PEST (Political, Economic, Social & Technological)

 POLITICAL ISSUES:
Political issues include regulatory frame work operating in judicial system which may
affect the business in different ways. There are not many political factors in Peshawar
affecting Pizza Hut as is lack of competition. Factors such as laws on business
employment, pollution and taxation apply on the organization which it has to follow
regarding the rules.

 ECNOMIC FACTORS:
If the county’s economy is better so the GDP of the country will be good, this is a green
signal for the business as the per capita income of the people will be increased and they
will spend more money. In our survey we came to know that most of the people in the
beginning of the months spend more and they visit pizza hut very often. When the
inflation rate increases the cost of raw material also increases and this leads towards
high prices of the products and vice versa.

 SOCIAL FACTORS:
Pizza hut is a multinational and it is basically originated from America so the
organization is overwhelmed by western culture. There are social forms of society which
consist of Upper class, middle class, middle upper class, lower class and lower class.
Every country has cultural norms, values, beliefs and religion which can affect the
organization.

 TECHNOLOGICAL FACTORS:
Now a day’s technology is improving so as baking and heating ovens will be of new and
efficient technology and will provide efficient service. Due to new technology there are
new ways of marketing like internet; telemarketing and the organization can advertise
their products with much more faster pace. Computer based customer data that is MIS
(managing information system) helps in collecting customer data, daily transactions,
future forecasting and decision making. New vehicles will make their service more
efficient.

PEST ANALYSIS

The PEST analysis examines changes in a marketplace caused by Political, Economical,

Social and Technological factors.

P: Political change, from one party to another in control- for example the rise in private
healthcare and privatisations under Conservative governments.
Political Analysis for Coca-Cola

Non-alcoholic beverages fall within the food category under the FDA. The government
plays a role within the operation of manufacturing these products in terms of regulations.
There are potential fines set by the government on companies if they do not meet a
standard of laws.

The following are some of the factors that could cause Coca-Cola company's actual
results to differ materially from the expected results described in their underlying
company's forward statement:-

? Changes in laws and regulations, including changes in accounting standards, taxation

requirements, (including tax rate changes, new tax laws and revised tax law
interpretations) and environmental laws in domestic or foreign jurisdictions.

? Changes in the non-alcoholic business environment. These include, without limitation,

competitive product and pricing pressures and their ability to gain or maintain share of
sales in the global market as a result of action by competitors.

? Political conditions, especially in international markets, including civil unrest,

government changes and restrictions on the ability to transfer capital across borders.

? Their ability to penetrate developing and emerging markets, which also depends on
economic and political conditions, and how well they are able to acquire or form strategic
business alliances with local bottlers and make necessary infrastructure enhancements to
production facilities, distribution networks, sales equipment and technology.

E: Economic change, for example a recession creating increased activity at the lower
ends of product price ranges. Rate of interest rises depressing business and causing
redundancies and lower spending levels.

Economic Analysis for Coca-Cola

Last year the U.S. economy was strong and nearly every part of it was growing and doing
well. However, things changed. Most economists loosely define a recession as two
consecutive quarters of contraction, or negative GDP growth. On Monday 26, the
government officially declared that the U.S. has been in recession since March. (CBS
Market Watch. " U.S. Officially in a recession." Rex Nutting. [nov 26,2001].
www.cbsmarketwatch.com)

However, because of aggressive action by the Federal Reserve and Congress it will be
short and mild. The economy will return to sustained, positive growth in the first half of
2002.

Future Outlooks
The Federal Reserve is doing all that it can help the economy recover. They have cut the
interest rate ten times this year. The rate now lies at a 40-year low of 2%. Lowering the
interest rates will ultimately excite consumer demand in the economy. Companies will
expand and increase use of debt as a result of the low borrowing rates. Coca-Cola can
borrow money for investing in other products as the interest rates are low. It can use the
borrowing on research of new products or technology. As researching for new products
would cost less the Coca-Cola Company will sell its products for less and the people will
spend as they would get cheap products from Coca-cola.

Before the attacks on September 11, 2001, the United States was starting tot see the
economy recover slightly and it is only just recently that they achieved the economic
levels. Consumers are now resuming their normal habits, going to the malls, car
shopping, and eating out at restaurants. However, many are still handling their money
cautiously. They believe that with lower inflation still to come, consumers will recover
their confidence over the next year.

The non-alcoholic beverage industry has high sales in countries outside the U.S.
According to the Standard and Poor's Industry surveys, "For major soft drink companies,
there has been economic improvement in many major international markets, such as
Japan, Brazil, and Germany." These markets will continue to play a major role in the
success and stable growth for a majority of the non-alcoholic beverage industry.

