Before diving into the topic of pestle analysis in the automobile industry, we need to understand what pestle means and why we are talking about this. How is it related to the Automobile industry? Why should everyone be aware of this? If you are looking for the answers to the above questions then you are at the right place. In this blog, we are going to discuss and try to understand the concept of pestle analysis. The automobile industry or automotive industry is one of the world’s largest industries by revenue.
PEST analysis stands for the environmental influences on a business. It is useful to identify the external environment factors in which a business operates. Pest analysis refers to political, economic, social, technological, environmental, and legal issues that could affect the strategic development of a business.
Before applying any kind of marketing strategy, it is necessary to apply situational analysis, and Pestel is a part of it. Industries that successfully monitor and analyze the changes in the environment can make plans and strategies in advance or gain a competitive image. Depending on the organization, the Pestel can be reduced to PEST or some areas like ethics can also be added.
The PEST tool is very useful to analyze or to understand the reduction and growth of a certain market including the potential of the business.
It is an essential strategy analysis tool that considers external factors or the environment in which they operate. This is particularly important for big firms or organizations that can become more inward-looking. The PESTEL tool can provide you with a positive perspective by making out the threats and opportunities in advance hence giving firm time to react. It is particularly useful when synchronized with Porter’s 5 Forces analysis which is also an important tool for understanding the forces that shape the competition within the industry.
Pestel analysis is more often criticized by people based on analysis that has been done poorly. This analysis should be done after every six months as the surroundings are changing very rapidly. Hire professionals or nominate people who can keep an eye on the pestle factors. The number of steps that are adopted while doing analysis are brainstorming, consulting, researching, evaluating, and repeating the process until it has been narrowed down to insightful points in every step.
PESTEL analysis assesses the political, economic, social, technological, environmental, and legal factors that impact a business or industry. In the automobile sector, understanding these factors is crucial for strategic planning and decision-making.
Political factors encompass laws, regulations, and security assessments. For instance, government regulations on vehicle emissions standards (like EU standards) and taxation policies can significantly impact automobile manufacturers.
Economic factors include exchange rates, interest rates, raw material costs, and employment rates. These factors influence consumer purchasing power and demand for automobiles, ultimately affecting industry profitability.
Social factors involve changes in demographics, lifestyle trends, cultural preferences, and buying patterns. Understanding these factors helps automakers tailor their products to meet consumer preferences and market demands.
Effective PESTEL analysis involves steps such as brainstorming, consulting stakeholders, thorough research, evaluation, and iteration. Hiring professionals or designating individuals to oversee the analysis process can enhance its accuracy and usefulness.