PEST FACTORS & IMPACT ON INTERNATIONAL BUSINESS

GROUP MEMBERS :-

NAINA CHAUDHARI (6)

RINKU CHAUHAN (7) KIRAN DANKE (8) ADITI DESAI (9) PRIYANKA DHANVEKAR

(10)

Definition Of International Business –

“The economic system of exchanging good and services, conducted between individuals and businesses in multiple countries.”

PEST ANALYSISP - Political changes

E - Economic changes

S - Socio - Cultural changes

T - Technological changes

IMPORTANCE OF PEST ANALYSISWhile entering in new business

Helps to break free of unconscious assumptions

Help to effectively adapt to the realities of the new environment

KOTLER’S VIEW ON PEST ANALYSIS

a useful strategic tool framework for reviewing a situationapplied by companies to review a strategic

directionseffective for business and strategic

planning, marketing planning, business and product development and research reports.

PEST analysis is also known as: STEP, PESTEL, PESTLE, PESTE, PESTLIED,

SLEPT, STEEPLE, STEEPLED, LE PEST C and LEPEST analysis.

SOURCES FOR PEST ANALYSISNewspapers, periodicals, current books

Trade organizations

Government agencies

Industry analysts

Financial analysts

POLITICAL ANALYSISCASE OF MCDONALD’SMcDonald’s established in California

during the 1940s Aggressive plan to expand in all

other cities of Pakistan Franchises owned by Lakson Group

of Companies in PakistanIn Pakistan- consumer protection

laws are not very strong In countries like US, where the

consumer protection laws are very strong

SONY Government laws for minimum wage Less profit unless they increase prices of

items.

CASE OF ENRON An American energy company based in

Houston, Texas.In 1992, the Dabhol power plant near

BombaySupply 2,000 megawatts of electricity Decentralized government control over

industrial licensing opened the country more to foreign

investment. Failed due to endless disputes over prices

and terms of the deal

ICI PAINTS(Bekshire, UK) :World’s largest manufacturing of paints

and industrial coatings.In 1965 ICI UK acquired a 50% in

“Fullers Paints Pakistan Ltd” Government has imposed 15% sales tax

and heavy duties on imports and raw materials.

As ICI import 75% of its raw materials.Profit margin have decreased.

ECONOMIC FACTORSBusinesses are affected nationally and

globallyAffect consumer confidence and behaviourImpact upon the nature of the competition

faced by the business.Affect the purchasing power of potential

customers

ECONOMIC FACTORS• Economic growth

• Interest rates

• Inflation rate

• Budget allocation

• The level of inflation

EFFECT OF INTERNATIONAL BUSINESS ON INDIAN ECONOMYEntry of MNCs in India

Reason :-new economic policy by government of

India in July 1991incentives to the foreign investors

Now the question is how the MNCs are affecting Indian economy whether they are useful for our economy or not ?

MNC’s AND INDIAN INDUSTRIES: Economists view – MNCs are helpful for Indian industrial sectorNew technique of production management

techniquesIncrease competition in the industrial

sectorDemand for skilled personsInflow of Foreign capital

SOFTWARE SECTOR

TCS , Infosys have controlled salary escalations, resulting in Wipro, Satyam, HCL to follow suit

Difficult for them to remain the price settersUnder pressure to match salaries with those

offered by MNCsMNC’S are increasingly recruiting employees

BISLERI’S EXPANSION IN EUROPERamesh Chauhan owned brand, Bisleri, is

set to sell sparkling water in Europe and US.

Scope for BISLERI in the fieldCompensate the deterioration of imageSilence the critics and increase the faith of

the customer International brand image Witness a major tussle between Bisleri and

Coca-Cola's Kinley

“The fact that we have reached out to international markets is an acknowledgement of our quality and our penchant for safety and purity”

- Ramesh Chauhan

INFLATIONIn Asia, Vietnam becomes the country

suffered most from inflation.

