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JAI HIND COLLEGE
PESTEL ANALYSIS PESTEL is an acronym that stands for Political, Economical, Social, technological, Environmental and Legal. It is used by many international consultancies to describe an analysis that is used for determining the opportunities and risks of global expansion. Sometimes it is described as a PEST or PESTLE analysis. Political, Economical, Social, technological, Environmental and Legal issues often differ domestically and even more so internationally. As a company looks to leverage the advantages that the democratization of technology, information and finance, and grow beyond the national borders that previously confined them, it is imperative that they consider a PESTEL analysis to accompany their SWOT analysis. The PESTEL analysis provides a strong framework used by global and multinational corporations to set the stage to develop specific tactics to mitigate the risks involved in executing their vision in unfamiliar environments.
POLITICAL These refer to government policy such as the degree of intervention in the economy. What goods and services does a government want to provide? To what extent does it believe in subsidizing firms? What are its priorities in terms of business support? Political decisions can impact on many vital areas for business such as the education of the workforce, the health of the nation and the quality of the infrastructure of the economy such as the road and rail system. India is the biggest democracy in the World. The government type is federal republic. Based on English common law, judicial review of legislative acts, accepts compulsory ICJ jurisdiction with reservations, separate personal law codes apply to Muslims, Christians, and Hindus. The political Situation in the India is more or less stable. Most of its democratic history, the federal Government of India has been led by the (INC) Indian National Congress. State politics dominated by several national parties including the INC. Overall India currently has a coalition
led government and both major political parties the UPA and BJP, whichever comes in power. It comprises political stability and the policies of the government. Ideological inclination of political parties, personal interest on politicians, influence of party forums etc. create political environment. For example, Bangalore established itself as the most important IT Centre of India mainly because of political support. In India many political factors those effect in business environment. Political pressures in ruling government and vote bank problems. These are the major factors those affect on political environment:(i) Taxation policy
India has a well developed tax structure with a three-tier federal structure, comprising the Union Government, the State Governments and the Urban & Rural Local Bodies. The power to levy taxes and duties are distributed among the three tiers of Governments, in accordance with the provisions of the Indian Constitution. The main taxes/duties that the Union Government is empowered to levy are Income Tax income, Customs duties, Central Excise and Sales Tax and Service Tax. The principal taxes levied by the State Governments are Sales, Stamp Duty, State Excise, Land Revenue, and Duty on Entertainment and Tax on Professions & Callings. The Local Bodies are empowered to levy tax on properties, Octroi Tax on Markets and Tax/User Charges for utilities like water supply, drainage, etc. (ii) Privatisation
Reduce the political interface in the management of enterprises, leading to improved efficiency and productivity. In India this time do many govt company Good performance but some time later there are facing many problems so the go for privatization. (iii) Deregulation
India Govt makes some Act to freely do business in India.
International trade regulations
International trade regulation day by day India makes it flexi able for foreign trade. (v)General initiatives Some policy to first Political initiates for the business environment in In India. (vi) Government stability In India past 10 years govt is stable. Before 10 years India facing govt stability. If govt stability not market is not improve and no one come here for investment. (vii)International stability No wars, no any country home problems, and no any type of war like Iraq they make uncertainty in market.
ECONOMICAL Economic indicators such as GDP, GNP, interest rate, consumer sentiment and others provide business people with the background needed to understand the risks and opportunities available within the region.
