PESTLEanalysis is a concept in marketing principles. In addition, the concept is usedby companies as a framework or tool to track the macro-environmental which isexternal marketing environment in which they are running or is planning tolaunch a new project, product or service. There are lots of strategic analysistools are available to business, but some are more common. The most commonlyused and detailed analysis of environment is PESTEL analysis. This is a bird’seye view of business practices. Besides that, managers and strategy buildersprefer to use this analysis to search their current market. It also helps toanticipate the future direction of the organization.
Furthermore, PESTELanalysis can help the business to reduce the impact or effect of the threats tothe organization, providing an easy-to-use and simple framework for theanalysis, the most important is it enables the company to do analysis beforeentering both nationally and globally. PESTLEanalysis stands for five factors, including Political, Economic, Social,Technological, Environmental and Legal. P stands forpolitical factor. Political factors dominate the current political situation inthe country.
It also reads about the impact of global political conditions oncountries and business. In this step, ask questions: “What kind of governmentleadership is affecting the decision making of a company?” This can includestaxes laws and tariff, government policies, entry mode regulations, taxes lawsand tariff, health and safety regulations.Political stability is also an indicator of economicstability. A country is politically stable and enjoying a high growth will havea business friendly environment. If a political instability, it can createinsecurity in the company. Especially in a country such as China, where a largepart of supply chain like Vivo, any kind of political or military damage cancause interruption to the business of Vivo, which can lead to financial losses.Such interruptions may undermine the operations of Vivo or its businesspartners. In some areas, geopolitical conflicts, terrorist attacks or politicaldiscordance are always more likely.
This will also adversely affect Vivo’soperating results and financial revenues. By this way, political factors can havea direct and indirect impact on Vivo’s business and profit. Furthermore, Vivofaces political pressure in Myanmar and Pakistan countries, its politicalenvironment is unstable, and its governance structure tends to changefrequently. This is not, of course, a major cause for concern as the Vivo hasmore or less incorporated political instability into its strategiccalculations. E stands for economic factor. Economic factors involve allthe determinants of the economy and the country that have a direct impact onthe company and resonate with the long term effects.
It also the factors thatcan summarize the market trends. For example, an increasing in the inflation ofany economy would affect the price of the company’s product and services. Inaddition, this will affect the purchasing power of consumers and change themode of supply and demand in the economy. Economic factors include inflationrate, interest rate, the foreign exchange rate, disposable income of buyers,unemployment rates and so on.
Therefore, companies analyze this factor based onthe environment. This helps to create a strategy that is consistent withchange.Most of the China people and across Asia have level of incomefar less than those people in developed countries or high unemployment ratesuch as China and India. As a result, people cannot afford the advanced latestphone from international brands such as Apple and Samsung. Vivo appeared inChina as their home grown brand and offering the latest smartphones atreasonable prices.
Apple’s I-phone and other Android brands have higher sellingprices compared to Vivo with similar characteristics. Thus, consumer able tobuy a smartphone with low price which has similar features to internationalbrands. China itself has a large market for selling phones with low prices andwith better features, while demand for cheap smartphones in other Asiancountries shows that Vivo’s social factors are very positive.S for social factor. The countries are vary from each other.
Every country has a unique attitudes. These attitudes have an impact on thebusiness. Then, social factors may ultimately affect the sales of products orservices of companies. Social factors including the social lifestyle,distribution of wealth, the cultural implications and the gender and connecteddemographics.Social and cultural factors are also of great significance inthe international business environment. Changes that have taken place at thesocio-cultural level can reduce the demand for certain products and servicesand increase the demand for other products and services.
Just as in the case ofsocial media, a few things have changed with the advent of it. If social trendschange, they will bring about more changes. Social and cultural forces affecthow people choose and buy. Consumer’s purchasing power are strongly influencedby socio-cultural factors. This also affects how brand markets themselves. Vivohas spending a lot of money on marketing. From market to market, Vivo hascreated strategies that suit the local cultures and tastes.T stands for technology factors.
Technologyis progressing continuously. The advancement has a great impact on thebusiness. Carrying out environmental analysis of these factors will help thecompany keep abreast of the changes. Technology changes every minute, and theinnovation of technology may affect the operations of the industry.
The way ofcompany to communicate with target market, the way of producing goods andservices depends on the technnolgy factors. This is why companies must alwayskeep in touch. Businesses should consolidate when needed. Then, technologicalfactors will business to understand how the consumers respond to trends.Technological change is happening faster in21st century, and much more is happening. There are more newtechnologies come and this make the old outdated. Vivo is making it morecompetitive by investing in R and manufacturing capabilities.