S: Social change involves changing attitudes and lifestyles. The increasing number of
women going out to work, for example, led to the need for time-saving products for the
home.

Social Analysis for Coca-Cola

Many U.S. citizens are practicing healthier lifestyles. This has affected the non-alcoholic
beverage industry in that many are switching to bottled water and diet colas instead of
beer and other alcoholic beverages. Also, time management has increased and is at
approximately 43% of all households. (http://www.cdf-mn.org). The need for bottled
water and other more convenient and healthy products are in important in the average
day-to-day life.

Consumers from the ages of 37 to 55 are also increasingly concerned with nutrition.
There is a large population of the age range known as the baby boomers. Since many are
reaching an older age in life they are becoming more concerned with increasing their
longevity. This will continue to affect the non-alcoholic beverage industry by increasing
the demand overall and in the healthier beverages.

T: Technological change - creates opportunities for new products and product

improvements and of course new marketing techniques- the Internet, e-commerce.

Technological Analysis for Coca-Cola

Some factors that cause company's actual results to differ materially from the expected
results are as follows:

? The effectiveness of company's advertising, marketing and promotional programs. The

new technology of internet and television which use special effects for advertising
through media. They make some products look attractive. This helps in selling of the
products. This advertising makes the product attractive. This technology is being used in
media to sell their products.

? Introduction of cans and plastic bottles have increased sales for Coca-Cola as these are
easier to carry and you can bin them once they are used.

? As the technology is getting advanced there has been introduction of new machineries
all the time. Due to introduction of this machineries the production of the Coca-Cola
company has increased tremendously then it was few years ago

? CCE has six factories in Britain which use the most stat-of the-art drinks technology to
ensure top product quality and speedy delivery. Europe's largest soft drinks factory was
opened by CCE in Wakefield, Yorkshire in 1990. The Wakefield factory has the
technology to produce cans of Coca-Cola faster than bullets from a machine gun.

Apart from fulfilling the commitment of serving delicious, fresh and hygienic food and at the

same time providing the customers with the ultimate entertainment; KFC also plays part in the

economic development of our country.

 Presently KFC has provided employment to over 1200 Pakistanis, which adds up to
6000 individuals directly dependent on KFC Pakistan.
 The Government of Pakistan receives over Rs.10 to 11 million per month from KFC
Pakistan as direct taxes.
 95% of all food and packaging material used in KFC Pakistan is procured locally,
which sums up to a purchase of over Rs.35 million per month.
 Each new outlet developed by KFC Pakistan costs approximately Rs.40 million,
which is a huge amount for our construction industry.
 Annual turn over in Pakistan 2.5 billion.
 KFC doesn’t buy its supplies from Pakistan
“KFC and Pakistan…Growing Together”
1) Demographical Factors:
Following factors included in the demographical
factors of the pest analysis of KFC:-
a) Age:Generally there is no age limit which is focus by the KFC. They target & focus on
each and every age of the society. But for somehow in our opinion they target heavily on the
youngster as compared to the middle & old age.
b) Gender:
In this case they generally focus on the both Males & Females of the society &
similarly target them.
c) Household Size:
Household size plays a vital role in the demographical factor of KFC.
Generally they target the whole family not a single family members. That’s why he
introduced many family packages meals.
d) Population:
Population also plays a vital role in the demographical factor of KFC. In the
light of this population they can make their strategy.
2) Economical Factors:
Following factors are included in the economical factors of the KFC:-
a) Income:
Income is an important economical factor of the KFC. This factor decides which
class KFC is going to target. In the early time of KFC they focusing on the upper class but
they introduce some meal through which we can say that they target the middle & the upper
level as well.
b) Consumption Behavior:
KFC also estimated the consumption behavior of the people, their
liking and disliking and make decision accordingly.
c) Payment Methods:
Payment method is an important factor in the economical factor of
the
KFC. They check the behavior of the regarding the payment methods of the people. They
check whether the gives money in the form of cash or plastic money.
3) Technological Factors:
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Following are the factors included in the technological

