PESTEL of international markets

Week 5

Johanna Fahy

Exhibit 2.1

Layers of the business environment

Why do firms need to pay attention to the external environment?

changing uncertainty

source of the THREATS to futuresource of OPPORTUNITIES for growth

Why is it important?

PESTEL

PESTEL Political Factors. The political arena has a huge influence upon the

regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:

1.How stable is the political environment? 2.Will government policy influence laws that regulate or

tax your business? 3.What is the government's position on marketing

ethics? 4. What is the government's policy on the economy? 5. Does the government have a view on culture and

religion? 6. Is the government involved in trading agreements

such as EU or others?

Economic Factors. Marketers need to consider the state of a trading

economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:

1. Interest rates. 2. The level of inflation 3. Employment level per capita. 4. Long-term prospects for the economy 5. Gross Domestic Product (GDP) per capita 6. Consumer Confidence, and so on (in which

field they spend more?

Sociocultural Factors. The social and cultural influences on business vary from

country to country. It is very important that such factors are considered. Factors include:

1.What is the dominant religion? 2.What are attitudes to foreign products and services?

(Cuba) 3.Does language impact upon the diffusion of products

onto markets? 4.How much time do consumers have for leisure? 5.What are the roles of men and women within society? 6.How long are the population living? Are the older

generations wealthy? (Germany in EU) 7.Do the population have a strong/weak opinion on

green issues?

VALUES TASTES / PREFERENCESLEVELS OF EDUCATION

Technological Factors. Technology is vital for competitive advantage, and is a

major driver of globalization. Consider the following points:

1. Does technology allow for products and services to be made more cheaply and to a better standard of quality?

2.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?

3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?

4.Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

5. Government expenditure on research? (on R&D)

An International PEST Analysis. PEST is a well-known and widely applied tool when

considering the external nature of the domestic market. However, it is equally as useful when applied to the nature of the international business environment.

International PEST Analysis would consider: How easy will it be to move from purely domestic to international

marketing?

Would your business benefit from inward foreign investment?

What is the nature of competition within each individual market, and how will companies from other nations compete when you meet with them head-to-head in unfamiliar countries?

Many other factors that are specific to your organization or industry.

Political Is there any historical relationship between countries that

would benefit or hinder international business and your marketing efforts?

What is the influence of communities or unions for trading? E.g. The European Union and its authority over European laws and regulation.

What kind of international and domestic laws will your business encounter?

What is the nature of politics in the country that you are targeting, and what is their view on encouraging foreign competition from overseas?

http://www.reuters.com/article/idUSTRE6A25P220101103?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+reuters/oddlyEnoughNews+(News+/+US+/+Oddly+Enough)&utm_content=Google+International

Economic What is the level of new industrial growth? E.g. China is

experiencing terrific industrial growth. What is the impact of currency fluctuations on exchange

rates, and do your home market and your new international market - share a common currency? E.g. Polish companies trading in Eire will use Euros.

There are of course the usual economic indicators that one needs to be aware of such as inflation, Gross Domestic Product (GDP), levels of employment, national income, the predisposition of consumers to spend savings or to use credit, as well as many others.

Not just a list of influencesNeed to understand key drivers of

changeDrivers of change have differential

impact on industries, markets, and organisations

Focus is on future impact of environmental factors

Combined effect of some of the factors likely to be most important

Key Aspects of PESTEL Analysis

Socio-cultural Culture, religion and society are of huge importance. What are the cultural norms for doing business? E.g. is

there a form of barter? Will cultural norms impact upon your ability to trade

overseas? E.g. Putonghua is very difficult for many Western people to learn.

Technology Do copyright, intellectual property laws or patents protect

technology in other countries? E.g. China and Jordan do not always respect international patents.

Does your technology conform to local laws? E.g. electrical items that run on non-domestic currents could be dangerous.

Are technologies at different stages in the Product Life Cycle (PLC) in various countries? E.g. versions/releases of software or medical technologies

Tariff and Non-Tariff Barriers.

There are a number of fences that companies need to plan for when initialising international business. Tariff and non-tariff barriers are still very common, even today.

Tariff barriers are charges imposed upon imports - so they are a form of import taxation. This could mean that your margins are reduced so much that trading overseas becomes too unprofitable. However they are normally transparent and you can plan to take them into account.

Non-tariff barriers are trickier to spot. Governments sometimes act in favour of their own domestic industries rather than allow competition from overseas. Bureaucracy is a hurdle often encountered by exporting companies - it takes many forms and includes unnecessary hold-ups and red tape. Quotas are another form of non-tariff barrier i.e. restricting the quantity of a product that can be imported into a particular country.

PLEASE SEE ALL THE CASE STUDIES FOR INTERNATIONAL PEST ANALYSES

PLEASE CONDUCT A PEST ANALYSIS FOR A COUNTRY / COMPANY OF YOUR CHOICE