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Do a PESTLE Analysis

Do a PESTLE analysis to assess an opportunity 

A PESTLE analysis is a tool entrepreneurs use to assess external factors that could impact their business. These are:

  • Political factors
  • Economic factors
  • Social factors
  • Technological factors
  • Legal factors
  • Environmental factors

You can do a PESTLE analysis to get a better understanding of the various factors that could impact your business. Along with a PESTLE analysis, it’s a good idea to also conduct a SWOT analysis (which assesses your businesses Strengths, Weaknesses, Opportunities, and Threats). Together, these tools help co-op entrepreneurs plan for events outside their control.

Before you do a PESTLE Analysis

When you do a PESTLE analysis, the goal is to group ideas and information in a way that becomes insightful and useful to the organization doing the analysis. So, it’s a good idea to bring well-informed people to the table and gather as much information as you can beforehand.

Depending on the strengths of the group, it may also be worth bringing in a consultant or experienced entrepreneur to help provide insights and direction. Plus, provincial supports, such as Business Link (AB) and Square One (SK), provide (often free) market research data.

The exercise below works well as a group activity, so consider gathering your steering committee or dividing the six sections for groups/committees to complete.

Also, take your time. It’s important to do this research properly and to think through all the factors that impact your co-op (short term, medium term, and long term).

Capturing ideas and information

No one way is better than another for capturing a PESTLE analysis, and each group will find what works best for them. However, we suggest starting with sticky notes and the six categories/factors. For each idea or insight create a sticky note and place it under the proper category (it may apply to more than one). In addition, we recommend adding a timeline to any potential impacts identified. To keep things simple, we suggest using short, medium, and long term as a general metric. You may also wish to identify if the impact will be positive, negative, or neutral, and determine whether this impact will (for better or worse) change over time.

Once the group has exhausted the categories and available ideas and information, find a way to capture this. Take photos of the sticky notes. Collect them all, keep them together, and assign someone to enter all this into a data set of some sort. We suggest using a shareable spreadsheet (like Google Sheets). A spreadsheet is good way to keep this type of information organized and is flexible enough to add information and insights as they come in later. Plus, the file can be shared with the group.

Analyze these six factors to complete your PESTLE:

Political Factors

Political factors include any influence a local, provincial, or national government has on an industry and your business. Be sure to consider all three levels of government as each one will have unique impacts. Finding this information may require some research or assistance understanding legal implications. Building relationships with representatives and administrators at each level of government is a great way to maintain insights into potential policy decisions that could impact the co-op. While it’s impossible to be aware or predict every eventuality, a strong network of friends and advisors goes a long way in helping mitigate the impacts from political factors.

Political factors that could impact your business include:

  • legislation (like the Co-operatives Act) and changes to this legislation
  • regulatory requirements (e.g. tariffs or licensing)
  • tax incentives
  • unusual political events (e.g. instability, conflict)
  • changes of leadership in government and administration

A few things to keep in mind as you explore this factor:

  1. What legislation governs your business? Are there important restrictions or benefits in the legislation that you should be aware of?
  2. What taxes affect your business (e.g. federal and provincial corporate tax, sales tax, property tax)?
  3. Are there specific regulations or compliance measures that impact your business (e.g. food safety or privacy)?
  4. Are there any licenses or certifications you need to start your business (e.g. municipal business license)?
  5. What other laws impact your business (e.g. minimum wage, labour laws, environmental protection)?
  6. Are there potential regulatory or legislative changes that could occur due to an election or bureaucratic appointment?

Economic Factors

A variety of socio-economic indicators influence an economy’s health. Consider working with a provincial business development resource centre to obtain up-to-date data on local or regional economic factors.

Economic factors that could impact your business include:

  • economic growth
  • interest rates
  • inflation
  • employment rate
  • household income
  • disposable income
  • supply and demand patterns
  • taxation
  • competition

It’s important to consider local, national, and international economic factors as well as those in your co-op’s specific industry. Good sources of information for this category include news sources and Statistics Canada.

A few things to keep in mind:

  1. Are there trends in your industry that might impact your business decisions (e.g. closures, automation, best practices)? Are there competitors in (or coming into) your area? Is the industry or sector undergoing disruption or maturing out (eg: coal, incandescent lightbulbs, online retailing)?
  2. What sources of funding are available to your business? What interest rates or requirements might you have to meet to obtain financing?
  3. Where will your consumers come from? Are people accessing the services you’ll provide elsewhere? Are there factors that might impact your customer interactions (e.g. tourism, seasonal employment)?
  4. Identify important economic characteristics of your customer base (e.g. household income, spending behaviour, debt levels, employment rate, dominant industry/employer).
  5. Is there space in the market for your business? How might local factors affect your operations?

Social Factors

Social factors describe who your potential customers are, what they do, how they think, and what might influence them to make purchasing decisions. If your business targets a certain demographic, this can have a big influence on your strategies (e.g. how you market to/reach millennial customers will be different from how you market to/reach baby boomer customers).

