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PESTLE Analysis

Gavin West

Nov. 4, 2021

Salt Lake Community College

MGT 1060 - Principles of International Business

Prof. Lon Schiffbauer

Product: Cologne

Countries: Spain, Italy

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PESTLE Analysis

In my PESTLE analysis, I will be analyzing the political, economic, social, technological,

legal, and environmental aspects of my chosen countries Spain and Italy in order to determine if

attempting to sell cologne in these countries would be a viable idea. I am planning on producing

my own luxury cologne here in the United States, and I will export the cologne to these countries

and attempt to sell it through select retailers in these two countries.

Political

First, I will look at the political system and philosophy of my countries. Spain is under a

constitutional monarchy and Italy is primarily a constitutional republic. Both of these political

systems are friendly to business so I don't believe I will run into any problems when it comes to

their political philosophy. Next is how stable their political systems are. Spain has a fairly stable

political system with small Parliamentary fragments. Due to the stability of Spain’s political

system I do not believe that I would run into any problems selling my product. Italy’s democracy

is unfortunately flawed, there is a lot of instability and fragmenting, and it often has many short

lived governments. Currently Italy is decently stable enough to do business in, but the possibility

of instability in the political system will be something to look out for when attempting to do

business within the country. Due to the political aspects of these countries, Spain will be very

favorable to do business in and it would still be possible in Italy, just a bit more risky.

Economic

Next, I will analyze the economic characteristics of my countries in order to decide if it

would be a good idea to attempt to sell cologne there. This will be an important thing to research

and many aspects could potentially affect my decision of doing business within these countries.

The economic system in Spain is mixed capitalism with private freedom but also government
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regulation. Italy also has a mixed capitalist economy that is very diverse and industrial. Both

economies of these countries would allow me to easily distribute and sell my cologne. Spain and

Italy are both under the Euro monetary unit and they are both under the European Union. Spain

has a monetary policy separate from the national government that is controlled by the Bank of

Spain. However, Italy’s monetary policy is more involved and controlled by the European

Monetary Union rather than it being controlled mainly by the state. It is very helpful that they are

both under the Euro and the EU, but because Spain is more private when it comes to monetary

policy it may be easier to do business there, but still very viable in Italy. Both Spain and Italy are

very economically integrated in their region of the EU. Because of this, both economies of these

countries are fairly strong with Spain having a projected GDP growth rate of 6.5% this year

alone and Italy having a 6% GDP growth rate. Both countries have a strong climate for

innovation as there are a lot of privately owned and operated businesses in both of their mixed

economies. Cologne is already a very popular product in both of these countries, both having a

few of the leading fragrance markets in the world, so the innovative climate would not be of

much effect on my attempt to sell cologne. Spain ranks 39th in the world for its economic

freedom, making its overall economic attractiveness very high. Italy ranks 68th in the world for

its economic freedom, so its economic attractiveness is still substantial but Spain is much more

attractive in this sense. Due to these rankings in freedom, Spain would be much more desirable

than Italy, but the ability to sell a product in each of these countries freely is still very doable.

Spain has a very competitive economy, with a very competitive fragrance market. The popularity

of cologne and perfume in Spain would make it an easy choice to sell these products in, but

because of how competitive the market is, it would make it difficult to compete against bigger

more well known companies. This is a very similar situation in Italy, as it is ranked 30th for its
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economic competitiveness, and it also has a very strong fragrance market. Spain has a labor force

of around 57.7% with it slowly rising as the pandemic settles down, making for a decent amount

of labor availability that is slowly growing. Italy’s labor force is also between 57% and 58% that

is slowly recovering from the pandemic, with an abundance of labor availability. In my personal

operation, I would not need to be hiring many employees from either of these countries because I

would be producing in America and exporting there, but it is still an important thing to know that

affects their overall economy. Spain has a very open philosophy when it comes to trade, they are

the world's 11th largest exporter of goods, and multinationals that are foreign in Spain make up

for 45% of Spain's total global exports. Italy has a trade balance of 53 billion, and they export

more than they import and are very open to international trade and look towards it as a major

revenue source. Because of how open and active these countries both are when it comes to trade,

it is a no brainer that exporting and selling goods in these countries would be a reasonable thing

to do. As for foreign direct investment climate, Spain ranks high as the 13th in the world for

receiving foreign direct investments. Italy is also very open and welcome to foreign direct

investment, and it ranks 8th in the world in the foreign direct investment confidence index. Both

Spain and Italy are very open and receiving of foreign direct investments, which means their

economies are very stable and being supported by an abundance of investors, and this would

make international business in these countries very viable. As was said, Spain has a very strong

export and import climate, with them ranking 16th in the world for total exports and 15th in total

imports. Italy has an even stronger import and export climate with them ranking 8th in total

exports and 10th in total imports. Both of these countries export a greater volume of products

and services than they tend to import, making their standing in global trade very high and their

dependence on it also very high. Because of their extremely strong export and import climates,
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economic stability, and economic freedom, these countries would be very favorable to export and

sell cologne in. However, due to the high amount of economic competition in these countries,

specifically in their popular fragrance markets, it would prove to be difficult to sell a product that

already has major companies that rule the industry. However, the popularity of the industry

would make it a great possibility to grow if the correct marketing and sales tactics were taken.

