PEST and PESTLE analysis are economic tools used to evaluate business environments. PESTLE adds legal and environmental factors to PEST analysis. Legal factors include labor and competition laws, while environmental factors include regulations on emissions and accountability for environmental impact.
Political, Economic, Social, Technological (PEST) analysis and Political, Economic, Sociocultural, Technological, Legal, Environmental (PESTLE) analysis are both economic analysis tools used to evaluate certain aspects of a business environment. The main difference between PESTLE and PESTLE analysis is the addition of two other factors to the PESTLE analysis. Other than legal and environmental factors, both tools perform essentially the same functions.
One of the differentiators between PEST and PESTLE analysis is the legal factors in a company’s operating environment. These are determined by the scope of the business environment. For example, a company based in Maryland in the United States would have to deal with local laws such as county laws, state laws and other laws that may apply to the company as a result of its location. These laws may include labor laws, employee laws, and laws that guide things like competition.
If the firm is an international company, it should study international trade, competition, foreign market and international labor laws. The company should also study other factors such as legislation and laws that guide the export and import of goods. Examples of such laws may include analyzing import quotas and imposing customs duties on commercial items. Other legal factors that differentiate these two analyzes include various tax laws and their application to society.
Environmental considerations also differentiate a PEST and PESTLE analysis. This includes legislation relating to the environment and the impact of such legislation on the business. For example, the Environmental Protection Agency (EPA) regulates how industrial manufacturing affects the environment in the United States. This includes laws governing the emission levels allowed by different manufacturing facilities and also how companies can discharge their waste. Failure to comply with these regulations and laws can result in severe fines, lawsuits or the permanent closure of a business.
Another environmental consideration that bounds the PEST and PESTLE analyzes includes regulations relating to how companies can be held accountable for the effect of their actions on the environment. Some countries may legally require companies to invest in the environment in order to offset the negative effect of their activities. Such mandatory acts may include the planting of a predetermined number of trees to compensate for greenhouse gas emissions and other related factors.
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