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We talk about PESTLE analysis a fair amount here. It’s a fantastic method of understanding how six factors affect a business or project. These six factors include:
The problem is, PESTLE analysis does have its disadvantages. It’s not perfect. Although it’s used primarily as a strategic tool for planning, it’s limitations can greatly affect its results. Before diving into such a detailed study, it’s best you understand the disadvantages of PESTLE analysis first.
1. It can’t offer the full picture.
PESTLE analysis is about investigating six external factors. Unfortunately, in strategic planning, you’ll need to know more than these six. PESTLE only gives provides an outside perspective about businesses. You shouldn’t forget about internal factors. Or your competition.
Unfortunately, if you only do PESTLE analysis, you only get one side of the story. And one side is an incomplete side. It leaves gaps, allowing assumptions to slither in. You end up filling in the holes with guesswork.
Luckily, other analyses complement PESTLE. SWOT analysis comes to the rescue for understanding internal discussions, errors, and threats. Competitor analysis handles the identification of your competition.
These two are the ying to PESTLE’s yang, so to speak. They offer the other side of the story. In my opinion, you should always use another type of analysis alongside PESTLE.
2. Factors change. Quickly.
The six factors of PESTLE analysis include:
In just a couple of hours, any of these influences can change drastically. A political party can be forced out. Technology can be rendered obsolete. Or a new law can pass overnight with little warning.
Any shift can change the result of your PESTLE analysis. What’s worse, it makes it difficult to predict the future of your business. Which is the exact opposite of what PESTLE analysis is used for.
3. Simple isn’t always better.
Often, a quick bullet-list is how PESTLE analysis discoveries are shown. It’s each letter of the analysis followed by bits of information. This does make it easier to digest. But it also leaves too much to the imagination. Unless each point is critically examined, it’ll remain shallow. You won’t have enough information for proper business preparation.
4. Most data isn’t easily found
Unfortunately, a lot of the data you’re after isn’t easily obtained online. If you do find anything, it’ll likely be cloaked in a vacuum of information. It could take hours to sift through and you won’t know if it’s trustworthy. We’re in an “information overload” age. Anyone with a computer or phone can write whatever they want and publish it. All those articles and commentary will bog down your search.
You may decide to avoid all this headache by just finding a few facts and filling in the blanks yourself. Don’t do that! Using unfounded information makes it all too easy to fall into traps. You’ll end up planning for disaster rather than preparing for it. Not intentionally, of course. But it’s the a high probability.
5. It eats up all your time.
You want to avoid a shallow list of information. Each section needs to be thoroughly researched. Unfortunately, that takes up a ton of time. You’ll need a hefty amount of data to cover all six parts. Whether that involves market research for the Social section or a list of laws for Legal. Simply saying, “We need to abide by copyright laws” is true. But it leaves out too much.
We know the information can change in a moment. And that this information isn’t easily found. It’s more likely you’ll need to hire an outside agency or experts to get the current data. Even after getting what you need, and the facts change, then new data will be necessary. Getting more information on a tight timeline isn’t going to work well for you.
6. The risk of mishandling information
Trouble can continue even when you have factual, credible information. The worry isn’t about validity anymore; it’s about mishandling the information.
For the PESTLE analysis, you’ll need plenty of information. Maybe too much. And when you’re juggling an abundance information, it’s easy to become confused. You’re likely to be swallowed up by the endless data, lists, and research.
When you’re overloaded, you’re more likely to lose sight of the main points. Instead of focusing on the info that matters most, you struggle on with lesser information. It becomes the focus, even though it shouldn’t be. If this ends up in your final draft of the analysis, you won’t be able to plan strategically. You can’t get to the right conclusion with the wrong information.
What does this all mean for PESTLE analysis?
Every analysis has disadvantages and PESTLE isn’t the exception. It was created to identify six critical macro influences that affect all businesses. Regardless of where you’re living, these factors can’t be ignored. They exist and will always exist. Understanding their influence is necessary for future planning.
With that said, this is the type of analysis that relies heavily on documented, relevant information. It’s not always easy to obtain. It may require hiring experts for each section. It’ll likely require weeks or months for completion. That’s not factoring in changes in information (like a newly introduced product tax). If anything changes, new information is needed. That can greatly influence the project deadline.
With PESTLE analysis, you’re only investigating outside factors. That’s not enough. Every business and project has internal factors too. It’s impossible to understand them by using PESTLE alone. For the full story, you’ll need to adopt another type of analysis. Again, this adds to your timeline.
When you want to fully understand how political, economic, social, technological, legal, and environmental factors affect a business, go for PESTLE analysis. But be weary about the amount of legwork is necessary.