Social factors that could impact your business include:

  • cultural norms and/or trends
  • lifestyles
  • demographics
  • education levels
  • attitudes toward your product or service
  • consumer preferences
  • behavioural features of consumers (e.g. preference for local, brand consciousness)

While there may be some data available through public sources, like Statistics Canada, understanding social factors will often rely on your experience in an area, reaching out and talking to people, and trying to better understand the market.

Some things to consider for this factor:

  1. Do people in the area want this type of business? How will people react to a new business offering the goods and services you plan on selling?
  2. What does the market population look like (e.g. family size, gender and age characteristics, wealth, education level, population growth)? How might this impact your business?
  3. Are there notable trends in your market that you should be aware of (e.g. religion, social classes, diversity, financial literacy, health consciousness, environmental awareness)?
  4. What cultural factors might impact your business (e.g. traditions, ethnicity, language, cultural preferences)?
  5. What are local attitudes towards businesses, co-ops, work, customer service, pricing, and product quality? How might this impact your business?
  6. Are there broader trends that shape local conditions and may impact your business? (e.g. online shopping, social movements, automation)?

Technological Factors

Consider both the existing technology required to run your business, and the new and emerging technologies that could positively or negatively affect your business now or in the future. This is tricky — it’s difficult to predict the future. However, it’s good to think about trends like automation and how they could impact your business/industry.

Technological factors that could impact your business include:

  • the technology you need to run your business (software, equipment, etc)
  • trends that might impact consumer behaviours (e.g. online shopping)
  • automation

Understanding these factors prepares a business for disruptions or advances in the market and identifies potential costs or investment opportunities. Some research on your industry, leading companies, and ongoing developments may be required.

Couple things to keep in mind:

  1. What technologies are necessary to run your business? Is this consistent with your competitors and industry leaders?
  2. Does the area where you operate allow for the technology that you’ll need (e.g. cell coverage, available internet)?
  3. Are there innovations that are impacting your industry (e.g. online shopping, automation)? How much will it cost to use these technologies?
  4. Is your market open to new technologies? How do consumers view technological innovation?

Environmental Factors

Environmental factors include meteorological, geological, and ecological challenges and opportunities the co-op might face..

These include:

  • Weather (drought, floods, storms)
  • Major geological events (earthquake, tsunami, volcano)
  • Ecological (collapse of a fishery)
  • Pandemic (contagious virus in human, livestock, or any other animal population)
  • environmental protection laws
  • waste disposal/energy consumption regulations
  • availability of raw materials and resources
  • climate change/pollution

How might these larger global issues impact your business at a local level. While sometimes hard to identify, thinking about them will help you plan for possible issues or disruptions (e.g. how might increasing changes to weather patterns impact local food supply?).

Here’s a few things to consider:

  1. What environmental regulations, certifications, or licenses may be required to operate your business?
  2. How might global environmental issues (e.g. climate change, resource scarcity) impact your business or market?
  3. Are there any environmental risks associated with your business? Are there any environmental disruptions (e.g. flooding or fires) that may impact your business?
  4. What trends impact consumer behaviour in your industry (e.g. vegan diets)? How might these trends impact your business?
  5. Will your products be viewed as sustainable? What environmental impact will they have?
  6. How might you use trends towards renewable energy and sustainability to your advantage?

Legal Factors

Legal factors include both internal and external laws, policies, and regulations that affect the co-op.

Internal and external legal factors that could impact your business include:

  • bylaws
  • board processes
  • committee terms of references
  • member engagement processes
  • consumer protection laws
  • health and safety standards
  • compliance measures
  • licencing regulations
  • reporting requirements

Doing some research into similar organizations and government requirements will be helpful for this factor. The Co-op Creator offers a number of tools for co-ops creating internal processes and complying with government-required reporting.

A few things to consider:

  1. What documents are necessary to operationalize your co-op? What are industry leaders doing? Where can these documents be located? How should these documents be created? What supports are available to your co-op to create these documents?
  2. What regulations impact your co-op (e.g. labour laws, health and safety)? Are there requirements you must fulfill to remain compliant with these regulations? Is it possible these regulations may change?
  3. What is the cost of complying with these regulations? Does the co-operative have enough information and expertise to comply with regulations? Are supports available?

Did you do a PESTLE analysis? Wondering what to do now?

Use the information from this process to identify next steps and create a to-do list (e.g. are there new costs you should add to your start-up budget? Are there licenses you need to apply for once you incorporate?). Check out our action plan resource to get organized.

Don’t let your research go unnoticed; re-work your analysis so it fits into your business plan. This analysis should help you complete several sections of the business plan (e.g. the information you’ve gathered here can help fill in sections about the marketplace, operations, sales, and marketing). Check out the Biz Plan Creator to get started.

With a clear sense of your internal and external regulatory environment, you are also better prepared to incorporate your co-op. As an incorporated entity, you can open a bank account, access grants and loans, and formalize the processes identified in your analysis. Check out our incorporation tools to start building.

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