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PESTEL ANALYSIS OF

By # Group 5 Janmey Patel ( 202 ) Nikhil Arora ( 206 ) Shashank Mohore ( 228 ) Aniket Gupta ( 229 ) Parandeep Chawla ( 231 )

>> Objective >>Brief on PESTEL Analysis >>Ease of doing business in UK on :


1. 2. 3. 4. 5. 6.

Political Front Economic Front Social Front Technological Front Environmental Front Legal Front

>>Conclusion

To study the ease of doing business in United Kingdom by analyzing the

country on political, economic, socio-cultural, technological, environmental and legal fronts.

Political factors Legal


factors

Economic
factors

Environmental
factors

Technological factors

Socio-cultural
factors

It is a strategic planning technique that provides a useful framework for analyzing the environmental pressures on a team or an organization.

Political factors

Global, regional, local and national . Political parties differing policies Integration with other jurisdictions Globalisation

Official Name

United Kingdom of Great Britain and Northern Ireland London 62.2 million 244,108 sq km Pound Sterling Church of England (Anglican), Roman Catholic, Church of Scotland (Presbyterian), Muslim App. 100% English, Welsh, Scots and Gaelic London, Manchester Moist with moderate temperatures

Capital Population Area Currency Religion

Literacy Languages Major Cities Climate

Political Map

The political environment is one of the most important factors

affecting the operations of a business.


Political forces are said to be part of the macro-environment.

All the factors of the macro-environment are external to an

organization, and completely beyond its control.


Political factors are concerned with the overall situation of politics in a

country, which can, in turn, be associated with the situation of government.

Type: Constitutional monarchy. Branches: Executive--monarch (head of state), prime minister (head of

government), cabinet. Legislative--bicameral Parliament: House of Commons, House of Lords; Scottish Parliament, Welsh Assembly, and Northern Ireland Assembly.
Judicial--magistrates' courts, county courts, high courts, appellate courts,

House of Lords, Supreme Court.


Subdivisions: Scotland, Wales, Northern Ireland (municipalities,

counties, and parliamentary constituencies).

1979 - 1997 : The Conservative government (Margaret Thatcher and John Major) was a firm believer in the privatisation of public corporations. 1997- till date :The Labour government that had been in power first under Prime Minister Tony Blair and then under his successor, Gordon Brown, lost its majority in the House of Commons in the May 6, 2010 election.

At Present Principal Government Officials Head of State--Queen Elizabeth II Prime Minister (Head of Government)--David Cameron (Conservative Party) Deputy Prime Minister--Nicholas Clegg (Liberal Democrat Party)

Stability of the government Government type (dictatorship, democratic, monarchy,

etc) Economic policy of the government Trade policy Diplomatic events in surrounding countries
Lack of political consensus is stifling Greenfield

investment in the U.K. The government must agree on a way forward for renewable if it is to unlock the billions of pounds poised to flow into the wind energy sector.
SOURCE: guardian.co.uk

Economic factors

Gross Domestic Product


As per GDP it is the 6th largest economy and its GDP amounts to

$2.603 Trillion for the period 2011 -12 and its GDP per capita is $39,459.
GDP contributor: Agriculture: 0.7%, Industry: 21.1% & Services: 78.2% GDP has grown by 0.9% in Q3, 2012 mainly due to London 2012

Olympic Games, but shrank by 0.3% in Q4,2012 mainly due to drop in mining and quarrying, after maintenance delays at the UK's largest North Sea oil field.
Inflation
Inflation rose to 2.7% in Oct compared to 2.2% in Sep2012 mainly due

to increased food prices & 19.1% rise in educational cost after the government lifted the cap on university fees. For both the months Nov & Dec annual inflation stands at 2.7%.

Interest Rates
The Bank of England has kept interest rates at 0.5% and held off from

more stimulus measures.


