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PESTEL analysis is a strategic tool that companies use to identify and evaluate Political, Economic, Social, Technological, Environmental and Legal factors in their external environment. It is especially useful for understanding and anticipating external conditions that could affect an organization’s performance and assisting in strategic decision making.

Suppose an international manufacturing company is considering setting up a plant in a new country. When conducting a PESTEL analysis, you might consider political issues such as the stability of local government, economic factors such as growth trends and inflation, social factors such as demographics and local culture, technological factors such as access to the latest manufacturing technology, environmental factors such as sustainability regulations, and legal factors such as labor laws and trade regulations. By evaluating all of these factors, the company can make an informed decision about whether it is viable and profitable to establish an operation in that country.