PESTEL ANALYSIS – EMODC ALINA KHAN 20141-17621 KULSOOM SIDDIQUI 20141-17819 TOOBA ALAM 20141-17236 SARAH IMTIAZ 2015-118887 GWROUP E PESTEL ANALYSIS - CHINA Political factors affecting China A permanent member of the Security Council of the UN 4th largest country in the world by the land area A great destination for FDI China attracted a record high US$139 billion worth of FDI in 2016 3rd largest FDI destination in the world A member of the WTO, APEC, BRICKS, BCIM, ASEAN Plus, and G20 Good diplomatic relations with many great powers in the world trade and politics Economic factors affecting China 2nd largest economy in the world by the factor of the nominal GDP Largest economy on the basis of purchasing power Economic reforms started in the late 1970s helping China make rapid economic growth Transition from a centrally-planned to a market based economy GDP growth has averaged nearly 10 percent a year China high inequality, rapid urbanization, and environmental damages in order to maintain its economic sustainability Cheap labor is a great source of competitive advantage for China Rapid economic growth led to a rapid increase in wages in the country Average wage level tripled between 2005 and 2016 and now it is higher than that in Argentina, Brazil, and Mexico Governing overseas investor in countries like USA, UK, Australia, Pakistan, Bangladesh, Indonesia, UAE, Venezuela, Argentina The standard corporate income tax rate is 25% however the Chinese government reduced the rate to 15% for veteran businesses The individual income tax rate in China ranges from 3% to 45% PESTEL ANALYSIS - CHINA Social factors affecting China The most populous country in the world with a total population of approximately 1.4 billion A whooping market for consumer products The average wage level has been following upward trajectory resulting in an increase in consumer spending pattern People in China, like the citizens of other emerging economies, long for status symbols Increased consumer spending and status symbols are great opportunities for both domestic and foreign companies Literacy rate in China is 96.4% Spectacular progress in poverty reduction by helping over 68 million people come out of poverty in the last five years China aims to eliminate absolute poverty by 2020 Ageing population is a concern Technological factors affecting China World’s largest online population with 829 million users Global tech giants in China like Baidu, Alibaba, and Tencent Many big companies from other countries have failed in China as it is not easy to compete let alone sustain Set vision to be a global leader in science and technology by launching ‘mass entrepreneurship and innovation’ program in 2015 Transformation from a labor-intensive economy into an innovation-driven one Brilliant technological landscape for both domestic and international companies Environmental factors affecting China Rapid economic development has intensively affected natural environment Water and air pollution, industrial waste, deforestation, climate change, and biodiversity loss are some of environmental challenges Chinese government has taken important and responsible initiatives to address the environmental concerns Decentralization of responsibility to local levels, and encouraging public participation concerning environmental protection Legal factors affecting China Labor standards, employee compensation and benefits, labor disputes, and other relevant issues are regulated by The PRC Labor Law 1995, the PRC Labor Contract Law 2007, and various administrative regulations The Catalogue of Industries for Guiding Foreign Investment monitors and regulates FDI The Catalogue divides FDI into four categories i.e. encouraged, restricted, prohibited, and permitted Encouraged category: 384 industries - Agricultural machinery manufacture, and fruit and vegetable drink production etc Restricted category: 35 industries - Construction and operation of power grids, banks, and securities companies etc Prohibited category: 28 industries - Air traffic control, postal companies, and domestic express delivery of letters etc Permitted category: Industries that do not fall into any of the above mentioned categories PESTEL ANALYSIS - RUSSIA Political factors affecting Russia The Russian Federation is a semi-presidential republic with the President being the head of state, and the Prime Minister the head of government. Russia is a superpower and is one of five permanent members of the UN Security Council. It is also a member of a number of influential, prestigious, and international organizations and unions such as World Trade Organization, BRICS, etc. The tumultuous privatization of the 1990s created an atmosphere ripe for corruption as a new class of oligarchs began converting their wealth into political power. It has bilateral relations with a number of powerful countries in the world The cooperation between China and Russia is seen as one of the most significant ones Both Russia and the United States are in constant competition with each other to be crowned as the most powerful country in the world. Economic factors affecting Russia Russian oligarch Oleg Deripaska has described successful business in Russia as “40% government relations, 40% public relations, and only 20% business.” High imports in medical equipment which