Professional Documents
Culture Documents
7 IBTa
7 IBTa
https://openstax.org/books/principles-marketing/pages/7-2-assessment-of-global-
markets-for-opportunities
PESTEL
PESTEL.
POLITICAL FACTORS. Factors driven by government actions and policies.
A country’s political stability can affect nearly every facet of the country, especially its
economic conditions.
When there is increased political stability, the country’s economy tends to stabilize or grow.
Many investors choose to avoid entering markets that lack political stability, not only because
of the shaky economy but also because of potential changes in leadership, laws, and
regulations.
PESTEL.
POLITICAL FACTORS. Factors driven by government actions and policies.
Trade Regulations/Inhibitors.
Trade Regulations.
Trade regulations either promote or inhibit trade with other countries. Governments sets some
level of trade regulations.
The common trade regulations surrounding imports and exports around the world include
tariffs, quotas, trade blocs, and embargoes.
Tariffs are taxes that governments impose on imports coming into the country. Tariffs can be
imposed as a percentage or dollar amount.
Tariffs are generally used by governments to bring more money into a country.
Country dependent: Japan, has one of the lowest tariffs in the world at 2.5 percent for
nonagricultural products. The East African nation of Seychelles once had a much higher tariff
rate, at 25 percent.
PESTEL.
POLITICAL FACTORS. Factors driven by government actions and policies. Tariffs are
taxes that governments impose on imports coming into the country. Tariffs can be imposed as a
percentage or dollar amount.
Tariffs are generally used by governments to bring more money into a country.
Country dependent: Japan, has one of the lowest tariffs in the world at 2.5 percent for
nonagricultural products. The East African nation of Seychelles once had a much higher tariff
rate, at 25 percent.
Quotas are maximum allowable units to be imported into or exported out of a specific country.
Quotas are often used by a country to protect a domestic industry. For example, if the US
government limited the number of Japanese automobiles to 2 million imports per year, this
would cause lower sales of imported vehicles and, in turn, higher sales of domestically
produced vehicles.34
PESTEL.
POLITICAL FACTORS. Factors driven by government actions and policies.
Embargoes are bans on trading a product with a specific country and are imposed between
countries that have different political ideologies.
Examples: The United States, has embargoes against Cuba, Iran, North Korea, and Syria that
prohibit all transactions with these countries without a license.
Trade blocs are intergovernmental agreements that remove barriers of trade within regions of
the world.
There are currently 10 major trade blocs in the world. The United States-Mexico-Canada
Agreement (USMCA) and the EU27 are two prominent examples. The USMCA allows
free trade among Canada, the United States, and Mexico.
PESTEL.
POLITICAL FACTORS. Factors driven by government actions and policies. Corruption
Perceptions Index (CPI). An annual survey conducted by the Transparency International. A
measure of the perceived levels of public sector corruption. Marketers use this survey for
insights into country dynamics and can evaluate market viability of their product or service
offering. This guide helps company leadership determine how much work they may have in
understanding a country’s way of operating and what kind of work it would take to make their
product or service successful.
Range 0 (highly corrupt) to 100 (very clean).
Denmark, Finland, New Zealand (all scored 88, ranked 1 as clean)
Philippines (scored 33, ranked 116)
Most corrupt are Somalia (scoring 12), Syria and South Sudan (both scoring 13).
PESTEL.
POLITICAL FACTORS.
What investors should consider:
How stable is the political environment in the prospective country?
What are the local taxation policies? How will these affect your business?
Is the government involved in trading agreements, such as the European Union (EU),
the North American Free Trade Agreement (NAFTA), or the Association of Southeast
Asian Nations (ASEAN)?
What are the country’s foreign-trade regulations?
What are the country’s social-welfare policies?
PESTEL.
POLITICAL FACTORS.
Examples:
Corporate taxation
Other fiscal policy initiative
Free trade disputes.
Antitrust and other anti-competition issues. The regulation of the concentration of
economic power, particularly in regard to monopolies and other anticompetitive practices
(ie: price fixing, price discrimination, cartel, predatory pricing etc…READ ON THESE)
PESTEL.
Economic Factors. Economic factors relate to the broader economy and tend to be
expressly financial in nature.
What investors should consider?
What are the current and forecast interest rates?
What is the current level of inflation in the prospective country? What is it forecast to
be? How does this affect the possible growth of your market?
o What are local employment levels per capita, and how are they changing?
What are the long-term prospects for the country’s economy, gross domestic product
(GDP) per capita, and other economic factors?
What are the current exchange rates between critical markets, and how will they affect
production and distribution of your goods?
PESTEL.
Economic Factors.
Examples:
Interest rates. Interest rates might appear in a range of different places, imposed by a range of
different people. It’s obvious that the status quo for interest rates is of great interest to banking
institutions, but it might also affect companies whose strategies rely on taking out large loans.
Exchange rates. Exchange rates affects those who deal with export or import. Changing
exchange rates might affect how much a company has to pay to its international supplier to
satisfy them, which can affect profit margins, as well as take a lot of resources to stay on top of.
Recession. Period of temporary economic decline during which trade and industrial activity are
reduced, generally identified by a fall in GDP.
An economic recession (of whatever scale) has the potential to change the purchasing attitude
of customers, which might force companies to drop their prices or clear smaller volumes.
PESTEL.
Social Factors. They refer to shifts or evolutions in the ways that stakeholders approach
life and leisure, which in turn can impact commercial activity.
What investors should consider:
What are the local lifestyle trends?
What are the country’s current demographics, and how are they changing?
What is the level and distribution of education and income?
What are the dominant local religions, and what influence do they have on consumer
attitudes and opinions?
What is the level of consumerism, and what are the popular attitudes toward it?
PESTEL.
Social Factors.
What pending legislation could affect corporate social policies (e.g., domestic-partner
benefits or maternity and paternity leave)?
What are the attitudes toward work and leisure?
Examples
Demographic considerations
Lifestyle trends
Consumer beliefs
Attitudes around working conditions
PESTEL.
Technological Factors. Technology is everywhere and is rapidly changing.
Management teams and analysts alike must understand how technological factors may
impact an organization or an industry. How they impact research and development
(R&D) in terms of costs and competitive advantage.
What investors should consider:
To what level do the local government and industry fund research, and are those levels
changing?
What is the local government’s and industry’s level of interest and focus on
technology?
How mature is the technology?
What is the status of intellectual property issues in the local environment?
Are potentially disruptive technologies in adjacent industries creeping in at the edges of
the focal industry?
PESTEL.
Technological Factors.
Examples
Automation