factor of the KFC:-
a) Pace of Change:Pace of change mean rate of change. KFC has strategy to introduce new
technology whenever they think that it is a time to introduce new technology.
b) Research & Development:
Research & Development is also an important factor in the
Technological factor. KFC always support the work of research & development in order to
introduce the new technology.
c) Capital Formation:
Capital formation means stock of machinery. KFC has a stock of
machinery in order to run its business activities. In other words KFC has a good amount of
Capital Formation.
4) Political Factors:
Following are the factor involve in the political factors of the KFC:-
a) Government Policies:
 Although KFC is a foreign company, but they have to obey the
policies of the Government where he run its business activities. KFC has handle this
situation
very tactfully and obey the policies of the Government as prescribe by the government in
order to run this kind of business.
b) Price Policies:
Price policies is also an important factor. KFC maintain & design its price
policies keeping in view the income & income distribution of the people living in the
country. That’s why all the classes are the target market of KFC.
c) Political Stability:
Political stability is very important if KFC want to become the leader in
fast food business in Pakistan. So this is also an important political factor.
5) Ethical/Legal Factors:
Following are the important factors which is included in the
ethical/legal factor of the KFC:-
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Business Law:
Just like the Government Policies the business units which is
working in Pakistan also regulate the law regarding the nature of business. KFC also fulfills
this factor.
b) Social Responsibilities & Ethics:
Social Responsibilities & Ethics are the important factor.
KFC tries his level best to this factor.
6) Social/Cultural Factors:
Social/Cultural Factors includes the following things:-
a) Social Class:
As we discuss earlier that KFC target all the class including the upper class,
upper middle and lower middle class etc.
b) Culture:
Though the culture of KFC from where they come is different but they adopt the
Pakistani culture also.
c) Religion:
KFC not only adopt the Pakistani culture but also the Religion as well. They offer
Halal foods to the customers, which is the symbol that they adopted the Muslim religion.

KFC targets the young generation, as here in this country the young generation is

more towards eating out and is more energetic. It targets the early single segment that is the

upper class.

KFC does not need aggressive marketing or advertising because Brand

is strong enough.

Previously they were focusing on single segment that was through Niche Marketing

by offering “Combo Deals”. Now they are focusing more on other classes as well. They are

dealing in masses by introducing value deals; most recently introduced “Zinger Junior”.
 Colonel’s value combo meals introduced previously were expensive and so there

were less sales but through their recent offers, they have increased the sales by offering low

prices.

Inflation highly affects the purchasing power of the customers. And here the

purchasing power of many customers is low. To cover this major segment, they have

introduced affordable meals, so that it is in reach of the masses

PEST ANALYSIS

PEST analysis is used to assess what environmental factors are affecting the organization,
which of them are most important and how they will effect in next years. It is an
indicator of political, economical, social and technological influences on organization.
The analysis of Mitchell’s is as under:
POLITICAL AND LEGAL FACTORS
INDUSTRIAL LAWS

Industrial laws regarding unions have no impact upon the Mitchell’s because there is
already an independent labor union and officers association in the organization. The
company considers these laws in their decision making concerning wage rates, bonuses,
and benefits of the employees.
FOREIGN TRADE
This factor is very much important for the Mitchell's fruit farms limited. It is because
the Mitchell’s is importing many raw material items from different countries of the
world. These items include cocoa powder, cocoa butter, lecithin, tin, aluminum foil,
pectin, metal caps, lemon concentrate, hydrogenated palm kernels and pineapple
concentrate. The major importing countries are Philippine, Germany, china, Indonesia

Although the laws regarding environment are not very sophisticated in Pakistan but even
if they become so, they will not be hampering for Mitchell's fruit farms limited, because
in Mitchell's, there is very sophisticated system for the drainage of the wastes. In the
wastes, there is not any such item that may be harmful for the environment.
TAXATION POLICY

The Mitchell's fruit farms is a public limited company. The company is paying all sorts
of taxes that are due to the Mitchell's. As the honesty is the dominant value of the
company, all the payments to government are made fairly and honestly.
EMPLOYMENT AND GOVERNMENT STABILITY
Employment is not a matter of high concern for the organization because it is already
following all the labor laws. But recently the Government increases the wages of the
employees but Mitchell's has not affected by that, because the minimum wage limit in
Mitchell's is Rs. 3000 that is high from the minimum wage limit of the government of
Pakistan..
ECONOMIC FACTORS

Among the many of economic factors some are more important for Mitchell’s; the detail
of these factors is in following:
INTEREST RATES

Interest rates increase and decrease has significant impact upon the financial performance
of the Mitchell's, because the company has take loans from the banks. It is also noticeable
that the company takes the long term loans from the banks on the regular basis. So, if in
the future the interest rates increase, it will be unfavorable for the Mitchell's. But such
increase is not expected in near future.
INFLATION

In the short run, the effects of inflation are minimal on the performance of the Mitchell's.
But if we take it in longer perspective the inflation in the country will increase the cost of
production, which will increase the sale price. And at high sale price the product will
become in-competitive in the international market as the company is involved in the
export. So the pan of export will be adversely affected by the inflation.
DISPOSABLE INCOME

Within the country the demand will be affected if the disposable income will be reduced.
There are lot many substitutes of the groceries products of the company. But other than
its direct use, these are also used in bakery and confectionery items and so many other
foods whose demand is dependent on disposable. So any decrease in disposable income
of the consumers will also be affecting Mitchell's fruit farms negatively.
SOCIO-CULTURAL FACTORS