are being thwarted by government. In recent years,the tobacco industry has faced increasing challenges from organizations opposed to its questionable methodology but also is a high economy driving industry. Russia is one of the top 15 largest economies in the world by nominal GDP. A strong growth of 5.3% in the construction sector has contributed to the overall growth significantly. Russia is a key part of the BRICS (Brazil, Russia, India, China and South Africa) group. It has undertaken a number of initiatives to encourage foreign investment. Recent infrastructure developments have also immensely improved the logistical efficiency of doing business in the country. PESTEL ANALYSIS - RUSSIA Social factors affecting Russia Though Russia is the largest country on earth, it has, as of April 2019, a total population of approximately 142.7 million. It is important to note that the middle class is very swiftly increasing in size in Russia and many Russian consumers are very receptive to foreign brands, particularly in the field of luxury goods, food and drink. However, it is worth mentioning that Russia faces some social challenges that need immediate addressing. For instance, the country’s population is decreasing by around 700 people a day. The decline is caused particularly due to an ageing population, falling rates of immigration, a lack of enforcement of health and food regulations, and Western economic sanctions (Evans, 2019). Social inequality is another problem i.e Russia has more than 70 billionaires; however, many people in the country live in poverty. The poverty rate in Russia is over 13% and expected to remain around 12% over the next few years (World Bank, 2018). Technological factors affecting Russia Russia is one of the most technologically advanced countries in the world. It has a remarkable history in the fields of science, IT, and space technology. Indeed, ICT is one of the major drivers of economic development in Russia. As long as search engines are concerned, Yandex (a local online search engine) is the leader with over 60% market share (Berzgal, 2019). While cash-on-delivery is still the most preferred method of payment, online payments are becoming more and more popular day by day. Environmental factors affecting Russia Rich cultural heritage, scenic beauty, ancient cities, museums, and 23 UNESCO World Heritage Sites are some of the factors that attract millions of tourists to Russia every year. However, Russia faces some grave environmental challenges. For instance, damages caused by landfills, water pollution, air pollution, deforestation, soil erosion, and nuclear waste are to name but a few. According to a recent survey conducted by Moscow’s Higher School of Economics (HSE), 94% of Russians are concerned about the country’s environmental challenges (The Moscow Times, 2019). PESTEL ANALYSIS -SOUTH AFRICA Political environment in South Africa A parliamentary republic where a mostly ceremonial president is the head of state The head of government is from the legislature Pretoria is the administrative capital Cape Town is the legislative capital Bloemfontein is the judicial capital Borders with Botswana, Mozambique, Swaziland, Lesotho, Namibia, and Zimbabwe Direct access to the waters of South Atlantic and Indian Ocean Political environment is widely known to be rampaged by high degrees of corruption, reported mismanagement, political instability, increasingly popular protests and insurmountable violence The overall progress of economic development is often hampered by these problems The president of South Africa has to face overwhelming difficult challenges in winning the support and favor of the general public and also investors Economic factors affecting South Africa The economy of South Africa is second largest in Africa and 32nd in the world with a GDP It has an upper middle income economy of 368.3 billion South Africa’s stated owned enterprises play a hug role in the economy. Some major challenges faced in businesses are government bureaucracy, strong labor regulations, and shortage of skilled workers, political instability and corruption. PESTEL ANALYSIS -SOUTH AFRICA Social factors affecting South Africa Mandela’s South Africa is called the “Rainbow Nation”. This term was used to describe the multicultural diversity of the country by Archbishop Desmond Tutu. 11 official languages are spoken in the country. While, Islam, Christianity and other indigenous beliefs are the major religions. South Africa was a home to around 50.7 million people as of April 2018. The life expectancy for is 54 years for women while 53 years for men. Facts aside, some major issues faced by SA include, high unemployment and poor health care system. Economic growth and social mobility are being affectedcountry’s inadequate infrastructure. The society remains divided, due to the tensions residing between immigrants and local communities. Keeping the above-mentioned aspects aside, SA has amazing opportunities in construction supplies and building sector. Eye care, cosmetics, automotive, telecommunications, utility services, education also enjoy positive image in the country. Generally, the people of SA desire for quality education, better employment opportunities and rapid economic growth, that provide better opportunities for both local and