The PESTLE formula

Jul 16, 2024

Written By Raphael Jucobin

When embarking on a career in a legal profession, it’s important to be able to demonstrate commercial awareness. By showing an understanding of the business implications and context of a given sector you are working with, you’re able to work more effectively with a range of different clients.

Preparing and being able to show this at the interview stage with a law firm will allow you to stand out as a candidate and show that you have a thorough understanding of their practice areas beyond the theory-based knowledge you’ve gained over the course of your training. When conducting legal analysis and research, the PESTLE formula can help to identify the influence of external factors on a business.

The six factors that make up the formula are: Political, Economic, Social, Technological, Legal and Environmental. Overall, this is a good structure for you to centre your commercial awareness research around.

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Political

Here, you’ll be expected to show knowledge of recent political developments and the ways in which they can affect the industry. This can range from new policies at a local level to larger-scale government schemes. A notable current example of this would be looking at how changes as well as the uncertainty brought about by Brexit will affect a company.

A political analysis would also include a consideration of taxation policies and any political decisions leading to changes in business regulations. In some cases, you might also take into account government stability and levels of corruption in your analysis.

Economic

This factor looks to deduce the impact of fluctuations in the performance of the economy on the business. This analysis would take into account changes in interest rates, inflation as well as supply and demand patterns. You’ll also need to consider the impact of past recessions and exchange rates, if applicable.

Businesses will particularly value an analysis of economic trends as this enables them to gain a competitive edge in the market and identify opportunities for growth.

Social

A social analysis of an industry might look into market trends and how these are affected by societal attitudes and shifts in values - this can include a growing ecological awareness and general public opinion about certain products or services. On a holistic scale, this would also take into account social differences based on culture, religion and demographics and how these could influence buying habits.

Technological

Here, you can chart the latest technological advances and the effect that innovation might have on a given field. It’s important to keep an eye on general global trends that might apply to the sector, as well as looking at legislation concerning them, such as patents and intellectual property laws.

Legal

This element will be the most relevant to you as you enter a legal profession, as you analyse the ways in which different laws and regulations affect the sector you’re looking at. This is a particularly time-sensitive aspect to analyse, as you’ll be required to look at when certain legislation comes into force and how this can affect future business.

Environmental

It’s important to cover the effects a company can have on its surrounding environment, as well as how environmental factors can in turn modify it. This will mean having an awareness of the specificities of the local environment, such as the climate and location.

This is especially relevant as climate change becomes a growing issue and businesses are expected to play an increasing role in adapting their practices, for instance in production methods. As new environmental laws come into force in order to reduce pollution, it’s important to be aware of how a sector is expected to anticipate and adapt to these changes.

If you’re interested in finding out more about how you can improve your commercial awareness, you can head on over to the dedicated Commercial Awareness section of our website!

Commercial Awareness