2 pestel analysis
TRANSCRIPT
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PESTEL ANALYSIS
Prof. Dr Vesselin BLAGOEV
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The Company
Inter-mediaries
Employees
ShareholdersCreditors
Customer
Suppliers
Political
Technological
Economic
Social-Cultural
Competitive
Ecological
MediaLegal
The Marketing Environment
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PESTEL+ (8 factors)
I personally prefer to analyze 8 factors of the marketing environment:
• Political• Economic, demand, market• Social-cultural• Technological• Ecological• Legal• Competitors• Media
STUDY THE MARKET
PESTEL
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Political environment
Functions of the State
The State performs some very important functions with major implications for business:
• establishes the legal framework
• regulator and deregulator
• public expenditure and taxation
• international negotiator
• internal and external security
• arbitrator/judge
• other
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Importance of the Political Environment
For example, the legislation/politicians can influence:• choice of production technology/techniques• product characteristics• packaging and labelling• advertising and sales promotion • terms and conditions of trade • taxation• the way competition is conducted • ownership of assets• financial reporting• the treatment of employees
Importance of the Political Environment
• Are there expected changes in the policies which affect our business, i.e. more or less bureaucracy?
• Are there expected changes in the political system that might affect our business?
• Are there political ideas in circulation which may affect our business, i.e. taxation, etc.?
• Are the politicians in power, and opposition leaders, who express views against or affecting negatively our business?
• Do politicians in this country express views which might change the import/export regulations, and in which way?
• Other
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Importance of the Political Environment
• Is the legal system dependent or influenced by the politicians?
• Pressure groups, lobbing• Split of power between the administrative
layers and bodies • Employment, salaries, exchange of
personnel?• Corruption – level and does it influence our
business?• Other
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https://www.theguardian.com/politics/2018/sep/26/no-deal-brexit-will-be-catastrophic-say-british-farmers-national-farmers-union-eu
The National Farmers Union has warned of “catastrophic” consequences for the industry if there is no Brexit deal, after being warned by the EU that the UK faces a six-month wait to be certified as an approved third-country supplier.This would be a major setback to the food and drink sector, where exports to the EU are worth £13.2bn a year.
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“What we are talking about in effect is a six-month trade embargo until such time we can get the product in, from that point we will face the European’s external tariff wall meaning we will be priced out of the market,” said the NFU’s director general, Terry Jones.It has been told that 6,000 meat processing plants that export to the EU will have to undergo individual audits by British authorities.These will then be checked by EU officials and then put to a standing veterinary committee for approval, a process that the NFU has calculated will take six months “at a conservative reading”.
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https://www.theguardian.com/politics/2018/sep/26/no-deal-brexit-will-be-catastrophic-say-british-farmers-national-farmers-union-eu
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What about the effect of Covid-19?
Expected changes affecting the business:
Lockdowns Masks Vaccination Travel restrictions Quarantine Digitalisation of the sales
Robotisation Disappearing job positions Unconditional basic income Restrictions on work, e.g. vaccination Other
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Economic Environment
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Economic environmentThe economic factors and forces that affect the production and availability of goods and services and the willingness and ability of buyers to purchase them, including the economic system, consumer income, economic growth and stability, inflation, and foreign exchange rates
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Economic and Financial Environment
• Inflation• Interest rates•Exchange rates•Credit availability•Financial stability•Unconditional basic income
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Economic environmentEconomic growth
Increase in a nation’s Gross National Product (GNP): the value of all goods and services that a nation produces for all (world) markets
RecessionA period of low economic growth when unemployment levels rise and incomes and purchasing power declines
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THREE MAJOR TRENDSIN THE WORLD ECONOMY
1. CHINA OVERTAKES THE U.S.:The U.S. Has Been the World’s Leading Economy for a Century
2. WORLD ECONOMIC GROWTH ACCELERATES:
Mainly Due to China and India
3. THE NEW WORLD ORDER IN 2020:China, U.S., India, Japan, Russia, Germany, Brazil
Source: Jorgenson & Vu (2012)
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Purchasing power parity (PPP)
• Purchasing power parity (PPP) is a
measurement of prices in different countries
that uses the prices of specific goods to
compare the absolute purchasing power of
the countries' currencies.