Socio cultural factors like demographics; income distribution, life style etc. can also
affect the company in different ways. Let’s see which of them are more concerned to
Mitchell's fruit farms limited.
LIFE STYLE CHANGES

The consumption of jams, jellies, marmalades, squashes, sauces, pickles and squashes is
very much related with the life styles of people. Now people, all around the world, are
becoming more and more health conscious. They are well aware that a high consumption
of heavy foods will increase the cholesterol, which leads to heart disease. That is why, a
significant change in the consumption of foods is being observed in last many months.
As the growth rate of fast food industry is spectacular in the country. That is most
favorable for the Mitchell's. it is because more consumption of fast foods will increase
the demand of Mitchell's products.
 LEVEL OF EDUCATION

Level of education is directly related with awareness and health consciousness. In

countries where education rate is high the people more like the nutritious products. In
Pakistan, as well as in foreign markets the rate of literary is increasing which will effect
the organization positively. High level of literacy will lead to high level of nutritious
products consumption and people started switch towards the products that are more
favorable for their health and fitness.

TECHNOLOGICAL FACTORS

Technology in food industry is very important for the maximum output, product
standardization and hygienic process of production. The technological factors, which are
more concerned with Mitchell’s, are as under:
GOVERNMENT SPENDING ON RESEARCH

Usually in order to support some industry and improve economy, government allocates
some fund to R & D. Unfortunately our government doesn’t have any money for R & D.
Due to this non-serious behavior of government this sector along with others, is suffering
very much. There is more need of R&D work in this industry in Pakistan than any other
industry. It is because of the sensitivity and importance of this industry in our lives. It is a
fact that our food industry is very poor in the field of technological advancement.
Mitchell's is well aware of this fact, the company has the best and most advance
technology in the respective industry. Mitchell’s continuously upgrading it on annual
basis. The 15% of total net profit invest on the automation of the technology every year.
NEW DISCOVERIES AND DEVELOPMENTS

It has already mentioned that Mitchell's has the best technology for the operations of the
business. Mitchell's is competing the market with its qualitative and innovative products.
All these are possible as the result of intense R&D, new product developments and new
recipes for the fulfilling the changing needs and wants of the market.
STRUCTURAL ANALYSIS

The PEST analysis concerned with broad aspects of the environment while there is
always a set of external influences, which are more immediate, and directly affecting the
organization. The structural analysis draws on Five Forces approach prepared by Porter.
It is a structured mean of assessing the competitive environment.
THREAT OF NEW ENTRANCE

Threat of entry depends upon the extent to which there are barriers to entry. A food
company requires a big manufacturing unit which requires a huge capital investment; like
Mitchell’s has more than 800 crore paid up capital. So we can say that groceries-
manufacturing unit is highly capital intensive and because of high capital investment it
has high risk for new to enter into production.
SUPPLIERS’ POWER
All organizations have to obtain resources and provide goods or services. The suppliers
can affects on strategic freedom of an organization and can influence the margins of that
organization. In Mitchell's fruit farms; there are two types of suppliers. One is a local
supplier, and others are foreign suppliers. We can evaluate the power of suppliers with
the help of following important points that cannot be ignored:
a)      As well as the foreign suppliers are concerned they have power of bargain because
the material is not available locally and the buyer don’t have any option other than
import, so the supplier charge the high prices and transaction is done through banks by
opening letter of credit and buyer also has to bear high transportation cost and import
duties.
b)      As well as the local suppliers are concerned they have small fruit farms. Food
companies are highly capital intensive so they don’t have any power because they can’t
do forward integration.
c)      There are large numbers of fruit, vegetables, sugar and other raw material suppliers
so the buyer checks the quality of suppliers’ products and make contract with any one
which meet their requirements regarding quality as well as price.
d)     Another reason of no influence of the suppliers over the Mitchell's is that the
company itself producing large amount of fruit, vegetables, milk and butter. The in this
way, backward integration reduces the power and influence of suppliers of the raw
material.
e)      Mitchell's has very good repute in the market since from the 1933. another fact is that
Mitchell's is the market giant in its industry, so every supplier want to work with the
Mitchell's.
BUYERS’ POWER

The buyers don’t have any power, because the prices of the products are fix, but high
competition among food companies leads the company to face problems in the price
competitiveness.

COMPETITIVE RIVALRY

Organizations will also be concerned with the extent of rivalry between themselves and
competitors. The extent of competitive rivalry depends upon the nature of four forces
described earlier. It could be concluded from previous discussion that the food market is
highly competitive. And the degree of competition in the industry is increasing day by
day.