PEST analysis is similar to or the same as External analysis of SWOT. Such external factors usually are beyond the firm's control and sometimes present themselves as threats or opportunities for the firms.
P= Political
E= Economic
S= Social Cultural
T= Technological
Many macro-environmental factors are country-specific and a PEST analysis will need to be performed for all countries of interest. The following are examples of some of the factors that might be considered in a PEST analysis.
Political Analysis
1. Political stability; Where there is no stable politics, it will be difficult for your business operation.
2. Risk of military invasion; When there is military invasion, it is always about dictatorship. So, no proper management for macro-economics.
3. Legal framework for contract enforcement; Where Law in the hands of the people in power, you have no stable future for your business.
4. Intellectual property protection; Where there is no IP law, your trademark or technology can be copied by others so easily.
5. Trade regulations & tariffs; Where the custom fee or tariff for your product is too high, you will be forced to charge higher which your customers are not willing to pay or not easy for you to compete with local competitors .
6. Favored trading partners; If your country or product is in favor of the local government, you will have good concession from the government.
7. Anti-trust laws; If there is anti-trust law, there will be no monopoly, so easier to compete. But it depends on what you want to do. If you want to dominate the market, it may not be good.
8. Pricing regulations; If the law or government control you in pricing your product, you may not be able to price for your profit. But in some case, the government can help you with subsidy.
9. Taxation - tax rates and incentives; If the tax is too high, you will be forced to price your product higher, which will discourage your customers to consume.
10. Environmental regulations; If the environmental regulations is too strict, you should not go there if your business is industrial or factory.
11. Industrial safety regulations; This will control you from going to any countries you want. If you do not meet the standard regulations, you can not go there.
12. Product labeling requirements; How do you have to label your product? Made in China, Made in Japan?
Employment Law
13. Wage legislation - minimum wage and overtime; Can you exploit the low labor cost? Is it the wage that you are able to pay? That’s why a lot of companies are going into developing countries to exploit these benefits.
14. Work week; How about working days? 6 days a week or 5 days a week?
15. Mandatory employee benefits; what are the perks or incentives you have to give to your staff by law? In case any accidents how much you are required to pay by law?
The rest three parts will be discussed after this post.
Figure (1) PEST Analysis In Macro Environments
P= Political
E= Economic
S= Social Cultural
T= Technological
Many macro-environmental factors are country-specific and a PEST analysis will need to be performed for all countries of interest. The following are examples of some of the factors that might be considered in a PEST analysis.
Political Analysis
1. Political stability; Where there is no stable politics, it will be difficult for your business operation.
2. Risk of military invasion; When there is military invasion, it is always about dictatorship. So, no proper management for macro-economics.
3. Legal framework for contract enforcement; Where Law in the hands of the people in power, you have no stable future for your business.
4. Intellectual property protection; Where there is no IP law, your trademark or technology can be copied by others so easily.
5. Trade regulations & tariffs; Where the custom fee or tariff for your product is too high, you will be forced to charge higher which your customers are not willing to pay or not easy for you to compete with local competitors .
6. Favored trading partners; If your country or product is in favor of the local government, you will have good concession from the government.
7. Anti-trust laws; If there is anti-trust law, there will be no monopoly, so easier to compete. But it depends on what you want to do. If you want to dominate the market, it may not be good.
8. Pricing regulations; If the law or government control you in pricing your product, you may not be able to price for your profit. But in some case, the government can help you with subsidy.
9. Taxation - tax rates and incentives; If the tax is too high, you will be forced to price your product higher, which will discourage your customers to consume.
10. Environmental regulations; If the environmental regulations is too strict, you should not go there if your business is industrial or factory.
11. Industrial safety regulations; This will control you from going to any countries you want. If you do not meet the standard regulations, you can not go there.
12. Product labeling requirements; How do you have to label your product? Made in China, Made in Japan?
Employment Law
13. Wage legislation - minimum wage and overtime; Can you exploit the low labor cost? Is it the wage that you are able to pay? That’s why a lot of companies are going into developing countries to exploit these benefits.
14. Work week; How about working days? 6 days a week or 5 days a week?
15. Mandatory employee benefits; what are the perks or incentives you have to give to your staff by law? In case any accidents how much you are required to pay by law?
The rest three parts will be discussed after this post.
1 comments:
good
Post a Comment