PESTLE analysis is a powerful tool for analyzing the external environment of a business.
However, it can be time-consuming and doesn’t provide a complete picture of your market.
Instead of using PESTLE analysis to predict the future, consider using other methods that rely on qualitative data (e.g., interviews with customers) rather than quantitative data (e.g., statistical modeling).
1. PESTLE analysis can be time-consuming
PESTLE analysis is time-consuming. While it’s not a difficult or complicated process, there are several steps involved: gathering data and analyzing it, writing up your findings in a report, and then presenting that report to your client.
If you’re working on a tight schedule (and who isn’t?), this could be an issue for you.
It’s important to keep in mind that PESTLE analysis doesn’t have to be done all at once; you can break each step into smaller chunks of time if necessary.
2. It has a high failure rate
The biggest disadvantage of using PESTLE analysis is that it’s not a foolproof method for predicting the future.
There are many factors that can’t be predicted with PESTLE analysis, and this is where other methods come into play.
For example, if you’re looking to predict what a competitor will do next or how your own product will perform in the market, you should use a combination of PESTLE analysis and other predictive methods like SWOT or Porter’s Five Forces.
3. It’s not accurate enough to be used as a predictive tool
You’ll often see PESTLE analysis used as a predictive tool. However, it’s not meant for this purpose.
While the factors in PESTLE can give you some idea how your industry could change in the future, they aren’t specific enough to be accurate predictors of what will happen.
For example, let’s say that your company is currently selling products with packaging that has a certain amount of recycled material in it—let’s say 30%.
You perform a PESTLE analysis and find out that there are new regulations coming down the pipe that will require you to use 50% recycled material in your packaging materials.
While this might seem like bad news at first glance (and might even prompt you to perform some major changes), keep in mind that these kinds of regulations tend not just affect one industry—they have an impact on many different industries at once.
For example: If all companies suddenly had 50% recycled material requirements for their packaging materials, then those who were already using 100% recycled materials would likely be able to cut back on their costs by outsourcing some of their production overseas instead of producing everything domestically themselves.
4. It doesn’t provide a complete picture of the market
One of the main disadvantages of PESTLE analysis is that it doesn’t provide a complete picture of the market.
It only looks at macrolevel factors, which means that it can’t take into account future trends or possibilities (e.g., upcoming legislation that might affect your business).
Another disadvantage is that PESTLE analysis only looks at macrolevel factors, ignoring microlevel factors that are also important in business decisions (e.g., company culture).
5. It’s not an effective tool for social and political analysis
While PESTLE analysis is a useful tool for understanding the external factors that impact your business, it’s not an effective tool for social and political analysis.
Social and political factors are important to consider when assessing risks in your industry, as well as how these risks may affect you or your customers.
6. It doesn’t consider other factors, such as environmental issues and technological changes
PESTLE analysis only looks at macro-level factors, ignoring micro-level factors that are also important in business decisions.
For example, let’s say you’re running a company and are deciding whether to expand internationally or not.
While PESTLE might provide insight into the macroeconomic risks of doing business abroad (political instability, for example), it won’t tell you how your team is likely to respond if they have to operate under different cultural norms or new regulations.
7. PESTLE analysis only looks at macro-level factors, ignoring micro-level factors that are also important in business decisions (e.g., company culture)
PESTLE analysis only looks at macro-level factors, ignoring micro-level factors that are also important in business decisions (e.g., company culture).
PESTLE analysis is a great tool for analyzing macro-level factors, but it doesn’t look at the micro-level factors that are also important in business decisions (e.g., company culture).
8. Companies need to do more than just analyze their external environment; they also need to analyze their internal environment (e.g., organizational structure)
While the external environment is obviously important to a company’s success, it’s important to realize that the internal environment can have just as much of an effect on the company.
After all, people within your organization are responsible for generating revenue and profits—not customers or competitors.
Therefore, you should always analyze your organizational structure (e.g., how employees are organized into teams), culture (e.g., how employees interact with each other), and policies (e.g., which regulations govern employee behavior).
These features of your business all need to be considered when making decisions about how to run your organization and what products or services you offer customers in order for these decisions to be effective long term!
PESTLE analysis is a well-established tool that can be used to analyze the external environment of your business.