IMF: Largest economies by PPP of GDP in 2020
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THE SOURCES OF ECONOMIC GROWTH:
Capital Input, Labor Input, and Productivity
CAPITAL INPUT GROWTH:Information and Non-Information Technology
Economic Growth
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Macroeconomic policy objectives
•A stable and satisfactory rate of economic growth
•A high and stable level of employment & low unemployment
•A low and stable rate of inflation
Economic environment
• GDP growth rate
• Sales
• Industry orders
• Unemployment
• Inflation
• Other
We are interested in data and trends related to our business, i.e. demographics, income structure and trends, orders, etc.
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IMF: Real GDP annual % change
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• https://www.statista.com/statistics/722971/g20‐public‐debt‐to‐gdp‐ratio/05/02/2021 26
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China with growth in 2020
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The US Middle class
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Source:Pew Research Center(2015)
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Change of Income 1967-2013
McKinsey (2014)29
Household income 1967‐2012
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Most Competitive Labour Cost in CEE
ROM
Indicates personal income tax rates
16% or 20.3%
16%
10%
18% or 32%
15%
19%
16% ‐ 41%
12% ‐ 40%
2,003
945
1,136
1,261
1,066
969
580
491BUL
HUN
SVK
CZE
POL
CRO
SLO
Attractive Tax and Labour Environment
Source: CBM EAD, (2012, p 4),
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Economic environmentItochu Exits U.S. Shale Selling Biggest Energy Purchase for $1 June 23, 2015 • http://www.bloomberg.com/news/articles/2015-06-23/itochu-
exits-u-s-shale-selling-biggest-energy-purchase-for-1 Itochu Corp. ended its $1 billion foray into U.S. shale by selling its 25 percent stake in Samson Resources Corp. back to Samson for $1.The sale reverses the Japanese trading company’s biggest purchase of an energy asset when it was made in 2011. The decision to exit was made because of the state of operations at Samson and the outlook for gas prices in North America, the Tokyo-based company said in an e-mailed response to questions.
US Department of CommerceBureau of Economic Analysishttp://www.bea.gov/newsreleases/glance.htm
• Current Numbers:
• 2nd quarter 2018: 4.2 percent (27 Sept 2018)
• 1st quarter 2018: 2.2 percent
• 2nd quarter 2016: 1.4 percent (6 Oct 2016)
• 1st quarter 2016: 0.8 percent
• Next release: October 27, 2018 •
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Social and Cultural
Environment
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Socio-cultural Environment Language
Religion
Culture/Customs
Demographic trends
Health/Education
Urbanisation
Labour force availability and skills
Wage levels/Working hours
Unionisation
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Cultural and Social Environment
The benefits, attitudes, values, and social institutions found in the society and culture in which marketing activities take place
DemographicsObjective, measurable population characteristics such as
size, geographic location, age, gender, race, income, and education
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General assumptions about the effect of culture
• Economies that did not suffer a direct financial crisis ‐ there were no bankruptcies of financial institutions, no high budget deficit, etc. ‐ would normally be expected to suffer weaker effects of the economic crisis.
