PESTLE Analysis for New Zealand and Indonesia

PESTLE Analysis Page 1

September 72009

SUBMITTED TO: MR. SUNDERASAN

SUBMITTED BY Hitesh GoyalNirupan ChakravarthiSainath.V MBA 12 and PGPRM-9

PESTLE Analysis for New Zealand and Indonesia

Introduction

PESTEL is a strategic management tool that provides useful framework to analyze the

environmental pressures on Business. It is an external analysis of the macro-environment in

which a business operates. These factors are beyond the control of an organization or a country

but are important to be aware of while undergoing business strategy. The main objective is to

understand the affect on business or trade policy because of external factors of a country which is

different to others. To complete this report we have chosen New Zealand and Indonesia.

PESTLE Analysis

Political and legal factor: One of the important factors for any country which affect trade policy

is their legal rule, regulation and their government. If the government is stable then there is less

chance of risk because legal rule and regulation would not be change in short time. In New

Zealand, the risk is high because after every three year, the new government applies new rule and

regulation which could be good for an organization. In the same way, the labor force is very

expensive in New Zealand but if we see in different prospective their productivity is more than

Indonesia or their one labor force is equal to five labor force in Indonesia (Table-3).

To start its new business or strategic business unit, every organization needs a vast amount of

money. In New Zealand, due to high lending rate (Table-3), company has to paid more interest

which could be good for the government but it reduce the profit of a company.

Business freedom in New Zealand is 99. 9 % and trade freedom is 84.6 % and in Indonesia business 46.7% and in trade freedom is 76.4%. It tells that New Zealand has better environment to do business and trading. (Index of economic freedom, 2009)

Economy Factor: New Zealand, per capita income is about eight times more than Indonesia

(Table-1) because they have only one sixth population of Indonesia. So, there is less scarcity of

products in New Zealand. In New Zealand, people spend more which help to carry on the

circulation of money all over the country in term of buy capital goods, luxuries products and

necessary products. In the same way their inflation rate and unemployment rate is less than

Indonesia which is a positive sign for GDP growth rate (Table-1). If inflation rate is low then

every commodity and service such as labor, steel, iron, rice, sugar and others products will

available at low price where an organization can make more profit but if we talk about Growth

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PESTLE Analysis for New Zealand and Indonesia

rate Indonesia is growing faster than New Zealand. It invest almost one fourth of its GDP to

develop economy condition. They have huge reserve of foreign currency and their export is also

more than import which shows that Indonesia has natural sources in huge quantity, good

productivity.

So, consider these all points in mind we can say that New Zealand is more suitable for a

company which produces luxurious products such as car, diamond, fast food and Indonesia has

huge market of middle class income people.

Social and Culture factor: Both countries have different culture to each other for example

Indonesia and New Zealand has majority of Muslim and Christian’s religion. So, during festival

like Ramzan, in Indonesia, consumption and the import of meat products decrease rapidly

because people in Indonesia eat only one time in a day and restaurant and shops open 5 PM to 10

pm but New Zealand is entirely different from it such as consumption and imports of foods and

beverage and electronic gadgets increase during festival like Christmas.

If people are educated, it will help to boost the economy growth because they have knowledge

about latest technology which helps them to maximize their output at low cost with effective use

of input. 90.4% of Indonesia’s populations are literate in which male are 94% and female are

86.8% compare to 99% in New Zealand (Table-2). 3.6% of Indonesia GDP is spent on

education compare to 6.2% in New Zealand which is very low. So, there is more opportunity in

education sector for a domestic and international organization in New Zealand to make profit.

In the same way, life expectancy rate is more and mortality rate is low in New Zealand which is

good for country but not consider so good at organization prospective because in New Zealand,

after retirement, without doing any work people get pension, gratuity fund till long time which

affect company profit.

Technology factor:

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PESTLE Analysis for New Zealand and Indonesia

Environmental factor: Indonesia is situated in South-Eastern Asia between the Indian Ocean

and the Pacific Ocean. It has total 1,904,569 sq km area in that land is 1,811,569 sq km and

water is 93,000 sq km (Table-2). It is hot and humid country but New Zealand has totally

different geography location. It is cold country with full of land.

Due to geographic location, several times Indonesia has faced many natural disasters such as in

December 26, 2004; magnitude 9.0 earthquake caused a tremendously powerful tsunami in the

Indian Ocean and about 155000 people died and after this in May 26, 2006, in Feb. 2007,

January 27, 2008. It has faced deforestation and massive forest fires. In 1983, about 3 million

hectares of prime tropical forest worth at least US$10 billion were destroyed.

Consider this thing in mind we can say that no country or organization wants to do business with

such a country where they more risk of loss due to natural disaster but New Zealand has some

disadvantage also like they have less resources of water, so the cost of fishery occupation is high

because they have to import at high cost.

