Pest (political)


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Pest (political)

  1. 1. Elements of International Business<br />PEST (Political, Economic, Social & Technological) Analysis<br />1<br />
  2. 2. 2<br />PEST FORCES & BUSINESS :<br />
  3. 3. The political system play a vital part of country’s business environment, and in navigating different markets. A firm must understand the coverage & diverge, where, when & how to adjust business practices, operating procedures and strategies to meet the challenges posed by the local environment is a key to success in International business.<br />3<br />
  4. 4. A firm looking to operate in foreign countries must heed of 3 points:<br /><ul><li> Discard belief that the firm can directly transfer to foreign environment
  5. 5. Need to accept the different political & legal system
  6. 6. Acknowledge the opportunities & threats</li></ul>4<br />
  7. 7. The goal of the political system is to integrate the elements of a society. It includes the complete set of institutions, political organizations & interest groups, as well as the relationship among institutions and the political norms & rules that govern their activities. This system is effective when it’s supported by a legitimate consensus of people who live under it.<br />Political System<br />5<br />
  8. 8. Political factors implies how & to what degree the Govt. intervene the economy which influence the organization in many ways by creating the advantages & opportunities in the form of Tax Policies, Labor laws & Trade Restrictions and conversely they may also place obligations & duties on organization.<br />Political Factors<br />6<br />
  9. 9. Individualism Vs Collectivism<br /> Individualism refers to the primacy of the rights & role of the individual. E.g. Individualistic orientation of the US (Rule of law).<br /> Collective refers the primacy of the rights & role of the community. E.g. formal & informal relationships within the business community of Japanese & Chinese. <br />7<br />
  10. 10. 2. Political Ideology:<br /> It is the system of ideas that expresses the goals, theories, and aims of a sociopolitical program. E.g the liberal principles of the Democratic party & the conservative doctrine of the Republican party.<br /> Democratic system involves wide participation by citizen in the decision making process in the forms of parliamentary, liberal, multiparty, representative & social democracy.<br />8<br />
  11. 11. Totalitarianism system restricts decision making to a few individuals. Unquestioning support for the official state & opposition to activities that run counter to the goals of the state. e.g One Child Policy in China prohibits a family from having more than a child otherwise subject to steep penalty of $1300.<br />Totalitarianism are of Authoritarianism (North Korea), fascism (Italy), Secular (Vietnam, Singapore & China) & Theocratic (Taliban Party in Afghanistan)<br />9<br />
  12. 12. <ul><li>E.g. The coalition of Conservative along with Liberal Democrats in England formed the Liberal-Conservative Govt. PM Mr. David Cameron & Dy. PM Nick Clegg. which will bring Economic Reform to India by reducing & eventually eliminating the country’s unprecedented & unsustainable fiscal deficit.
  13. 13. British Govt. decided to work on a long-term view on enterprise, markets, fiscal responsibility & building a green economy.</li></ul>10<br />
  14. 14. 11<br />e.g. China, the second largest economy after U.S with 60% global growth, what drive others to go for China?<br /><ul><li>Market potential (poor looking at brighter economy)
  15. 15. Market performance (US & Britain realized in 19th took 50 years, whereas China in 9 yrs)
  16. 16. Infrastructure (Spent trillion of dollars in airports, dams, seaport, power plant)
  17. 17. Resource (Cheap manpower as 1/3rd of Mexico, 1/25th of US. )
  18. 18. Strategic positioning (Global strategies)</li></li></ul><li>12<br />China Govt. keen to know-<br /><ul><li>Who you are?
  19. 19. What you want to do?
  20. 20. How much you intend to invest?
  21. 21. Need to file an application to the concerned Govt. authority to determine the path & pace.
  22. 22. Seek permission from MOFTEC (Ministry of Foreign Trade & Economic Corporation) to see whether it encourages the capital formation, promotes, exports, create jobs or transfer tech.
  23. 23. More depend or terrain on bureaucratic system than legal statutes whereas the westerners are accustomed with “RULE OF LAW”
  24. 24. No formal legal System (No Comprehensive Bankruptcy Law protect business)</li>