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 & Legal

Environment

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

NAFT
A

EU

ASEA
N

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
Motor Car
Car Manufacturers
Manufacturers
Example:

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
factors
Political

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.

Social/ Cultural Factors

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)

Technological Factors
Integrated 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/pestle
-analysis-to-explain-companys-international-strategy-for-mcdo
nalds-.html
http://www.marketingteacher.com/lesson-store/lesson-internat
ional-marketing-environment.html
http://ezinearticles.com/?Key-Principles-of-PEST-Analysis&
id=5791508
http://ezinearticles.com/?Key-Principles-of-PEST-Analysis&
id=5791508