To evaluate the external environment in which a business operates. The acronym PESTEL stands for Political, Economic, Social, Technological, Environmental, and Legal factors. The aim is to understand the ecosystem situation for the innovation we would like to assess.

This tool is particularly useful for understanding the broader landscape of opportunities and threats that could impact industry or organization. The steps of conducting a PESTEL analysis are: 

1. Understanding External Influences: The primary objective of a PESTEL analysis is to identify and understand the external factors that could impact on an organization’s performance. These factors are generally beyond the direct control of the company but are crucial for strategic planning. 

2. Strategic Planning: By evaluating external factors, organizations can develop strategies that exploit opportunities and mitigate potential threats. This strategic alignment with the external environment helps businesses to remain competitive and adaptive. 

3. Risk Management: PESTEL analysis helps in identifying potential risks associated with the external environment. Understanding these risks enables organizations to develop contingency plans and risk management strategies. 

4. Opportunity Identification: Through a detailed analysis of external factors, businesses can identify new opportunities for growth and expansion. For example, technological advances might open new product development avenues, or economic trends might suggest new market potentials. 

5. Market Entry Analysis: When considering entering new markets, PESTEL analysis provides a framework to assess the suitability of different geographical regions or new sectors. It helps in understanding the political stability, economic conditions, and legal frameworks of new markets. 

6. Decision Making: The insights gained from a PESTEL analysis assist decision-makers in making informed choices about a wide range of strategic issues. This can include decisions on investment, market development, and operational strategies. 

7. Long-term Planning: It facilitates long-term planning by providing a clearer picture of the future business environment. Organizations can anticipate changes and adapt their long-term strategies accordingly. 

Overall, PESTEL analysis is a strategic tool used to ensure that the company’s performance aligns well with the external conditions expected to influence its goals and operations. It’s especially useful in dynamic environments where external factors change rapidly and unpredictably. 

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