DKSH is a holding company belonging to Switzerland and is engaged in offering market expansion services to its clients across different industries. Some of these segments are FMCG, healthcare, precision machinery etc. The PESTLE Analysis of DKSH of the external environment of the company that influences its operations, profitability and future outlook.
Political Factors
Political instability constitutes a significant risk to the capacity of an organization to run its businesses. Due to conflict, the management may need to take steps such as closure of company operations to maintain safety of its employees. It also determines the degree of investment that is made in unstable regions.
Since DKSH is a part of the global industry, the changing political climate in the international arena effects the business decisions. Events such as Russia and Ukraine war, disrupt various industries, including healthcare segment which is a part of the service portfolio of the company. The sanctions on trading and ethical pressure can further affect its business operations.
Moreover, events such as Brexit also carry implications for the chemical business unit of DKSH, since UK is a part of the supply chain and distribution for the company. In order to cope with the effects of uncertainty, the management has formulated a specific task force to analyze the emerging regulatory situation (DKSH, 2019).
Some other components that are an important part of the political environment for the company are regulations related to tax and trading policies. Global trade wars pose a considerable degree of threat and the intense competition makes it complicated to navigate the business environment. However, the management has been able to deal with trading issues effectively.
Economic Factors
The company manages market expansion for companies that are aiming to venture into Asian markets, as well as provide their products on a larger scale. The economic environment of these countries provides the foundation for the pace of business growth. Poor economic performance in these regions can lead to stagnation of growth, making it difficult for DKSH to achieve goals.
The increasing inflation has been exerting pressure on the company’s supply chain and other operations. Pricing of goods has been adjusted according to the inflation, and the company has to provide solutions to its client businesses related to the expansion in the specified markets despite the challenge of inflation.
The company also has to deal with the impact of changing buying power, rising cost of fuel, increasing freight cost and wage changes. All these factors affect the operational expense and profit margin for the organization, as increasing cost across these areas lowers profitability, while a higher cost is incurred in managing operations.
Social Factors
The client companies of DKSH are in need of a market expansion service provider that helps them in gaining insight into the target market. The ability to provide the required information provides the company with a competitive edge (Atkins, 2018). The Asian Pacific region is included among the profitable segments for the company, owing to the positive social trends.
European region has also displayed positive growth trend as an increasing demand has been observed. The role of the management is of critical importance in this context, as the market expansion decisions are based on the social factors. Variables such as population growth, distribution and urbanization determine the success business is likely to achieve.
Pace of urbanization suggests that a country is flourishing in terms of its economic stability and infrastructure, which indicates a positive business environment. With changing market demographics, the need for market expansion services increases. DKSH has been able to take benefit from the changing social outlook and increasingly complex consumer behavior.
Technological Factors
E-commerce gaining increase in popularity as a larger number of people shift towards online means of gaining access to products. The use of digitalization has been beneficial for many business, including DKSH. The management has used technology to gather data related to the consumer behavior and gain insights into the market dynamics to make effective decisions.
The company has been able to achieve significant growth in its e-commerce sales. The omni-channel portfolio enables the businesses to connect with customers thus increasing their market reach through DKSH’s assistance (DKSH, 2016). The company has been able to gain a larger presence in the online domain through its focus on digitalization.
Furthermore, by making the supply chain automated, the company has been able to make its operations more efficient. In addition, some of the products being offered by the company heavily rely on technology, such as could computing which is helpful for the healthcare industry, supported by the increasing trend of HealthTech and use of digital medium for patient solutions.
Legal Factors
The legal factors for DKSH are influenced by the countries where the company is operating in as the regional differences are reflected through the different legalities. The management has to understand and adhere to the legal aspects of its Asia Pacific, European and other regions. Some of the regulations include quality of goods, services and contract with the different stakeholders.
Environmental Factors
DKSH has formulated the goal of becoming climate neutral by 2030 as a part of its sustainability plan, which entails decreasing the emissions. This plan also includes components such as restructuring the transportation system to lower the vehicle’s impact on the environment. In addition, energy saving mechanisms and solar power has also been implemented (DKSH, 2022).
Along with that, the waste water management system has been put in place to play a positive role in protecting the environment. The company has also incorporated the use of recycled water in one of its denim finishing units, as a reflection of adhering the sustainable business practices.
Conclusion
DKSH is operating in a favorable environment as the economic, social and technological factors have increased the demand of its services. The political factors cause risk to the company’s operations, however, the strong market presence and strong hold in Asia Pacific and Europe sustained the position of DKSH, while new opportunities emerge due to environmental changes.
References
- Atkins, R. (2018). How DKSH turned trading house model upside down. Financial Times. Retrieved from https://www.ft.com/content/d16cbf2e-e34c-11e8-8e70-5e22a430c1ad
- DKSH (2016). Sixth Market Expansion Services Report: economic importance and strength of Asia continues unabated but market complexity increases – deep knowledge of regions and markets is gaining importance. Retrieved from https://www.dksh.com/media/854/54/Download_Media_release_MESReport_20161018_PDF_en.pdf
- DKSH (2019). Are you ready for Brexit? DKSH Holding Ltd. Retrieved from https://www.dksh.com/global-en/brexit2019
- DKSH (2022). Annual Report. Retrieved from https://www.dksh.com/global-en/publications/full-year-results-2022