In Insolvency and Bankruptcy Board of India’s valuer exam, PESTEL Analysis comes under Valuation Applications chapter that carry 35% weightage. Along with this, various set of business strategy analysis tools are covered in this chapter, which are very important to understand for the purpose of clearing IBBI Registered valuer examination. You can expect 1 to 2 marks from PESTEL Analysis in the IBBI registered valuer exam. In Today’s blog we will discuss only regarding PESTEL Analysis which a business tool used to identify the macro (external) forces facing an organisation.

A PESTEL analysis is an acronym for a tool used to identify the macro (external) forces facing an organisation. The letters stand for Political, Economic, Social, Technological, Environmental and Legal. Depending on the organisation, it can be reduced to PEST or some areas can be added (e.g. Ethical).

In marketing, before any kind of strategy or tactical plan can be implemented, it is fundamental to conduct a situational analysis. And the PESTEL forms part of that and should be repeated at regular stages (6 monthly minimum) to identify changes in the macro-environment. Organisations that successfully monitor and respond to changes in the macro-environment are able to differentiate from the competition and create a competitive advantage.

Let’s look at each element of a PESTEL analysis.

Political Factors:

 These determine the extent to which government and government policy may impact on an organisation or a specific industry. This would include political policy and stability as well as trade, fiscal and taxation policies too.

Economic Factors:

 These factors impact on the economy and its performance, which in turn directly impacts on the organisation and its profitability. Factors include interest rates, employment or unemployment rates, raw material costs and foreign exchange rates.

Social Factors:

 These factors focus on the social environment and identify emerging trends. This helps a marketer to further understand their customers’ needs and wants. Factors include changing family demographics, education levels, cultural trends, attitude changes and changes in lifestyles.

Technological Factors:

These factors consider the rate of technological innovation and development that could affect a market or industry. Factors could include changes in digital or mobile technology, automation, research and development. There is often a tendency to focus on developments only in digital technology, but consideration must also be given to new methods of distribution, manufacturing and also logistics.

Environmental Factors:

 These factors relate to the influence of the surrounding environment and the impact of ecological aspects. With the rise in importance of CSR (Corporate Sustainability Responsibility), this element is becoming more important. Factors include climate, recycling procedures, carbon footprint, waste disposal and sustainability

Legal Factors:

 An organisation must understand what is legal and allowed within the territories they operate in. They also must be aware of any change in legislation and the impact this may have on business operations. Factors include employment legislation, consumer law, healthy and safety, international as well as trade regulation and restrictions.

Political factors do cross over with legal factors; however, the key difference is that political factors are led by government policy, whereas legal factors must be complied with.

Conclusion

 A PESTEL analysis helps an organisation identify the external forces that could impact their market and analyse how they could directly impact their business. It’s important when undertaking such an analysis that the factors affecting the organisation are not just identified but are also assessed – for example, what impact might they have on the organisation? The outcomes of a PESTEL analysis can then be used to populate the opportunities and threats in a SWOT analysis.

From this piece of information you must have realised how intuitive appealing and easy to learn the PESTEL Analysis is. Student’s unfamiliar with business strategies like ADL, Porter, PESTEL etc assume that these areas are complex and they avoid studying them. But is it so? Are they really difficult to understand? I Do not think so! I would like to encourage you all to remove these misconceptions and embrace these theory areas. You can easily score those 1 or 2 marks in valuer examination that will make the difference between passing and failing.

What is eventually important for you is to study strategically and work on your weak areas with complete dedication so that you could pass the IBBI registered valuer examination. And for passing that examination with a minimum of 60% marks, these small and easy areas make a lot of difference. RVMOCKTEST.ONLINE is there to help you in this path of becoming a Registered Valuer by making you exam ready. You can check your preparedness and identify your mistakes, by appearing in online mock tests of RVMOCKTEST.ONLINE that will boost your confidence and increase your chances of clearing in one single shot!!

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