PESTEL ANALYSIS

strategy Apr 30, 2020

PESTEL analysis is a strategic planning tool used to evaluate the impact of external factors on a business or organisation. For Kenneth Frazier CEO of Merck Co, to apply a PESTEL analysis to his firm, he would need to consider the following six categories of external factors:

  1.  Political: This includes factors such as government policies, political stability, and regulatory environment. For Merck Co, this might include considerations such as the impact of healthcare reform in the United States, or the potential for changes in patent laws that could affect the company's ability to bring new products to market.
  2.  Economic: This includes factors such as economic growth, exchange rates, and inflation. For Merck Co, this might include considerations such as the impact of economic downturns on demand for the company's products, or the potential for currency fluctuations to affect the company's bottom line.
  3.  Sociocultural: This includes factors such as demographics, values, and lifestyles. For Merck Co, this might include considerations such as the ageing of the population and the potential impact on demand for certain types of medications, or changes in societal attitudes towards certain health issues.
  4.  Technological: This includes factors such as innovation, automation, and the use of technology. For Merck Co, this might include considerations such as the impact of advances in genetic engineering on the company's research and development efforts, or the potential for new technologies to disrupt the company's traditional business model.
  5.  Environmental: This includes factors such as climate change, natural disasters, and resource availability. For Merck Co, this might include considerations such as the potential impact of environmental regulations on the company's operations, or the potential for natural disasters to disrupt the company's supply chain.
  6.  Legal: This includes factors such as employment laws, consumer protection, and intellectual property rights. For Merck Co, this might include considerations such as the impact of changes in patent laws on the company's ability to bring new products to market, or the potential for legal challenges to the company's business practices. 

By considering these external factors in the PESTEL analysis, like Kenneth Frazier, you can develop strategies for managing the risks and opportunities they present, and help ensure the long-term success of your own firm. 

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