Struggle for their lives every day, unemployment rate goes higher, and many companies and factories have to shut down because of inflation.

CEMENT COMPANIES AFFECTED

Higher input costs, low market valuations and scaled up capacity amidst reduced demand

Growth rate is projected to drop below 10 % for the current fiscal

High inflation and home loan rates have slowed down the growth trajectory of the real estate sector

INCREASE IN SPANISH INVESTMENTS The Spanish investments in india rose five

times to $158 million in last yearOver ten leading companies entered the

countryMany Spanish companies are present in

sectors like infrastructure, insurance, auto components and ports and more are keen to enter the market as India’s economy is quite promising

Invest in Spain is a government agency for promotion and attraction of foreign investments in Spain.

Spanish investment - $158 mn increased by 500% from the previous year

Investing in the automotive and infrastructure segments in India

Indian corporate like Infosys, Tata Consultancy Services, ICICI Bank, Essar Group, Navneet Publications, X L Telecom & Energy, Tata Motors and Kingfisher Airlines met Spanish delegates.

BUDGET 2009: RETAIL SECTOR DISAPPOINTEDBudget had not mention FDI or industry

status for retail

Plans for increasing expenditure in infrastructure under various programes, besides hiking the income tax ceiling, will increase consumption

Abolition of FBT and hike in allocation for rural and urban areas will lead to boost in demand.

PROVIDE STIMULUS TO REAL ESTATE SECTORIndian economy as a whole has largely

been insulated against the global economic slowdown

The Indian real estate sector has been severely been affected keeping in sync with the fortunes of the global real estate sector

Need for the Government to provide a stimulus for the industry to revive this ailing spectrum of sectors

SOCIO-CULTURAL ANALYSIS

MCDONALD AND HINDU CULTUREMcDonald’s is the world’s largest user of

beef “Maharaja Mac” – which is made form mutton. “McAloo Tikki Burger”, which is

made from chicken.Found beef extract in the oil. Close McDonald’s 27 stores in the country.

PROCTER & GAMBLE’S CASE: Camay soap. Diapers.COCO COLA: Labeled “No- alcohol” on their bottles supplied

to the Gulf countries. NOKIA:Introduced Hindi SMS

for Indian users.

TECHNOLOGICAL FACTORSMajor impact on the business

Affects business prospects, cuts down the profits and forces the management to change the course of the business operations

Change in technology changes the work cultures, the methods and the systems

Technological environment consists of:-

State of domestic or indigenous technology

Facilities for Research and Development

Technical Collaborations etc

IMPORTANCE OFTECHNOLOGICAL ENVIRONMENT Non- replacement of new technology

affects the survival and growth prospects Advances helps to improve quality of

product, increase output and reduce the cost of production

Latest technology enhance marketability of products and face competition

iPHONE

Apple deserved kudos for coming up with a product idea like the iPhone and also implementing it successfully

Aggressive entry into the mobile phone market and had managed to attract the attention of the existing competitors

AIRLINE INDUSTRYIncreasing use of the Internet has provided

many opportunities to airlinesLong-term effort to promote Indian aviation

infrastructureThe Authority is developing modern

communication, navigation, surveillance, and air traffic management systems for India's aviation sector that will help the country meet the expected growth and demand for air passenger and cargo service over the next decade

Helps in attracting investments in improving the infrastructure and services

Microsoft's operating system Vista most recent generation released worldwide on January 30, 2007

Vista was aimed to improve the security of the most widely used PC operating system in the world

Reasons for Failure:- - securities features were not much better

than the previous versions of Windows - came with its own list of hardware

requirements - Vista ran slower on PCs than XPPrevented Vista from taking over from its

predecessors

FAILURE OF HD-DVDHD-DVD group was holding a press

conference, Warner Bros withdrawing its support for HD-DVD

Exclusively supporting backing rival format Blu-ray

There were several factors that led to HD-DVD format lose out to Blu-ray

Most commonly cited explanation is that Sony did a better job convincing major film studios