It also decided not to increase its programme of quantitative easing

(QE), having lifted it by 50 billion in July to 375 billion


Public Sector Net Debt
Rose from 1009.6 billion in Dec,2011 to 1111.4 billion in Dec,2012.

Public Sector Net Borrowing


Rose from 0.6 billion in Dec 2011 to 15.4 billion in Dec 2012.

Disposable Personal Income


Rose from 237835 million in Q2,2012 to 238842 million to Q3,

2012.

Bond Market
UK Government Bond Yield for 10 Year Notes declined 6 basis points

in Dec,2012 which means it became less expensive to borrow money from investors.
Stock Market
Stocks in the UK had a positive performance in Dec,2012. The UK

Stock Market (FTSE 100), rallied 257 points or 4.23% in the month.
Consumer Confidence Index
Consumer Confidence Index fell to 38 in Dec,2012 from 40 in Nov,

2012.
Mainly due to cost of living which continued to rise at more than twice

the rate of underlying wage growth and also due to crisis.

ongoing Euro

Unemployment Rate
Unemployment Rate in the United Kingdom decreased to 7.70% in

November of 2012 from 7.80% in October of 2012.


Trade Deficit
Trade deficit decreased from -3.7billion in Oct 2012 to -3.5billion in

Nov 2012.
Exchange Rates
The GBP-USD spot exchange rate depreciated by 1.27% during Dec

2012.
British Pound per USD Dollar is 0.6324 for the year 2012.

Exports : $481 billion, 2012 ( 12th as per World Ranking)


Others (manufactured goods, food, beverages, tobacco) 36%

By Products

Transport Equipment Chemical Products

16% Machinery & Equipment 10% Computer, Electronic and Optical Products Pharmaceutical Products

9%

6% 7%

8%

Refined Petroleum Products


Basic Metals

8%

Exports : $481 billion, 2012 ( 12th as per World Ranking)


By Country
United States

13%

42%

Euro Area Countries (Switzerland, Belgium, Ireland, France, Germany,Netherland, Italy, Spain )
45%

Rest of the World

Imports : $646 billion, 2012 ( 7th as per World Ranking)


By Products 5% 12%
Manufactured Products (Computer, Electronic and Optical Products, Transports Equipment, Chemical Products, Food and Beverages, Chemical products,Apparel, Textiles and Leather) Raw Metals & Fuel

Others

83%

Imports : $646 billion, 2012 ( 7th as per World Ranking)


By Country 8% 7% 6%
China United States Norway Germany Netherland France Belgium Others

49%
12%

7% 5% 6%

Socio-cultural factors
Link with business

Demographic factors Aging population Family life Changes in lifestyle Education levels Labour force Work place Etiquettes

Total population 63.2 million


Life expectancy ratio 80.4

Year
Aging Population

Smaller labour force

supporting the growing population of retired workers.


This is forecast to get worse

over the next 20 years

A number of social factors have

increased the flow of workers into the UK.


The UK has an ageing population.

Without immigration, the labour force would be shrinking


Many migrants also moved to the

UK to improve their standard of living.


Unemployment rate 7.7% (Sep-Nov

2012)

On average 2.4 people live as a

family in U.K. which is smaller than most other European countries.


Number of single-person

households increased to 29 per cent of all households.


It is estimated that by 2020 there

will be more single people than married people.


Around 46% of children in Britain are born to unmarried (cohabiting) parents.

The English are said to be reserved

in manners, dress and speech. They are famous for their politeness & self-discipline
They have Etiquette on Dos &

Donts, Greeting and other social custom.


Social class as the grouping of

people by occupations.

Time keeping

Meetings
Presentations Report

Lunch time
Bad behaviours Dress code

Peer group interaction

Spreading of and breakthrough in new technology Research & Development (R&D) New materials, products and processes Information Communication and Technology (ICT) changes. Rates of obsolescence

Technological factors

Technological innovation backed by excellent research. The European Innovation Scoreboard ranks the UK, one of the

innovation leaders, with innovation performance well above that of the EU average and all other countries.
The UK has claim to 23 Nobel prizes in the life sciences. (medicine

and chemistry). UK researchers produce 16 research papers per US$1 million of research funding (compared with 9.2 papers in the U.S. and 3.6 in Japan).
According to Global Information technology report 2012 UK has

advanced in Business ICT usage ranking.

