SUBMITED TO PROF.DESH RATNA DEEPIKA AMIN- 01 MMS A PRATIKSHA GHUGE- 09 MMS A PRAGATI KAMATH - 13 MMS A NEHA KHANOLKAR- 15 MMS A SONIKA SHET- 32 MMS A HARSHA SHETTY- 33 MMSA SUKRATI SINGH- 35 MMS A DEEPALI ZAWAR- 09 MMS B ABHILASHA MULIMANI- 16 MMS B ANKITA YADAV- 42 MMS B 2 TEAM MEMBERS : INTRODUCTION IMPORTANCE AND CHALLENGES POLITICAL FACTOR ECONOMICAL FACTOR SOCIO-CULTURAL FACTOR TECHNOLOGICAL FACTOR LEGAL FACTOR COUNTRY RISK CASE STUDIES ISSUES AND CONCERNS CONTENTS TO BE COVERED 25-10-2014 3 25-10-2014 4
P POLITICAL
E ECONOMICAL
S SOCIO- CULTURAL T TECHNOLOGICAL WHAT IS PESTEL ANALYSIS? Understand , evaluate and work out various parameters PESTLE is an analytical tool which considers external factors and helps you to think about their impacts Take advantage of the opportunities and minimize the threats.
25-10-2014 5 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 effectiveBusiness and strategic planning, Marketing planning, Business and product development etc. 25-10-2014 6 Navigation from home country to the host country Development of proper business system Knowledge of all regulatory bodies both in home and host countries Knowledge of customer's changing taste Customers attitude towards foreign goods Revenue earning Interaction with right people to make business deal effective 25-10-2014 7 Challenges of an organization Political Environment 25-10-2014 8 Political Factors Affecting International Business Political and legal differences Government system Trade agreement Restraining forces Political environment 25-10-2014 9 Formal trade barriers Informal trade barriers 25-10-2014 10 Political Factors Affecting International Business The Political Environment 25-10-2014 11 THE POLITICAL ENVIRONMENT SYSTEM POLICIES STABILITY THE POLITICAL ENVIRONMENT 25-10-2014 12 POLITICAL SYSTEM POLITICAL STABILITY Totalitarian state Democratic state POLITICAL POLICIES TAXATION INDIA ,USA CHINA Economic Environment 25-10-2014 13 ECONOMIC ENVIRONMENT OF INTERNATIONAL BUSINESS Forms of economic System Centrally planned economy Market Based Economy Mixed economic system Levels of Income and its distribution Low income country Middle income Country High Income Country 25-10-2014 14 ECONOMIC FACTORS 25-10-2014 15 The size of demand for its product The expected cost of production and net earnings Whether it will smoothly repatriate its earnings back to its country Preliminary economic indicators Bank Financing Interest Rates Exchange Rate Mechanism Incentives for Exports Restrictions for Imports Inflation Labour Policies Fiscal, Monetary and Industrial Policies Consumption Behaviour Network of Infrastructure Strength of external sector
Government outlook Towards
ECONOMIC FACTORS CONT. Level of Government Spending Avenues for Capital Creation Size of the Capital Market Role of the Regulator Type of the Instruments Nature of the Investors 25-10-2014 16 ECONOMIC FACTORS CONTD. Business Cycles Monsoon Energy Availability Cost of Energy 25-10-2014 17 Social Environment 25-10-2014 18 Why to study socio cultural environment? To understand the significance of culture in international business decisions. To understand cross cultural behavior and its implication in International business. To understand the sensitivity of cultural knowledge of host country in order to get success in business. 25-10-2014 19 Levels of human mental programming
Personality Culture Human nature 25-10-2014 20 Specific to individual Specific to group Universal Inherited and learned learned biological Constituents of culture: Value system Norms Aesthetics Tradition and Customs Language Religion 25-10-2014 21 Comparison of Cross Cultural Behavior Power distance Individualism vs. collectivisms Masculinity vs. femininity Uncertainty avoidance The most widely used tool to study cross cultural behavior is the hofstedes classification. On the basis of massive survey of 1,16000 respondents from 70 countries working in IBM subsidiaries, Hofstede has classified culture into: 25-10-2014 22 Social Factors Affecting International Business Social factors include the demographic and cultural aspects of international business. Demographics Class structure Education Culture 25-10-2014 23 Emphasis on safety Entrepreneurial spirit Attitude Leisure interests 25-10-2014 24 25-10-2014 25
Example: Motor Car Manufacturers
SOCIAL FACTORS Brand image Health aspect Energy consumption
Technological Environment 25-10-2014 26 Technological Factors Affecting International Business Recent technological developments Technology impact on product offering Impact on cost structure Impact on value chain 25-10-2014 27 Technological Factors Affect Demand Production process Evaluating Technological changes to increase growth and to maintain survival 25-10-2014 28 Legal Factors Affecting International Business Common Law Civil Law Socialistic Law Theocratic Law International Law Principles of International Law Principles of Sovereignty International Jurisdiction Doctrine of Comity Act of State Doctrine Treatment and rights of Aliens Forum for settlement of disputes The major types of legal systems are: 25-10-2014 29 Case Study: PEST Analysis of McDonalds. 25-10-2014 30
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 Factors Integrated technology in the management of its inventory system and value chain. COUNTRY RISK PERFORMANCE STRATEGY CONTEXT 25-10-2014 33 PERFORMANCE INDICATOR GDP Internal and external economy Population Literacy rate 25-10-2014 34 STRATEGY Strategies based on- GOALS POLICIES Foreign / defence policy Monetory policy Fiscal policy Income policy Industrial policy Social policy 25-10-2014 35 CONTEXT Political context Institutiona l context Ideological context Physical context International context 25-10-2014 36 Issues and Concerns The main problem with these external PESTLE factors is that they are continuously changing Therefore PESTLE analysis should include a thorough analysis of what is affecting the organization or a project Now, and what is likely to affect it in the Future However, by themselves, theses factors they mean very little It is important to bear in mind, that PESTLE analysis requires careful Application of results The result of a PESTLE analysis is usually a list of positive and negative factors that are likely to affect a project 25-10-2014 37 25-10-2014 38