may government and other political factors impact our organization?
• Economic. What economic trends could have an impact on our organization?
• Social. What are emerging social and demographic trends?
• Technological. What technological innovations could affect our market?
• Environmental. What ecological aspects influence our business environment?
• Legal. What changes in legislation could impact our organization?

If needed, you can modify the perspectives according to your needs – rename existing perspectives or add a new one. As we have discussed before, original PEST analysis is subject to many variations.

Source: PESTEL Analysis Template.

Inside each of the perspectives, you’ll find some examples that could direct your analysis of external factors:

Source: PESTEL Analysis Template.

Example of PESTEL Analysis

Follow these steps to conduct PESTEL analysis using the template.

Step 1. Review Perspectives

Review the perspectives of the template. Are you fine with classical PESTEL perspectives, or do you need to add/remove some?

Source: PESTEL Analysis Template.

Step 2. Update Trends

Look into the trends examples included in each perspective:

• Some might not be relevant for your organization or your country.
• Some emerging trends for your industry might not be reflected.

Update the items within perspectives. Save the updated template to your account to re-use it in future.

Source: PESTEL Analysis Template.

Step 3. Discuss Trends

Discuss trends with your team. Map your findings using the “Initiatives” function of BSC Designer.

For example:

• We can map “Remote employment is getting more popular” within the “Workspace and lifestyle changes” trend.
• We can map the Sustainable Development Goals (SDGs) as a trend within the “Environmental” perspective. We have discussed it in detail before, so I can add a link to the article in the initiative.
• One of the emerging legal trends is the Personal data protection legislation (GDPR law in Europe).

Source: PESTEL Analysis Template.

We mentioned some trends; it’s a good idea to explain why these trends are important for our organization, and what might be a possible response plan.

• We can use the “Initiatives” function to map all necessary details.

For example, for “Remote employment,” a rationale might sound as:

Remote employment is an emerging trend today. Being able to hire talents remotely will allow us to work with professionals all over the world; this will also imply important changes in the way we manage teams.

Source: PESTEL Analysis Template.

Step 4. Update Strategy Map

The next step is to formulate the findings of the PESTEL analysis as strategic hypotheses or even specific goals. We can use the popular Balanced Scorecard strategy map approach for this.

In BSC Designer, to use the findings of PESTEL analysis on another strategy scorecard click the Export indicator button on the toolbar or simply copy and paste items between the scorecards.

Let’s continue with “Remote employment trend” as an example.

We can start with a Learning and Growth perspective where we typically talk about infrastructure and general skills needed. In the context of remote employment, we might have these thoughts:

Source: Trend Analysis Example.

To make the remote employment possible, we also need to update our internal processes:

It’s important to keep the connection to the rationale behind these hypotheses (in this case, the link to the PESTEL analysis), so it’s a good idea to save the link to the results of PESTEL analysis in the description of this scorecard.

• What we have so far are not the strategic goals, but some aspirations, or hypotheses that we want to test.

From this point, we can:

• Convert this map into a real strategy map
• Use this map for further discussions
• Include the findings of the analysis into the overall talent strategy or specific training strategy.

You can find more ideas about managing remote employees as well as specific KPIs in this article. 

In complex cases, moving the findings of strategy formulation frameworks directly to the strategy map might be a challenge. In such cases, use the Strategic Change Agenda framework as a pre-filter. This framework facilitates converting insights into the goals and creates a context for the new goals.

PESTEL Analysis and AI

Consider using generative AI for PESTEL Analysis.

In BSC Designer:

1. Add 'PESTEL Analysis' to your account (via New > New Scorecard > More templates).
2. Open the template, switch to the 'AI' tab, and formulate your question.

The tool will pass the necessary contextual information from the template to AI.

Advantages and Disadvantages of PESTEL

Similar to other strategy formulation tools, the obvious advantage of PESTEL analysis is a more disciplined approach to the analysis of external factors.

What are the disadvantages of PESTEL?

Like many similar frameworks:

• There is no guarantee that all important external factors were analysed
• The framework doesn’t guarantee the quality of the findings

Basically, the framework prescribes starting points for the analysis, but the level of further research depends on the team and its experience.

What's next?

More About Strategic Planning