External Environmental Analysis

Kotler (1998) claims that PESTLE analysis is a useful strategic tool for understanding market growth or decline, business position, potential of the business and future direction of the business.

Political/Legal Factors

Political and legal policies differ greatly from country to country and this presents a number of potential difficulties when entering a new market. How politically stable a country is and whether that country welcomes foreign direct investment is a key factor in deciding market viability. Also the influencing powers between governments and the relationships plays an important part. As the USA is a member of the World Trade Organisation (WTO) this allows free trade and any disagreements can be facilitated as necessary. There may be industry specific regulations which need to be addressed and may limit the level of investment and production. The investment regulations need to be considered as these will vary from city/region/state. Environmental regulations will need to be considered in relation to the country. The consumer law and protection within the USA needs to be addressed and the fact that it varies from state to state. Health and safety regulations may be an issue due to lack of enforced standards and differing levels. Also employment law and contracts need to be considered as these may differ and may involve communication with unions or similar representatives.

Economic Factors

Economic growth trends within the country need to considered and whether it is viable to enter the market at that particular time. The taxation levels also need to be addressed along with any incentives offered. Government spending levels will also need to be considered as this may affect the potential for any grants or subsidies.

Levels of personal disposable income is a major factor which needs to be considered and how changes in taxes and inflation can affect this (e.g. hyper-inflation in Zimbabwe) along