international bodies. Technological environment in South Africa South Africa is one of the most technologically advanced countries in Africa. It has made an enormous progress in mobile software, security software and electronic banking services A number of international tech and social networking companies already operate in South Africa often through subsidiaries. Amazon, IBM, Microsoft, Facebook, LinkedIn, Intel, Dell, Novell, and Apple are some of the companies that can be considered in this regard. Online shopping is on the rise in South Africa. Consequently, there are great opportunities for online retailers. Likewise, due to a number of high profile cyber-attacks and other online vulnerabilities, demand for IT security products and software is high as well. It is worth mentioning that South African companies sell a lot of ICT products to growing African markets. PESTEL ANALYSIS -SOUTH AFRICA Environmental factors in South Africa South Africa is one of the most popular tourism destinations in the world. Cape Town rated ‘the World Best City’ in 2016. Abundant wildlife, scenic beauty, impressive coastlines, brilliant penguin-filled beaches and vivacious coral reefs have all contributed to the development of South Africa as a tourist destination. However, the country faces some environmental challenges such as water pollution, air pollution, land degradation, solid waste pollution, and deforestation. Legal environment in South Africa South Africa encourages Foreign Direct Investment in all sectors of the economy. However, there are some restrictions on foreign shareholders in some sectors e.g. mining, defence, insurance, broadcasting, telecommunications, and banking. Employees receive fundamental protection in South Africa. The Employment Equity Act 1998 (EEA) aims to achieve equality in the workplace by promoting equal opportunity and fair treatment in employment (Kleitman, 2015). PESTEL ANALYSIS -INDIA Political: India is one of the largest democracies in the world. However, the government has to face lots of mass protests and violence when balancing economic growth and religious agenda. One of the major issues India’s government faces is corruption. It creates a barrier in business and political activities and has a huge role to play in the economic field. In india, cows are most than just a livestock, looking from a political angle, Modi’s government has to handle cow vigilantism. They have to deliver economic growth taking along the religious agenda. Modi has promised to deliver economic growth and development. Public awareness and government initiatives are combating against corruption. Economic: India’s GDP is currently expected to reach 2610.00 USD (trading economics of india.com) by the end of 2020. Which can be said is one of the most powerful economies in the world. India focuses on beef export and leather industries to contribute to the overall GDP and employ millions. India is the 4th largest beef producer in the world and the third last exporter of beef. India faced severe issues after modi’s government made cow protection one of the symbols of winning the election. Beef exports increased 16% after the elections. However, cow slaughtering has become illegal in many states of india. India’s key exports include petroleum, jewelry, pharmaceutical, transport equipment and machines. PESTEL ANALYSIS -INDIA Social: India’s population stands at 1.35 billion (2019/20). It has a big consumer market and has huge opportunities for businesses to flourish and grow. They have a cheap labor force and large labour force. Due to high diverse population with many ethnicities, india makes an attractive market. India is known renowned for cricket and the film industry. However, a huge part of india still suffers from poverty and has a growing middle class. 1 out of 5 indians are still poor according to the World Bank. Cow vigilantism has a hige impact on the muslim minority in India. Cow protection programs have increased violence against the minorities specially in northern india. Muslim community seems to have alienated. Technological: India is the world’s third largest technological hub for startups (ibef.org) India offers huge opportunities to grow for entrepreneurs, working in technological and software based projects. The R&D and product development market in india is expected to grow at 10.65%. Environmental: Due to the increase of population. Lower standards of living and high pollution (noise, air), india faces many challenges. There is water depletion, floods, cutting down of forests and india has to face environmental challenges. Legal: India attracts many foreign investors due to the high number of opportunities and big consumer market. Indian companies are governed by the companies Act 2013. Labour laws that regulate employment relations in India are Employees’ State Insurance Act 1948 (ESI Act), Industrial Disputes Act 1947 (ID Act), Maternity Benefit Act 1961 (MBA) and the Payment of Bonus Act 1965 (PBA). PESTEL ANALYSIS – BRAZIL Political Aspect of Brazil Being one of the largest democracies in the world, it has huge potentials in many fields. A lot of political analysts believe that, Brazil might become a superpower in future. Brazil holds a spot in several international organizations and unions, e.g. the International Monetary Fund, United