business Cycle Stage Consumers’ Disposable Income Economic Growth Exchange Rates GDP Growth Globalization GNP Growth Interest Rates Inflation Rate (cost of capital) Labor Costs Labor Supply Likely Economic Change
It includes interest rates, taxation changes, economic growth, inflation and exchange rates. For example: higher interest rates may deter investment because it costs more to borrow a strong currency may make exporting more difficult because it may raise the price in terms of foreign currency inflation may provoke higher wage demands from employees and raise costs higher national income growth may boost demand for a firm's products In order to solve economic problems of our country, the government took several steps including control by the State of certain industries, central planning and reduced importance of the private sector. The main objectives of India’s development plans were: Initiate rapid economic growth to raise the standard of living, reduce unemployment and poverty, Become self-reliant and set up a strong industrial base with emphasis on heavy and basic industries, Reduce inequalities of income and wealth, Adopt a socialist pattern of development — based on equality and prevent exploitation of man by man As a part of economic reforms, the Government of India announced a new industrial policy in July 1991, The broad features of this policy as follows: The Government reduced the number of industries under compulsory licensing to six. Disinvestment was carried out in case of many public sector industrial enterprises.
Policy towards foreign capital was liberalized. The share of foreign equity participation was increased and in many activities 100 per cent Foreign Direct Investment (FDI) was permitted. Automatic permission was now granted for technology agreements with foreign companies. Foreign Investment Promotion Board (FIPB) was set up to promote and channelize foreign investment in India. The economic factors in India are improving continuously. The GDP (Purchasing Power Parity) is estimated at about 3.965 trillion U.S. dollars in the year 2009. The GDP- real growth rate in 2009 was 6%. India has the third highest GDP in terms of purchasing power parity just ahead Japan and behind U.S. and China. Foreign direct investment rose in the fiscal year ended September 2009 to about US$ 10.532 billion. There is a continuous growth in per capita income; India’s per capita income is expected to reach Rs. 33283 by the end of 2009-2010. This will lead to higher buying power in the Hands of the Indian consumers. India GDP is now 6.5. Today India reserve US dollar in Good condition. In Indian economy is strong. We see in recession our economy is less affect from recession compression to western countries. These following factors: (i) Interest rates (ii) Money supply (iii) Credit control (iv) Financial markets (v) Inflation (vi) Competitors pricing (vii) Globalization
SOCIAL Understanding the social dynamics of the region that you decide to enter will enable you to more efficiently communicate with the natives, access target markets, build a labor force and successfully manage teams. Your knowledge of the social aspects and cross-cultural communications is important in face to face situations as well as virtual interactions. Geert Hofstede developed a cultural analysis tool that segments it into multiple dimensions: Power Distance, Uncertainty Avoidance, individualism vs. collectivism, masculinity vs. femininity, and long term orientation vs. short term orientation. A high measure of power distance indicated that they are hierarchical, most likely having strict delineations between professional positions and responsibilities within a company. A low power distance score indicates that they are egalitarian. An uncertainty avoidance score measures the comfort level than individuals have with ambiguity. The higher the score, the less comfortable they are in ambiguous situations. Individualism signifies a culture that is more likely to have their members make decisions independently, valuing their independence. Members of collectivist cultures may rely on a consensus based approach to making decisions. Masculinity and femininity compare the culture’s emphasis on the quantity versus the quality of life. Masculine cultures are more materialistic. Long term orientation reveals the culture’s focus on the distant future rather than the short term orientation view of stressing the importance of the immediate present and past changes in social trends can impact on the demand for a firm's products and the availability and willingness of individuals to work. In the India, for example, the population has been ageing. This has increased the costs for firms who are committed to pension payments for their employees because their staffs are living longer. It also means some firms have started to recruit older employees to tap into this growing labor pool. It describes the characteristics of the society in which the organization exists. Literacy rate, customs, values, beliefs, lifestyle, demographic features and mobility of population are part o the social environment. It is important for managers to notice the direction in which the society is moving and formulate progressive policies according to the changing social scenario
India is the second most populous nation in the world with an approximate population of over 1.1billion people. This population is divided in the following age structure: 0-14 years – 31.8%, 15-64 years – 63.1% and 65 years and above – 5.1%. These are (i)Mobility (ii)Income distribution (iii)Population demographics (iv)Attitude to work and leisure (v)Standard of education and skills (vi)Working conditions All these play an important part in deciding the social aspect of the country
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