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A macro environmental analysis technique, PESTEL analyses the impact that political, economic,
socio-cultural, technological, environmental and legal factors may have on an industrys profitability
potential (Johnson, Scholes & Whittington, 2005). Within each major PESTEL heading, there are a
variety of sub-factors to be considered. PESTEL analysis can be used by non-profit organizations as
part of the strategic planning process. It can also be used in conjunction with other management
tools such as Porters Five Forces Analysis and market segmentation and marketing and
management capabilities analysis.
PESTEL has been designed to review and analyse the impacts on profitability however it can be used
by non-profit organizations to identify areas where funding or operations may be threatened.
Analysing the macro-environment of the non-profit organization is important to ensure that the
organization can meet future challenges.
The Impact of Political Factors on Non Profit Organizations
When considering the impact that political factors may have on future industry profitability,
government stability, taxation policies, foreign trade regulations and social welfare policies may all
contribute to an industrys profit potential (Johnson, Scholes & Whittington, 2005).
For non-profit organizations that provide community development services in developing countries,
government stability may be a key issue to the ongoing provision of future services. Taxation policies
may have either a positive or negative impact on the likelihood of donors continuing to donate and
on the organization obtaining new donors.
framework (Johnson, Scholes & Whittington, 2005). For non-profit organizations, an environmental
audit can be easily undertaken in-house, which may highlight areas where performance can be
improved and costs decreased.
For example, if an organization provides care services to people in their own homes, it may be
prudent to investigate the costs of transferring a fleet of cars to hybrid cars such as the Toyota
Prius. While the fleet transfer costs may be significant, the potential for savings in carbon taxes (if
applicable) and fuel may ameliorate the costs of transfer over a short to mid term period.
Legal Framework Can Impact Profitability
The legal framework in which an industry operates can impact on its profitability through
competition laws, employment laws, health and safety requirements and product safety (Johnson,
Scholes & Whittington, 2005). In Australia, the proposed model occupational health and safety laws
(due to become mandatory by 2011) may require non-profit organizations to make changes to
occupational health and safety practices (Safework Australia, n.d.).
The PESTEL analysis model was designed to identify the profitability of an organization or industry
however it can be used by non-profit organizations to assist the strategic planning process. PESTEL
reviews the political, economic, socio-cultural, technological, environmental and legal factors that
may affect a non-profit organization in the future. As with any form of future focused analysis, a level
of educated guessing is required however using the PESTEL analysis model enables a non-profit
organization to consider what the future might hold and how it might meet the challenges faced.
References
Johnson, G., Scholes, K. and Whittington, R. (2005). Exploring corporate strategy (7th edition),
England: Pearson Education Limited
Safework Australia (n.d.). Frequently asked questions.
http://suite101.com/article/using-pestel-analysis-in-strategic-planning-for-non-profits-a322718