Nations, World Bank, World Trade Organization, the G20, Marcos and BRICS. It is also a key partner of the OECD. Brazil enjoys strong political and economic relations with United States of America, while its relations with neighboring Venezuela are deteriorating very fast. Brazil is facing foreign policy challenges along with some other issues that have hit Brazil very hard in recent years. Corruption is among the leading problems in the country. It is rampant and there’s hardly any chance of ending. According to the Corruption Perceptions Index of Transparency International, Brazil now ranks 105 th among 180 countries and territories in the world. Economic Aspect of Brazil Brazil is the 9th largest economy in the world having nominal GDP. It enjoyed a strong growth between 2002 and 2013, but entered intro recession in 2015, with a growth rate of -3.8% and in 2016 with a growth rate of -3.6%. Things started getting back on track in 2017, and the country saw a growth rate of 1.4% in 2018. Many forecasts suggest that the Brazilian economy will grow in 2019 and will continue to do so in coming years. The unemployment rate in 2019 remained 11.8%; however, it was 1% less than the rate recorded in 2017. Brazil ranks No. 1 in the list of Top 10 Coffee Producing countries in the world. It produced approximately 55 million in 2016/17. Brazil is also among the leading sugar producer and exporter in the world. 25% of the produce caters the local need, while the rest 75% is exported to more than 100 countries around the world. Soybeans, Iron Ore, Crude Oil, Raw Sugar and cars are the other top exports of the country, while Refined Petroleum, Vehicle Parts, Packaged Medicaments, Integrated Circuits and Cars are the top imports. United States, China, Argentina, Germany, South Korea and Netherlands are the top export destinations of Brazil. Whereas, the top import origins are Argentina, China, South Korea, United States and Germany. Being the key part of the BRICS, it has taken various initiatives to encourage Foreign Direct Investment (FDI) in the country. Right now, Brazil is the 4th largest FDI recipient in the world. The FDI took a downturn in the country in 2018, it still manages to maintain its position. PESTEL ANALYSIS – BRAZIL Social Aspect of Brazil Brazil enjoys the status of being one the most diverse countries in the world. It has a population of 208 million people approx. the life expectancy for women is 79 years and 72 years for men. Christianity is the major religion, while Portuguese is the major language in the country. Some major social challenges faced by Brazil include, adequate education for the children, proper housing and health care. Thousands of children live and work on streets and majority of them are exposed to drugs, crime and prostitution. Gender discrimination and racism is also rampant in Brazil. Apart from these major social challenges, the middle-class population is growing rapidly in Brazil. Its people are a lot modern and stay updated with the fashion world. They love buying branded stuff. The people of Brazil love Football and remain among the leading contenders of the world championship title in FIFA World Cup. In fact, it has produced some of the greatest footballers of all time. Technological Aspect of Brazil Sao Paulo has experienced a technological boom in last few years, specifically in the software development area for Web and Mobile. The country’s population is enthusiastic when it comes to Social Media and thus, around 505 of the population is engaged online activities of some sort. It has the 5th largest user population of mobile phones and internet in the world. It is known as the largest ICT market in Latin America and is among the largest in United States of America. The people prefer using mobile phones with internet as a mean of communication. Therefore, most of the houses do not have landlines. The government invests heavily in innovation and digital transformation. Also, may MNCs are also investing in Brazil’s IT sector. Environmental Aspect of Brazil Brazil is among the most beautiful countries in the world; having the Amazon River, Rainforest, Iguacu Falls, 2000 beaches, 62 National Parks, along with hundreds of conservation areas, that serve as the point of attraction for millions of tourists every year. The tourism industry in Brazil contributes heavily to the national economy. The environmental challenges faced by Brazil are also in rise. Deforestation, illegal poaching and wildlife trade, air and water pollution, land degradation and sever oil spills are the leading environmental issues faced by the countries. Though the country has taken various initiatives to overcome the environment related problems, its still faces a lot of challenges that needs to be looked upon. Legal Aspect of Brazil The article only highlights the business and employment related legal aspects of Brazil. There’s this common practice of writing down contracts of employment, whereas they are not usually required by the Brazilian law. Though it encourages FDI in the country, it imposes restrictions in certain sectors, including investing in postal services, nuclear energy, financial institutions. Whereas, private security and transportation is either restricted to the civilians or the authorization of the Government of Brazil.