pest factors affecting ib
TRANSCRIPT
PEST Factors Affecting International Business
Presented by:
Yogesh Godhwani 33
Balaji Gopal 08
Namita Kulkarni 47
Prashant Mehta
Gaurav Bhatia 16
Lakshmi Suresh 51
Agenda
What is PEST analysis
Importance In International Business
Political and Legal environment
Economic environment
Social Environment environment
Technological environment
Case Study McDonald's
Conclusion
Bibliography
PEST Analysis
Acronym for– Political– Economical– Social– Technological factors
Concerned with External Macro Environment
Answers These Questions
• How easy will it be to move from purely domestic to international International business?
• Would the business benefit from foreign investment?• Which markets to enter?• What is the nature of competition?• Product/service range to introduce?• What are the cultural norms for doing business? • What kind of international and domestic laws will your business
encounter?• What is the nature of politics in the market.?• What is the level of new industrial growth?
Importance in International Business
Framework for reviewing a NEW ENVIRONMENT
Helps to • break free of unconscious assumptions • effectively adapt to the realities of the new environment
Thus aiding effective• business and strategic planning, • marketing planning, • business and product development etc.
Political & LegalEnvironment
Political Factors Affecting International Business
• Political Systems: Party Systems • Democracy • High in Political rights & civic liberties
Eg: India, U.S.A, Australia etc• Totalitarianism
Eg: China, Vietnam, North Korea etc• Politics & Economics Mix
Eg: Thomson drops bid for LTV Division
Political Risks & Instability
• Corruption• Social Unrest
Eg: Hindu-Muslim Conflict in India• Policies of host Government
Eg: Coca-Cola shown the door in 1977.
Eg: Instability in Pakistan poses risks• Operation Risk
Minimization of Risks
• Stimulation of the local Economy
Eg: IBM in FRANCE• Employment of Nationals
Eg: Dell & IBM in India & Gulf.• Sharing ownership
Eg: Ford reduces share to 40% in Africa.• Being Civic Minded:• Eg: Heinz funds nutrition studies in China.
Legal Factors Affecting International Business
• Common Law: Eg U.S.A, U.K etc• Civil Law: Eg France, Germany etc• Theocratic Law: Eg Muslim Countries• Product Safety & Liability• Labour Laws:• Eg: Nike in Vietnam
( Failure of implementation of labour laws )
Economic Environment
Economic Factors Affecting International Business
Home Country
Host Country
Global Level
Home Country
Conducive• Economic policies• Trade and commercial policies• Promotional and regulatory measure
Host Country
Major Criteria• Market Size• GDP• Industrialisation• Purchasing Power• Foreign Exchange• Income Levels• Economic Diversity
Global Level
• International Organisations• Trade Agreements Between Countries
NAFTA ASEANEU
Social Environment
Social Factors Affecting International Business
Social factors include the demographic and cultural aspects of international business.•Demographics
•Class structure
•Education
•Culture
• Emphasis on safety
• Entrepreneurial spirit
• Attitude
• Leisure interests
Example: Motor Car Manufacturers
SOCIAL FACTORS• Brand image • Health aspect• Energy consumption
Technological Environment
Technological Factors Affecting International Business
• Recent technological developments
• Technology impact on product offering
• Impact on cost structure
• Impact on value chain
Technological Factors Affect…
• Demand
• Production process
Evaluating Technological changes to increase growth and to maintain survival
Drambuie Liquor Company
• Better Manufacturing Facility• Update to better Technology• Command The market based on Technological
planning• Hence Comes out with better product at cheaper cost
Case Study: PEST Analysis of McDonalds.
Company Background
• It has been synonymous to what is widely-accepted the fast-food concept.
• Operates over 31000 stores all over the world • One of the first to perfect the concept of fast service
in the food industry in its early days of operations in 1955.
Political factors
• government control on marketing of fast food restaurant• control on license and Business Regulations for franchising.
Economic Factors
• Dealing with international sourcing for its material• Compliance with the tax structures that vary with the
country.• Economic condition and growth of the country is an
important indicator of demand.
• For different countries cultural sensitivity should be upheld.
For example• in India people (Hindu) do not take beef, Muslim countries do
not take pork, • Finnish like fish type of food menu, • Chinese like to associate food with something good (for
example prosperity)
Social/ Cultural Factors
Technological FactorsIntegrated technology in the management of its inventory system
and value chain.
Bibliography
• International Business – R. Chandran.• Ebesco.com, IB by Subbarao• http://ivythesis.typepad.com/term_paper_topics/2010/10/pestl
e-analysis-to-explain-companys-international-strategy-for-mcdonalds-.html
• http://www.marketingteacher.com/lesson-store/lesson-international-marketing-environment.html
• http://ezinearticles.com/?Key-Principles-of-PEST-Analysis&id=5791508
• http://ezinearticles.com/?Key-Principles-of-PEST-Analysis&id=5791508