A Report On PEST Factor On International Business Operations

Submitted to: Dr. Pravin Patil

Submitted by Umang Bhartiya 10BSP0961

What is PESTEL factor:

Political factors: These refer to government policy such as the degree of intervention in the economy. What goods and services does a government want to provide? To what extent does it believe in subsidizing firms? What are its priorities in terms of business support? Political decisions can impact on many vital areas for business such as the education of the workforce, the health of the nation and the quality of the infrastructure of the economy such as the road and rail system. Economic factors: Economic environment refers to the aggregate of the nature of economic system of the country, the structural anatomy of the economy to economic policies of the government the organisation of the capital market, the nature of factor endowment, business cycles, the socio-economic infrastructure etc. These include interest rates, taxation changes, economic growth, inflation and exchange rates. For example:
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A strong currency may make exporting more difficult because it may raise the price in terms of foreign currency Inflation may provoke higher wage demands from employees and raise costs Higher national income growth may boost demand for a firm's products

Social factors: Sociological factors such as costs structure, customs and conventions, cultural heritage, view toward wealth and income and scientific methods, respect for seniority, mobility of labour etc. have far-reaching impact on the business. Technological factors: New technologies create new products and new processes. MP3 players, computer games, online gambling and high definition TVs are all new markets created by technological advances. Online shopping, bar coding and computer aided design are all improvements to the way we do business as a result of better technology. Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organisations providing the products. Environmental factors: Environmental factors include the weather and climate change. Changes in temperature can impact on many industries including farming, tourism and insurance. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider. The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries (for example, more taxes being placed on air travel and the success of hybrid cars) and the general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities.

Legal factors: These are related to the legal environment in which firms operate. In recent years in the UK there have been many significant legal changes that have affected firms' behaviour. The introduction of age discrimination and disability discrimination legislation, an increase in the minimum wage and greater requirements for firms to recycle are examples of relatively recent laws that affect an organisation's actions. Legal changes can affect a firm's costs (e.g. if new systems and procedures have to be developed) and demand (e.g. if the law affects the likelihood of customers buying the good or using the service).

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 marketing? 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? Economic

What is the level of new industrial growth? E.g. India is affected by low 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? 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.

Socio-Cultural Culture, religion and society are of huge importance. Cultural norms for doing business. Eg :- Barter System

Technology: Some countries do not respect international patents.

Certain Political issues which make International marketing frustrating:

The political relations between a firms country of headquarters (or other significant operations) and another one may, through no fault of the firms, become a major issue. For example: Oil companies which invested in Iraq or Libya became victims of these countries misconduct that led to bans on trade. Similarly, American firms may be disliked in parts of Latin America or Iran where the U.S. either had a colonial history or supported unpopular leaders such as the former shah. Certain issues in the political environment are particularly significant. Some countries, such as Russia, have relatively unstable governments, whose policies may change dramatically if new leaders come to power by democratic or other means. Some countries have little tradition of democracy, and thus it may be difficult to implement. For example, even though Russia is supposed to become a democratic country, the history of dictatorships by the communists and the czars has left country of corruption and strong influence of criminal

Cultural Guidelines for Business in INDIA:

People in India are very friendly, hard working and diverse. Extended family living is norm. Astrologer still play an important role in India Social freedom between the sexes is not appreciated. Use of first name in addressing someone should not be avoided. Cow is considered as God. Beef is not allowed(McD had to face problem because of this only.) Whistling is considered as impolite The left hand is considered as unclean Business relationships are based on personal relationships

Interesting issue:- Body gestures (Shaking of head) for yes and no are just opposite for North Americans and Indians