CFI Commercial Banking & Credit Analyst (CBCA) Core Course Assessments Practice Test

PESTEL Analysis is a strategic tool used for evaluating the external environment in which a business operates, encompassing a range of macro-environmental factors. These factors include Political, Economic, Social, Technological, Environmental, and Legal influences that can impact an organization’s performance and strategic decisions.

By focusing on the external economy level, PESTEL Analysis helps businesses understand the broader context in which they function. This includes assessing how various external factors can drive opportunities or pose threats. It allows for a comprehensive analysis of the external landscape without delving into the specifics of the internal workings of the company itself, which would be the focus of company-level analysis, or the particulars of financial management at the financial analysis level.

Identifying PESTEL Analysis at the external economy level stresses the importance of understanding the environmental factors outside the immediate control of the business. This understanding is crucial for long-term strategic planning and adapting to changes that may arise in the broader economic and social environment.