In terms of NRI (Network Readiness Index), UK has been up by five

positions.
The UK also ranked 10th in how its regulatory environment encourages

growth of the IT sector. Ranked 13th for innovative business that use the technological resources to the fullest.

Identified Potential Growth Areas:

Biotechnology and Pharma Sector Sensors and Computing Agricultural Technology Advanced material Eco infrastructure Energy Technologies

Consumers need more convenient shopping and technology plays a vital role in enhancing user experience and cost effectiveness. Self checkout, in store media, intelligent scales and shelves, electronic advertising displaysthese are just some recent innovations in retailing (Fiorito et al., 2010).
Technology is a major macro-environmental variable which has

influenced the development of many of the Aldi products. The new technologies benefit both customers and the company: customer satisfaction rises because goods are readily available, services can become more personalized and shopping more convenient. The launch of the Efficient Consumer Response (ECR) initiative provided the shift that is now apparent in the management of food supply chains (Data monitor Report, 2003). Aldi stores utilize the following technologies: Wireless devices Intelligent scale Electronic shelf labeling Self check-out machine

Global warming Pollution factors Green energy Energy conservation Recycling Natural resource depletion

Environment al factors

The issue of waste management and recycling is acute in

London - the capital produces 17 million tonnes of waste each year. forecast to rise to 26.5 million tonnes in 2020 The existing organisational arrangements however are complex with a number of waste disposal authorities at sub-regional and local levels.

37% of household waste was recycled in 2008/09. There was a 235% increase in household recycling in

England between 2000/01 and 2009/10.


23 million tonnes of household waste was generated in

2009/10, of which 9.4 million tonnes was recycled, reused or composted.


In 2009/10, compost was the largest component of recycled

waste, comprising 40% of the total.

In 2009, 48 million tonnes of C&I waste was generated in

England, a decrease from 67.9 million tonnes in 2002/03.


52% of C&I waste was reused or recycled in 2009,

compared to just 42% in 2002/03.

Glass

Recycling glass products uses 40% less energy than making glass products from all new materials. However, not all glass containers can be recycled. Paper Paper is the number one solid waste product in the U.K., and it takes 60% less energy to make paper from recycled paper than from fresh wood. Recycled paper also uses fewer chemicals, bleaches and dyes

Created Under the Royal Warrant in 1970. Primary function to advise the Queen, Government,

Parliament and the Public on Environmental Issues.


Closed on April 1, 2011 as part of the Coalition Governments

Spending Cuts.
The Commisions report covered both the Natural and the

Built Environment.

Commitment to reduce emissions of carbon dioxide by

80% by 2050 (compared to 1990 levels)


Despite increased awareness of environmental issues,

nearly one-quarter (24 per cent) of adults aged 16 and over in England in 2007 left their television on stand-by overnight.

Legal factors
Competition laws Labour market legislation Standards Information disclosure Intellectual property laws Laws can be an opportunity as well as a problem.
Eg car emission laws

The United Kingdom has three Legal Systems:

English Law, which applies in England and Wales. 2. Northern Ireland Law, which applies in Northern Ireland. 3. Scots Law, which applies in Scotland
1.

The Supreme Court came into being in October 2009,

replacing the Appellate Committee of the house of Lords.


Highest Court of the Land for all criminal and civil cases in

England and Wales and Northern Ireland and for all civil cases in Scots Law

A Company may be Incorporated under the Companies

Act 2006 or under the European Company statute.


Formation occurs through a series of procedures with the

Registrar at the Companies House.


Fee for registration varies from 18 to 100 (for same day

incorporation).