Social - Spain

Another very important aspect to pay attention to in pursuing international business is the

social aspects of the countries you are entering. Social structure, religious influence, customs and

traditions, and lifestyle are all important things to consider. Spain is under a social structure of

democratic and social rule of law, and it advocates for plural politics, justice, and equality. Spain

is also greatly influenced by Catholicism and they often observe important religious holidays.

Spanish people also have many unique customs and traditions such as cheek kissing, coffee, beer

and wine, litter at bars, late meals, nightlife, personal space, and cleanliness. The Spanish people

also greatly value fashion and various nice things such as clothes and food. Also, thankfully for

my product, cologne and perfume are also highly valued in Spain as they uphold cleanliness and

Spaniards of every age can be associated with a clean smell. In Spain they love to spend time

with friends and family, eating out is also a very popular aspect of Spanish culture, and they

enjoy outdoor activities. Nightlife is also very popular in Spain. Considering the cultural

practices and lifestyle in Spain, Cologne would be a very successful product to sell there. When

we look at Hofstede’s framework and where Spain sits, it scores a 57 in power distance, 51 in

individualism, 42 in masculinity, 86 in uncertainty avoidance, 48 in long term orientation, and 44

in indulgence. I can only see a problem being with the high uncertainty avoidance, this could

cause people to avoid purchasing a product that they are unfamiliar with such as a new cologne,
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or it could lead them to easily purchase it because many people in Spain are already well

acquainted with fresh and fancy scents.

Social - Italy

In Italy, they have a social structure with a defined class system, but it does not constitute

what their occupation or quality of life will be. They simply just recognize it, and it is seen that

about 52% are identified to be middle class, 37% are part of the lower class, and 11% being part

of a higher class. Due to the high amount of middle class citizens, it would be a very good idea to

create a cologne and price it such that it is attractive to those in this middle class. Italian culture

is greatly influenced by the tradition of Roman Catholicism. Many of Italy’s bordering countries

also deeply influence Italian culture. Italy has many unique customs and traditions, they value

many of the same things that the people of Spain value such as family, food, holidays and

celebrations, religion, and they also have a deep connection and love for art and architecture.

Body language and gestures are also very important to the social culture of Italy. Consumer taste

in Italy consists greatly of ceramics, sweets and baked goods, food, and fashion such as shoes,

accessories, jewelry, and fragrances. Based on their popular consumer tastes, we can see that it

would be a great idea to sell a cologne to the people of Italy. As stated, the lifestyle of Italians

consists of family and friends, drinking and eating well, and enjoying the beauty that surrounds

them. Rankings in Hofstede’s Framework for Italy consist of a 50 in power distance, a 76 in

individualism, a 70 for masculinity, a 75 for uncertainty avoidance, a 61 for long term

orientation, and a 30 for indulgence. Based on these scores, I would only consider their amount

of uncertainty avoidance and long term orientation to be potential roadblocks. This is because

they could avoid purchasing a new and unfamiliar type of cologne, and they might not see the
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value of cologne to be long term in certain situations. Overall, because of the social aspects of

Italy, I would deem selling cologne here a good idea.

Technological

I will next examine the technological aspects of Spain and Italy to see if any of them

would affect my attempt at international business in these countries. This is an important thing to

consider for many specific products, but my product may not be largely affected by it. Spain is

very technologically advanced and has kept up with much of the world's technological

advancements and infrastructure. It has a very efficient telecommunications system and is ranked

23rd in the world for best technological conditions for companies to establish themselves there.

Because I am not establishing a company in Spain and simply just exporting my cologne from

elsewhere, this will not be the most effective to my efforts. Spain also is very advanced when it

comes to production and distribution. However, their distribution abilities will be of much more

use to me than their production. They have a large network of vehicle transportation of goods

and mainly distribute goods in large retailers and stores classified as traditional. They also have a

very prominent digital distribution system across social media and ads that we are also used to

here in the United States. Since I am planning on selling my cologne through select retailers in

my countries, Spain will be very helpful in the effort and if I am to digitally market my cologne,

the abilities of Spain will also come to great use. Italy is also very technologically advanced with

a strong infrastructure in technology. They are well known for their production technology, and

many Italian companies invest in technological research. This information is not the most useful

to my specific needs, but they could have a slight positive effect on my sales in the country.