Conclusion: After analyzing PESTLE analysis of these two countries we came to know that both

country has some advantage and disadvantage in term of legal policy, economic factor, social,

geographic and technological factor. Where growth rate, labor force, foreign reserve, water

resources and natural resources such as gas, crude oil are more in Indonesia they have less per

capita income, huge population, high inflation and unemployment rate. New Zealand has better

business environment and their legal rule and regulations are liberal to start a new business. In

Indonesia FDI is restricted in most of the sectors and the business environment is not good when

compare with New Zealand and in Indonesia because of persistent corruption and natural

disaster.

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PESTLE Analysis for New Zealand and Indonesia

References

Karim, S., Lee, M., & Gan, C. (2007, December). Real Effects of Monetary Policy in New Zealand. Australian Economic Review, 40(4), 385-401. Retrieved September 4, 2009, doi:10.1111/j.1467-8462.2007.00478.x

McAloon, J. (2006, March). ‘LONG SLOW BOOM’?: MANUFACTURING IN NEW ZEALAND, 1945–70. Australian Economic History Review, 46(1), 45-69. Retrieved September 4, 2009, doi:10.1111/j.1467-8446.2006.00151.x

Bourgeois, R., & Kusumaningrum, D. (2008, August). WHAT CEREALS WILL INDONESIA STILL IMPORT IN 2020?. Bulletin of Indonesian Economic Studies, 44(2), 289-312. Retrieved September 6, 2009, doi:10.1080/0007491080216903

Commerce. (n.d.). Retrieved 08 29, 2009, from Indonesiacommerce: http://www.indonesiacommerce.com/front/

Economy. (2008). Retrieved 9 3, 2009, from Indonesia-tourism: http://www.indonesia-tourism.com/general/economy.html

Fry, E. (2009, 06 26). New Zealand GDP shrinks for fifth quarter. Retrieved 08 26, 2009, from FT: http://www.ft.com/cms/s/0/dad55046-61f4-11de-9e03-00144feabdc0,dwp_uuid=b2e7f792-b6a6-11db-8bc2-0000779e2340.html?nclick_check=1

Global etiquette. (n.d.). Retrieved 08 28, 2009, from Kwintessential: http://www.kwintessential.co.uk/resources/global-etiquette/new-zealand.html

Index of economic freedown. (2008). Retrieved 08 05, 2009, from heritage: http://www.heritage.org/Index/Country

Indonesia. (n.d.). Retrieved 08 30, 2009, from IISG: http://www.iisg.nl/w3vlindonesia/

The world fact book. (2008). Retrieved 08 29, 2009, from Cia.gov: https://www.cia.gov/library/publications/the-world-factbook/geos/id.html#top

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PESTLE Analysis for New Zealand and Indonesia

Particular Indonesia Rank New

Zealand

Rank

GDP Growth 6.1% 56th 3.1 201th

Per Capita Income $3900 157th $27900 50th

Foreign Exchange Reserve $51.2 billion 25th $11 billion 62th

Import

Export

$116 billion

$139 billion

33rd

32th

$32 billion

$30 billion

63rdx

62th

Inflation 9% 143rd 4% 64th

Investment 23% of GDP 61th 22% of GDP 78th

Unemployment rate 8.4 116th 4.2% 53rd

Table-1

Sources: https://www.cia.gov/library/publications/the-world-factbook/geos/nz.html

Table-2

Particular Indonesia New Zealand

Population 240271522 4213418

Literacy rate 94% 99%

Life expectancy rate 70 years 80 years

Mortality rate 29/1000 birth 4.9/1000 birth

Sources: https://www.cia.gov/library/publications/the-world-factbook/geos/nz.html

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PESTLE Analysis for New Zealand and Indonesia

Table-3

Particular Indonesia New Zealand

Government type Republic Democratic

Election 5 year 3 year

Independence day 17th Aug. 1945 26 Sep. 1907

Capital Jakarta Wellington

Nation Holiday 17th August 6 Feb., 25 April

Labor force 112 million (5th rank) 2 million (114th)

Legal System Base on Roman-Dutch law Based on British law

Lending rate 6.41% 12.83%

Sources: https://www.cia.gov/library/publications/the-world-factbook/geos/nz.html

http://www.indonesia-tourism.com/general/economy.html

http://www.iisg.nl/w3vlindonesia/

http://memory.loc.gov/frd/cs/idtoc.html

http://www.indonesiacommerce.com/front/

http://www.infoplease.com/ipa/A0107634.html?pageno=8

https://www.cia.gov/library/publications/the-world-factbook/geos/id.html#top

http://www.fcgi.or.id/en/aboutgc2.shtml

http://www.asiatradehub.com/indonesia/tax.asp

http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/INDONESIAEXTN/0,,contentMDK:21517996~pagePK:141137~piPK:141127~theSitePK:226309,00.html

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