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Hypothesis
• We hypothesize that in the period of economic crisis the development of retail sales is significantly influenced by cultural factors just as economic development is contingent, at least partly, on cultural values
(Minkov and Blagoev, 2009; Blagoev, 1987)
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Changes of Retail Sales as effect of the financial crisis in some EU countries in October 2008
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1 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09
EA16 99,3 99 98,7 98,3 97,9 97,8 98 97,5EU27 99,5 99,1 98,9 99 98 98,1 98,5 97,9Ireland 99,7Belgium 98,4UK 100Bulgaria 99,7Greece 103Spain 98Roman 92,8
Signifficant financial problems
No financial crisis
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Changes in retail sales in the EUEurostat 65/May 2009 (September 2008 =100%)
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1 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09
EA16 99,3 99 98,7 98,3 97,9 97,8 98 97,5EU27 99,5 99,1 98,9 99 98 98,1 98,5 97,9Ireland 99,7 98,7 97,6 96,6 96,8 95 94,8 92,4Belgium 98,4 97,5 98,8 100 100 100,3 99,6 99,7UK 100 100 101 102 99,7 100,9 100,9 100,2Bulgaria 99,7 98,8 97,9 97,7 96 95 94,1 93Greece 103 98,9 95,7 94,7 92,1 89,3 90,2 89,3Spain 98 98,2 96,9 97,2 96,4 95,7 95,6 95,2Romania 92,8 93,8 84,2 93,7 89,6 89,1 88,2 88,5
Hypothesis
•One such factor could be the individualism versus collectivism dimension (Hofstede, 2001).
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Hofstede's individualism indexes for 16 countries
Country IND Country INDAustria 55 Ireland 70Belgium 75 Italy 76Bulgaria 30 Netherlands 80Denmark 74 Portugal 27Finland 63 Romania 30France 71 Spain 51Germany 67 Sweden 71Greece 35 United Kingdom 89
47Source: Hofstede (2001) Culture's consequences, Sage
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Correlation coefficient
The correlation between the average change in retail sales and the individualism indexes across 16 countries is
.60 (p = .015)
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High IND countries
• The individualist countries experienced a lower drop in retail sales, regardless of whether they registered big losses from the financial crisis or not
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Low IND countries
• The collectivist countries show higher negative effects (a steeper drop in retail trade) even if they did not have any financial crisis
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Discussion• Consumers in individualist societies are less likely to be affected by the word of mouth
• Consumers' perceptions in collectivist societies seems to be strongly affected by the opinion of friends and relatives and retail sales can be disproportionately negative
Social environment
We are interested in data and trends related to our business, i.e. demographics, education, etnic groups, national and sub-groups culture, income structure and trends, orders, etc.
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US Age Pyramid Becomes a Rectangle
Pew Research Center
(At 2060)”We'll have almost as many Americans over age 85 as under age 5. This is the result of longer life spans and lower birthrates. It’s uncharted territory, not just for us, but for all of humanity.” (PRC, 2016)
http://www.pewresearch.org/next-america/#Two-Dramas-in-Slow-Motion
CULTURAL FACTORS
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The new cultural environment
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Other norms accepted as a result of globalization
Additionally taught and
accepted religious and professional values and
norms
National culture, values and norms
Influence of new technologies (Internet, mobile coms)
Blagoev (2014)
New cultural environment
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CULTURAL MAPS of
THE WORLD
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Cultural map of the worldMinkov, Blagoev & Hofstede (2013)
49 countries, clustered bycultural factors
(№198-208 от WVS)
Journal of Cross-Cultural Psychology (2013) 44: 1094-1106
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The BrandsFundamental problem of the new marketing: What type of brand should we develop to have success in the specific cultural environment in which we sell?When we talk about type of brand, we mean brand identity, which we develop and position in customers’ minds with our marketing mix, and with all our marketing instruments
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The Brand
120
60
0
050
100
UAI+
UAI‐
FEMININE MASCULINE
Style Design Fashion
Security Functionality
Technology Innovation
Power Recognition
Big
Portugal
France Spain
Greece
Belgium
Italy
AustriaGermany
Swiss Finland
NederlandNorway
Sweden
Denmark
PolandUSA
UK
Ireland
RussiaяBulgaria
Japan
Singapore
China
Renault Citroen Peugeot
Audi, VW, BMW Alfa Romeo
VolvoSUV
Unc
erta
inty
avo
idan
ce
inde
x
Major motives when buying a car
For 22 of all 23 countries, we find out, that Hofstede cultural dimensions’ index coincide with our observations about the prevailing customers’ preferences.
