What is Pest Analysis?
PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of management. These are known as PEST analysis.
Here we are analyzing the pest analysis because we want to open a new company Adidas in Pakistan which is Actually a Football manufacturing company, a European company.
Firstly, he wants to analyze the pest analysis in Pakistan before starting their business.
importance of Pest Analysis.
PEST influences are a helpful method of summarizing the external environment in which a business operates.
ADIDAS A football manufacturing Company
We see, that Adidas is a world famous football manufacturing company in Europe and supplies in all over the world and earned a huge amount of profit. But not the company decided to start business in Pakistan.
Purposes of adidas
Adidas know that the per capita income of Pakistan is low and if we manufactured the footballs in Pakistan then the cost will be reduced and here the labor cost is less than Europe and the company can earn a big profit from Pakistan. But due to some reasons Adidas Company has some problems because the company cannot know the environmental position of Pakistan. Due to this reason he is doing the pest analysis in Pakistan. here we see that how the pest analysis is done by Adidas?
Components of Pest analysis
Political Factors.
Economic Factors.
Sociocultural Factors.
Technological Factors.
These are four factors whose applies in pest analysis mostly, but here all factors will be discussed with details.
Political factors
Political factors, are how and to what degree a government interference in his economy. Specifically, political factors include areas such as
Ø Tax policy,
Ø Labor law,
Ø Environmental law,
Ø Trade restrictions,
Ø Tariffs,
Ø Political stability.
Political factors may also include goods and services which the government wants to provide or be provided but others there are some question in our mind during the analysis which is…..
The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:
Ø How stable is the political environment?
Ø Will government policy influence laws that regulate or tax your business?
Ø What is the government's position on marketing ethics?
Ø What is the government's policy on the economy?
Ø Does the government have a view on culture and religion?
Ø Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?
If these factors are goes in favor of Adidas then the company will decide that the Pakistani political environment is favorable for doing business and I thought that it is a big opportunity for Adidas to do business and for earn profit.
Economic Factors
Here the Adidas analyze the economy of Pakistan and know how the economic factors are influence on company the factors may be include of
Ø Employment level per capita.
Ø Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on.
These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy. Here the Adidas knows that if the majority of factors are going to his favor then the company can decide the start his business.
Sociocultural Factors.
In the sociocultural factors the Adidas company will analyze the Social factors include the
Ø Cultural aspects
Ø Health consciousness,
Ø Population growth rate,
Ø Age distribution,
Ø Career attitudes
Ø Emphasis on safety.
Trends in social factors affect the demand for a company's products and how that company operates. For example, an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor). Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers) and some question arises in our mind because the culture is different from country to country these may be….
The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:
Ø What is the dominant religion?
Ø What are attitudes to foreign products and services?
Ø Does language impact upon the diffusion of products onto markets?
Ø How much time do consumers have for leisure?
Ø What are the roles of men and women within society?
Ø How long are the population living? Are the older generations wealthy?
Ø Does the population have a strong/weak opinion on green issues?
If these are in favor of Adidas Company then will be the best environment for investing in Pakistan for manufacturing footballs.
Technological Factors.
In technological factors the Adidas Company will analyze the Technological factors which include ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation.
We know that, Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points: Ø Does technology allow for products and services to be made more cheaply and to a better standard of quality?
Ø Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?
Ø How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?
Ø Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?
Adidas Manufacturing Company analyze the technological factors if they meet their requirements then the company will decide it positively.
Conclusion
The conclusion of Adidas manufacturing footballs company will be that the company will firstly analyzed the four factors pest analysis if these are fulfilled the company requirements and we know that all factors never fulfilled at desired but if the majority will favorable then the company will agree to start his business in Pakistan and manufactured footballs and enjoyed the huge profit due to the business of company will expand.
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