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