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De Mooij (2010): the image, as a brand characteristic, is more important in cultures with Hofstede’s high power distance index, while the trust is more important brand characteristic in cultures with high uncertainty avoidance.
De Mooij (2010)
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The Brand
Technological environment
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Product innovation
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Internet users per 100 people1996‐2014
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Technological environment
The forces which contribute to improving the ways in which humans and machines accomplish tasks
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Technological Environment
• Artificial intelligence (AI)
• Robotisation
• Digitalisation
• Science and technology infrastructure
• Road network/Public transport
• Telephony/Internet capacity
• Air transport
• Ports
• Power supply and reliability
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Competitive Environment
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Competitive Forces• The size of the market
• Growth rate of the market
• No. and size of competitors
• Marketing strategies
• Production capacity
• Cost structure
• Entry
• Substitutes
• Power of buyers and sellers
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Competitive environment
•The competitive environment affects the number and types of competitors the marketing manager (the company) must face, and how they may behave. The marketing managers can not control these factors, but they can choose strategies that avoid head-on competition.
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Competitive environmentPerfect (pure) competitionA competitive environment in which there is a large number of both buyers and sellers
Monopolistic competitionA competitive environment in which a reasonably large number of sellers compete on the basis of differentiated products
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Competitive environment
MonopolyOnly 1 seller in a market
OligopolyCompetitive environment with many buyers and a few sellers, each having a substantial market share and influence on prices
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Competitors’ analysis
•Marketing managers turn to analysis of competitors– an organized approach for evaluating the strengths and weaknesses of current or potential competitor’s strategies
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A Framework for Competitors’ Analysis
Competitor Firm’s Current or Planned Strategy
Competitor’s 1st Strength & Weakness
Competitor’s 2nd Strength & Weakness
Target Market
Product
Place
Promotion
Price
Comp. Barriers
Likely Response(s) Source: Hooley, Piercy and Nicoulaud (2012, p.119)
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Competitive barriers
•A condition that makes it difficult or even impossible for a firm to compete in a market
Example: NutraSweet has a patent (did it expire?)
Environmental factors
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Importance of the Environmental conditions
The VW case from 2015
• Regulations
• Policies., i.e. electric power stations
• Administrative issues
• Legal
• Public influence/s, i.e. Green movement, etc.
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Legal Environment
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Importance of the Legal Environment
The legal environment can influence:• choice of production techniques• product characteristics• packaging and labelling• advertising and sales promotion • terms and conditions of trade • the way competition is conducted • ownership of assets• financial reporting• the treatment of employees
Different Legal SystemsFour major systems in the world
Civil Law:• the most widespread
• primary source – legislation/legal codes
Common Law:• operates in e.g.UK, US, Canada, Australia, India
• sources – case law; statutesSharia Law:
• operates in Muslim countries
• source – the Koran Customary Law:
• important role in many countries e.g. in Africa
• source – life experiences, religious or philosophical principles
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Legal Systems across the World
Costs of Contract DisputesLegal Costs as % of Claim
Source: World Bank, Doing Business
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Resolving a Contract DisputeNo. of Days to Resolve the Dispute
Source: World Bank, Doing Business
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Market Potential
Market Size
Population
GDP per head
Disposable income
Distribution of Income
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Market Potential‐Market growth
‐ Population growth‐ Growth in GDP
‐Quality of demand‐ Socio‐economic profile
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Stabilize the economy•Stimulating growth of GDP
•Stimulating employment, reducing unemployment
•Keeping inflation under control•Maintaining the public spending
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Ecologic Environment
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Ecological Environment
Resource depletion
Global warming/climate change
Pollution
Water supply
Natural disasters
Sustainable development
