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BBK3363 |

International Business Environment by Dr Khairul Anuar

L3: PESTEL Analysis

PESTLE stands for Political, Economical, Social, Technological,

Legal & Environmental. These are the factors which need to be

considered while expanding business nationally or Internationally.

PESTLE Analysis is a simple technique which can be used in a fairly

sophisticated way, particularly when it is combined with Risk

Analysis, SWOT Analysis and expert knowledge about the

organisation and its external factors.

PESTLE Analysis is normally used to help organisations identify and

understand the external environment in which they operate and

how it will operate in the future. I believe that a version of PESTLE

Analysis can be used by the individual for personal development

planning.

What is PESTLE and Why it is carried out for business?

External analysis: Beyond the industry

(the macro-environment)

• PESTLE forces

• Political

• Economic

• Socio-cultural

• Technological

• Legal

• Environmental

• For each: What’s keeping you up at night?

• What’s getting you up in the morning? (Or should be?)

POLITICAL

• Environmental protection/legislation

• Consumer protection

• Government’s attitude

• Competition regulation

• Advertising standards

Economic

• Economic growth

• Taxation international trade

• Exchange Rate

• Employment law

• Health and Safety law

• Inflation

• Consumer confidence

• Minimum wage

Social

• Income distribution

• Demographics

• Labour & Social mobility

• Lifestyle changes

• Attitudes to work and leisure

• Education

• Fashion and Fads

• Health & Welfare

• Living conditions

Technological

• Changes in physical sciences

• Internet

• Energy use and costs

• Rates of technological obsolescence

• New discoveries

• Govt and Industry focus on tech

• Govt spending on research

Legal

• Employment law

• Health and Safety

• Taxation both corporate and consumer

• Other regulations

• International trade barriers

• Strength of the rule of law

Environmental

• How people’s perception and reaction to

environmental issues can affect a business.

Exam tip

• Remember it is not enough to identify the

factor, you must say why it is where it is.

Groupon: PESTEL Analysis

• Technological:

• Fast developing environment;

• E-business flexibility;

• Real time;

• Dealing via phones/iPads.

• Environmental:

• Works in every market.

• Legal:

• International e-commerce low.

• Political:

• Government stability;

• Tax policies.

• Economic:

• Recession;

• Currency fluctuating;

• Developing vs. Developed countries.

• Social:

• Culture differences;

• Ageing population.

Groupon: SWOT Analysis

Strengths:

• Original idea – first mover in the industry;

• Largest company in the daily deals market;

• Name – recognition internationally (in over 44

countries);

• Diversified into new markets;

• E-business company let it be more flexible in

strategic.

Weaknesses:

• Negative online reviews;

• Emails preceived as spam;

• No creation of customer loyality;

• Deals not profitable for merchants;

• Rapid growth into other countries.

Opportunities:

• Continue to develop business on apps for

phones, tablets;

• Increase deal variety;

• Expand domestic areas;

• Partner with big companies;

Threats:

• One time users;

• Lack of deal personalization;

• New entrants too the industry;

• Huge competition;

• Economic slow down.

PESTEL REPORT ON CHINA

Case study

Political Overview of China

• China has been under single party leadership for past 60 years and

the leadership has been able to impose its decision on the country

without negotiation.

• China is one of the fastest growing economy in the world.

Political Analysis

Trade relationship between Canada & China

Trade relation between Canada & China seems to be improved in past few years.

In 2003, the import of beef product has been banned from North America because of the disease named as Bovine Spongiform Encephalopathy (BSE).

In 2007, the World Organization for Animal Health officially categorized Canada as a “ Controlled risk” country for BSE.

On June 24, 2010, an agreement has been signed between Canada & China to allow the market access for Canadian beef.

Conclusion: Based on the information above, China seems to be a favorable market for Canadian Beef.

Economical Overview of China

• The economic growth rate in China is 13.3 percent/annum.

• China encourage foreign companies to invest in

manufacturing & modern services.

• China ranked second after U.S. in the number of express

highway links.

• One of the drawback of Chinese Economy is that the

Unemployment rate in China is increased in 2008 however it

is expected to be reduced in 2011

Economical Analysis

Beef trading impact on Chinese Economy

• China is the third largest producer of Beef products in the

world but still the export of beef is less then 1 percent.

• Technological progress is not good as compare to developed

countries despite the continues growth in beef production.

• China is facing significant challenges to expand its cattle

sector as they are short of grass and foreign resources,

breeding stock, water and energy resources.

Conclusion: The information above mentioned the

current situation of beef industry in China, Which

makes it an ideal location for expansion of our

business.

Social overview of China

• Population is one of the biggest problem with China however

after adopting the one child policy, the growth rate of

population has fallen down.

• But every policy has its side effects, adopting one child

policy has raised another problem “Aging Population”.

Another reason for this is increased life expectancy.

• One of the biggest challenges for China is the Gender

Imbalance with male to female ratio of 128:100.

• Being one of the booming economy in the world, the decline

in poverty is one of the achievement for China. The

population below poverty line has come down from aound

64%.

Social Analysis

Social aspect of Beef in China

• Beef products are socially accepted in China.

• Consumption of beef is very high in Winter.

• Chinese people prefer fresh meat instead of frozen products.

• Beef consumption is expected to be increase in next 20

years.

Conclusion: As per the information mentioned above,

There are no such social barriers to enter into the

Chinese Beef industry.

Technological overview of China

China has many R & D institutions which make them very well equipped for advanced research.

Chinese people don’t want to enter the field of research because of the low compensation and no incentives.

Another drawback in Chinese R & D, Government interference in R & D with week enforcement of cyber law.

Funding for R & D is very non optimal.

Special Economic zone have been created for R & D centers.

Technological Analysis

Technological impact on Beef Processing

There are two ways of Slaughtering equipments, first one is very crude which has a poor quality & utilization ability for beef cattle.

Second slaughtering equipments is advanced the slaughtering ability is very strong, but the beef cattle is fall short of demand, which make these advanced equipment in a shutdown condition in most time.

Quality of Chinese beef product is low because of the processing method.

There is one technology named beef acid which refers to carry out the quarantine system and cooling processes rapidly of carcass after slaughtering. The Chinese technician should learn the production process, western beef products processing method.

Legal overview of China

• Favourable policies to attract foreign investments.

• Political involvement in legal matters is also another

important factor for future risks.

• China has a developed and organized judiciary.

• Because of a week implementation of corporate laws

companies are not in effective compliance.

Legal Analysis

Legal requirements for exporting to China

• To export frozen meat and poultry products to chine,

certification is required. FSIS form 9060-5 and form 9295-1

are the certificates related to meat and poultry products.

• Importers of beef should have a valid license for entry of

meat and poultry products into the country.

• Beef meat and meat products should be certified by

WHO, FAO & OIE that the products are BSE infection

free.

Environmental overview of China

• Vast areas of land cover under forest.

• Evolving environmental policies.

• High pollution levels.

• Farmers shifted to Beef farming.

Environmental Analysis

China has biologically diverse environment and vast land is cover by forest in China.

In 2003 China has banned beef from Canada because they were worried about the mad cow disease.

China have increased the regulation on beef due to diseases caused by it.

Farmers shifted to beef farming in China because of increase in demand of beef.

Conclusion- Environmental conditions seem favorable for Beef products in China.

Environmental Aspect of Beef In China