Companiesare investing in technology to build deeper relationships with their customersand reach a larger customer base. The need to invest in better technology isgrowing both in marketing, sales and customer service, which also can affectthe level of competitions among companies. Infact, data and technology now playing a more central role in the businessenvironment. The brand is gathering data, turning it into actionableinformation and using the data to make real time decisions and real timeactions. If a business wants to grow its customer base and to attract andretain customers, then reliable data can be very rewarding. In marketing,digital technology and social media are more effective than traditionalmethods.
Investment technology to provide personalized service brand is winning.Nowadays, international smartphone brand provide 4G to their customers, same asVivo also invest in 4G, thus Vivo able to compete with its competitors. Inaddition, not only those people who use I-phone can unlock their phone screensby fingerprint, but also Vivo users. In order to compete with the local brandsor international brands, Vivo has put more effort in the technology, to providebest function for the Vivo’s users. The second E in the PESTEL refers toenvironmental factors. The locations will affect the business transactions.Changes in climate change also can affect the trade. This will directlyinfluence the response of the customers to specific product or services.
Thesefactors all those that affect or are determined by the surrounding environment.The aspect of PESTLE is crucial for some industries, especially agriculture,tourism and others. The people’s attitudes towards the environment,geographical location, the climate and weather can also influence the operationof a company.Sustainable development is now an importanttrend for the big business in 21st century. Most of the big andsmall business are investing sustainability practices that not only incontrolling the costs but also to create a sustainable brand image. Such animage can be very beneficial to the business because not only customers butalso government are called to support such business to minimize their carbonfootprint and environmental impact. This is not just about reducing the carbonfootprint of a company, it is about improving the community and protecting theenvironment. Some companies with low or no carbon footprints also invest insustainability and environment.
No matter how big or small of the brands canreduce their carbon footprint and work hard to protect the environment. Vivohas been committed to sustainable development from the very beginning andstrengthened its commitment in 2017 to reduce their carbon footprint and alsothe environmental impact. In addition, Vivo is working to expand the renewableenergy mix and reduce energy use in the production chain.
The last factor in the PESTEL analysis islegal factors. Legislation changes from time to time. Many of these changesinfluence the business environment. Example, if a regulatory body sets aregulation on industry, then the laws can affect the economy and industry.
These factors have both internal and external aspects. A certain laws affectsthe business environments of a country, and the company maintains a certainpolicy for itself. There are some regulation in the legal factors such ashealth and safety regulation, advertising standards, equal opportunities,consumer rights and laws, safety of product and also product labelling.
Obviously,in order to be successful in trading, companies need to know what is legal andwhat is notFor companies operating internationally, thesituation can be particularly difficult. Different countries have differentlegal structures and different market. Require the international brands tooperate and comply with all these laws in any country. Thus, organization hasto know the set of rule structure in that country. Law and legal troubles can also increaseoperating cost. If a brands get caught up in a legal dispute, it can eventuallycause coughs to millions and losses a large amount of money.
In this situation,the law can be a big pain. Companies do their utmost to avoid legal troubles.In some countries, the necessary regulatory approval may take months and thiscan be difficult situation for the business. For instance, local laws andregulatory restrictions, including labor regulations and trade union agreementswill also make Vivo in trouble. In this way, legal factors have a significantimpact on the business and profitability.
Furthermore, Vivo not only focus to upgradethe phone system to the latest version but also put more attention on itsproduct safety. This is to prevent causing harmful to the consumers such as thephone explode case of Samsung phone Note 7. If the product safety is not therequirements, the brands might be kick out from that countries or not able tosell their products in that country. Next is the advertising standards.Advertising is one of the ways for the company to promote their products orservices through the multimedia.
Every country has different advertising standards.For example, advertisement in China might has little different withadvertisement in Malaysia like the model in the advertisement may wear a shortdress but it is not allowed in the advertisement in Malaysia.As a conclusion, it is true that industryfactors have an impact on the performance of the company.
Environmentalanalysis is crucial to determine the role of certain factors in the business.Moreover, PESTEL analysis allows Vivo to look at external factors. Manyorganizations same as Vivo use these tools to effectively predict the company’sgrowth. These analyze examines factors like revenue, profitability and businesssuccess. If the Vivo companies wants to make the right decision, then has touse environmental analysis.
As this analysis will bring advantageous to thecompany and make it easier when operating the business. Besides that, after thecompany completed the PESTEL analysis, the company should be able to use thisto identify the strengths and weakness for SWOT analysis.