Italian industry does offer a wide variety of advanced means of distribution such as roads, freight

hubs, and digital means. They also distribute products in large retailers which will be helpful to
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the sales of my cologne. Their distribution capabilities both physical and digital will greatly

assist in getting my cologne on the shelves of retailers, and putting ads out for the public to see.

Both Spain and Italy have favorable technological conditions that will prove to be useful when

selling my product.

Legal

Next, I will consider the legal regulations, and the ethical climate of Spain and Italy. I do

not anticipate that these two things will be greatly influential to my selling of cologne because

the practice of selling goods, specifically fragrances, is already so prominent in these two

countries so I don't believe that there will be any legal regulations that will prohibit me from

doing so. However, regulations with imports and trade may be present which could affect my

efforts, but also observing the economic freedom and the great degree to which both these

countries indulge in trade also makes it safe to assume there will be little to no regulation in that

area as well. Spain uses a law system that comes from Roman law, it is very civil and based on

legal codes that are comprehensive also to Roman law. There are small legal shipping regulations

when it comes to cologne and any liquid in Spain. Since many fragrances are flammable, they

must be held in a sealed container that cannot have any easy access to fire. There are also

regulations with how much liquid can be transported at once. They do have specific health

regulations that prohibit certain chemicals from being used in toiletries such as cologne, but

these regulations are no different than what is in the United States where I will be producing it. I

can assure that if I stick to using traditional and harmless ingredients in my cologne, I obey

Spain’s importation and trade laws, and distribute my cologne under their specific legal

conditions, I will not have any legal problems in Spain when selling my product. Spain also has a

strong ethical climate but this should not be of much affect to me. Italy also is rooted in civil
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Roman law, and they have many of the same elementary regulations when it comes to shipping

and transporting liquids, the chemicals that are used in products applied to the body, and trade

and importation regulations. Again, if these basic laws are followed, I will have no problems

importing and selling my cologne. It will be even more helpful to use commodities such as

transportation and distribution that are already in these countries because I can be very certain

that regulatory laws are already being followed and that should not have to change with my

product entering the market.

Environmental

Lastly, I will discuss the environmental policies and practices of Spain and Italy, and how

sustainable these two countries are. Like previous aspects such as legal and political, I do not

believe that this will have a huge impact on my efforts. Spain has a very solid environmental

policy and they are focused on using only renewable energy sources in the next 10 years. They

are also responsible when it comes to recycling and making sure their country's environment is

clean. Italy is also dedicated to using fully renewable energy sources and they have a unique soil

protection law and they are also advanced when it comes to keeping their country's environment

clean. Spain is highly sustainable with it ranking 21st of 162 other countries in environmental

sustainability. Italy follows these footsteps while ranking 15th in environmental stability. These

aspects are surely helpful on an extended basis to my business efforts, but they do not profoundly

have an effect on my specific import and sale of cologne in these countries.

Conclusion

After widely analysing the political, economic, social, technological, legal, and

environmental aspects of Spain and Italy, I have come to the conclusion that attempting to

produce my cologne in America and sell it through retailers in these countries would be a very
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possible feat. However, because of the general economic competition, the competition in the

popular fragrance industry, and specific social aspects of these countries, I do not believe that it

would turn out to be the most successful idea. As stated in the economic section, both these

countries are very economically competitive, which would make it difficult to enter the market

with many products. Also because of the already very prominent fragrance industry in Spain and

Italy, it would make it almost impossible for people in these countries to abandon their beloved

and familiar colognes and purchase mine. I would need to have a marketing tactic much more

extreme than even my distribution of the cologne in order to catch people's attention in the sea of

different cologne brands that are already existent and popular. I also believe that because of how

dedicated the people of Spain and Italy are to their own customs and traditions in terms of beauty

products, they would have a harder time bringing themselves to purchase an American made

cologne as opposed to a designer Spanish or Italian cologne that is already very popular.

However, I do believe that I would have better luck trying to sell cologne in Spain because their

fragrance industry is not quite as strong as Italy’s but I still think it would be difficult to do so. It

was very interesting to research the different aspects of these countries and I was somewhat

surprised to find that I came to the conclusion that it would not be the best idea to try to sell

cologne in these countries. I would focus on finding places that don’t have the biggest fragrance

industry and attempt to build that industry bigger with my product, and I would focus on finding

areas that are more open to foreign beauty products

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