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 and legal policies differ greatly from country to country and this presents a number of potential difficulties when entering anew 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 maybe 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 stateto 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 growth trends within the country need to considered and whether it is viable to enter the market at thatparticular 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) alongwith the spending power of a country as a whole. The affordability of the product, therefore needs to be considered within this context. Organisations need to be aware of the potential for changes in taxation, interest rates and exchange rates.
Somebody experienced problems in ??? due to increased tax and cut in exchange rates = reference.
The potential for the growth of the job marketand current unemployment levels needs to be considered.
Consumer confidence is a vital part in the process as if the price is not right then this will not attract consumers. Global recessions need to be considered as this affects general consumer spending and competitors activities and abilities. An actractiveness of investing within a country can be based on that country’s level of GrossDomestic Product (GDP), levels of government debt.
The demographics of the population of the country as well as from state to state is an important factor along with the diversity of that population. The lifestyle changes of the population will play a key part as people look towards a more healthy lifestyle. People may have certain attitudes and perceptions of European productsand designs. Local tastes and trends will differ and will need to be considered. With all this the earning capacity and therefore PDI needs to be addressed.
Technology is key factor for developing and continuing to have competitor advantage. It is important that the necessary research and development is carried out to future proof the product and meet the needs of theconsumer. At a time when pressure is on organisations to use more sustainable means of energy and alternative fuels, it is important to investigate these. Information technology plays a huge part in a company and gaining competitor advantage. Advances in technology need to be embraced. Communication channels have also changed and methods of communication with consumers needs to considered....
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