The Importance of PESTEL Analysis for Environmental Scanning Process

Abstract

Strategy and tactic are two inseparable dynamics for organization which can be the same as a chess game. Organizations' theoretical infinite life cycle needs well-established strategic management. To create competitive advantage among competitors, top management of organizations must scan environmental factors very carefully. Without environmental scanning process organization can be viewed as blind and deaf in an ecosystem which definitely ends with shutdown of activity. Environmental scanning has two parts; internal environmental analysis and external analysis which aim to create early signals for organization. Internal analysis deals with micro-based factors which can be controlled by organization whereas external analysis universe is larger and wider when compared to internal analysis. External analysis covers all the factors such as political, economic, social, technological, environmental, and legal, which an organization cannot control and cannot affect. This type of analysis can be named as top-down approach analysis aims to create competitive advantage.