A Guide to performing PESTEL analysis

The main purpose of performing a PESTEL analysis is to identify opportunities and threats.

 

  1. Identify specific factors which impact on the soft drinks production industry in the United Kingdom. For example, exchange rate i.e. exchange rate of the pound against the euro currency.

 

  1. Then, ask yourself ‘so what?’ i.e. you need to discuss the implications of each factor identified in terms of how it creates an opportunity or threat (challenge) for UK soft drinks production companies. For example, the fall in the value (exchange rate) of the pound against the euro would means there could be an increase in production costs for UK soft drinks production companies due to the fact that they import inputs from their suppliers in Europe. This poses a challenge for UK soft drinks production companies as they may choose to absorb the costs in the form of lower profits….or they can increase prices to…which may ultimately led to reduced demand and lower sales.

 

  1. Show good insights into the interconnected between factors. For example, the Soft Drinks Industry Level or ‘Sugar Tax’ introduced in the UK in 2018 (political factor), regulation (legal factor) on the maximum levels of caffeine permitted in soft drinks like coca (150mg/l) and growing attitudes towards improving dietary health (social factors) has implications for UK soft drinks production companies to reformulate soft drinks to lower the sugar content to avoid the threat of tax and exploit opportunities to develop reduced-sugar healthier choices of drinks and smaller packages.

 

Below are examples of PESTEL factors to consider but you may identify and discuss others not stated here.

 

Political Factors:

Attempt to identify the main political factors and how they might affect the UK soft drinks production companies in the UK. For instance, you could evaluate how political stability of the UK market, tax policy, trade restrictions, and tariffs might affect companies.

 

Legal Factors:

Attempt to identify the main Legal factors and how they might affect the demand for UK soft drinks manufacturer’s products, its costs, and how that companies operates. For instance, you could evaluate how discrimination law, consumer law, employment law, and health and safety law, create opportunities and challenges for UK soft drinks production companies.

 

Economic factors:

Attempt to identify the main Economic factors and how they might affect the performance and decision making of UK soft drinks production companies. For instance, you could evaluate how economic growth, interest rates, exchange rates, and the inflation rate in the UK can affect UK soft drinks production companies’ growth and expansion.

 

Social Factors:

Attempt to identify the main social factors and how they might affect the demand for UK soft drinks production companies’ products/services and how companies operates. For instance, you could evaluate how changing cultures and demographics, and new ethical attitudes create opportunities and challenges for companies.

 

Technological Factors:

Attempt to identify the main technological factors and how they might influence the way that UK soft drinks production companies operates. For instance, you could evaluate technological change such as the Internet, the rise of smartphone and social media (photo sharing and hashtags), mobile payments, automation and robotics, and discuss how these shifts create opportunities or challenges for companies in the UK soft drinks production market.

 

Ecological Factors:

Attempt to identify the main environmental (ecological) factors and how they might affect UK soft drinks production companies’ operations, costs, and the products they offer. For instance, you could evaluate how environmental regulations can create opportunities and challenges for companies in the UK.