Parameter Ease of Doing Business Rank Starting a Business Dealing with Construction Permits Getting Electricity Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Resolving Insolvency

United Kingdom 7 19 20 62 73 1 10 16 14 21 8

India 132 173 182 105 94 23 49 152 127 184 116

Customs duty is assessed on the fair market value. Import prices for products entering the UK from non-EU states

generally consist of: Cost, Insurance, Freight and Duty, with VAT of 15% levied on the aggregate value.
The commercial invoice value is usually accepted as the normal price,

but if an unrealistic value has been declared, HM Revenue and Customs (HMRC) reserves the right to assess a fair market value for duty purposes.
In addition to customs duties on imported goods, an excise tax is levied

on in-country sales of alcohol, tobacco, and road vehicles, and on sales of oil and petroleum products

A limited range of goods requires import licenses, which

are issued by the UK Department for Business, Enterprise and Regulatory Reforms Import Licensing Branch.
These include firearms and explosives, nuclear materials,

controlled drugs and certain items of military equipment

The UK has no significant trade or investment barriers and

no restrictions on the transfer of capital or repatriation of profits. The very few barriers that exist area lmost all attributable to UK implementation of EU Directives and regulations

Strengths
1) Has the economic resources to survive
2) Good industrial relations 3)Political willingness to adapt to changing world 4)Good education system compared to most countries 5)English as first language and is the world language therefore improves business. 6) Recovering economy 7)Improved management system

Opportunities
Reductions in barriers to trade therefore increasing trade partners Fill skills gap from migrants( Proposed policy on CAP on migration however may be otherwise) Larger market in which to trade

Weaknesses
1) Strong pound makes exports expensive

Threats
Increased competition due to cheaper labour etc

Businesses relocated abroad due to cheaper costs Reduced E.U. spending on UK as new countries require investment Cheaper imports from abroad

2 )Skills shortage

3)Not enough R+D

The easiest place to set up and run a business in Europe: The World Bank found that it takes 13 days to set up a business in UK, compared to the European average of 15 days. It ranks the UK first in Europe and fifth in the world to setup a business. Source: Doing Business 2012. The best place in Europe for doing business: The World Banks Doing Business 2012 ranks the UK fifth in the world on Ease of Doing Business making the highest ranking country in Europe. Source: World Bank. Doing Business 2012

The least number of barriers to entrepreneurship in the world: The OECD noted

that the UK is fifth in the world for Product Market Regulation, has the least barriers to entrepreneurship in the world and has the third least barriers to trade and investment in the world. Source: OECD, 2012.
One of the most stable political environments to do business (IN SPITE OF

COALITION GOVT.) According to Transparency International, the UK is one of the most transparent (least corrupt) countries in the world. It has a higher rating than France, Belgium, USA and Japan.

Stable regulatory environment: The UK has a consultative approach to the

formulation of regulation, so there are no surprises for business.


Speaking in the international language of business: operating in English gives

firms in the UK a natural advantage when communicating globally.


Springboard to Europe: The UK is the number one gateway to Europe, giving

easy access to the 27 member states of the European Union, the world's largest single market, with its population of nearly 500 million.
Number one location for European headquarters: More overseas companies set

up their European headquarters in the UK than anywhere else. (Source: European Investment Monitor)

Outstanding transport links: The UK offers world class transport links.

Heathrow's new Terminal 5 is now open and working efficiently. Additional expansion is planned for international airports at Stansted and London City; for sea container terminals at London Gateway and Felixstowe; and for the rail network, with investment in London Cross Rail and rail freight infrastructure.
Magnet for foreign investment: In 2012, the UK attracted 432 new investments

and expansion of existing investments, the highest in Europe. (Source: European Investment Monitor, December 2012)
Productivity rapidly increasing: Historically, the UK had lower productivity

than its main competitors, but this is changing and the UK has closed the gap with many countries and overtaken others