Political Factors

Businesses struggle in regions that are marked by political turmoil and violence. Brazil has facing political instability over the years, resulting in uncertainty for the organizations. The protests that erupted after the shift in government happened as anti-democratic people gathered together. The mass protest in January 2023 turned the country’s political climate volatile.

As a result to the violent protests in Brasília, the military involvement was required to handle the matter and restore the political equilibrium. The attack on state institutions caused nationwide tension and the investors regarded the country as a high risk region for investment. Another factor that contributes to unfavorable political climate is polarization (Andrade, 2023).

From 1980 to 2012 Brazil has flourished due to stable political domain. However, from 2013 onwards the political climate altered and riots and protests became a part of the normal occurrences. This change in political environment had negatively affected business growth opportunities and also created a discouraging dynamics for investors.

Economic Factors

The economy of Brazil shows that the country has been struggling in maintaining a steady pace of economic development. The onset of pandemic and the weak policies of the government have further adversely impacted the economic environment. The GDP growth has been significantly slow, hinting at the underlying economic issues.

Brazil is a part of the trading group of BRIC, and during the pandemic the comparative analysis of these countries indicates that Brazil is lagging behind in terms of GDP ratio. Other countries have also faced pandemic and the consequent economic decline; however Brazil reported lowest GDP growth, averaging 0.3% in the past 10 years (The World Bank, 2022).

There has been some improvement in the GDP from 2020 to 2021. However, the country faces economic challenges arising out of high unemployment, inflation and poverty rates that make the economic progress slower. The limited trading on the international front and discouraging tax policies for businesses also slows economic progress (Martuscelli, 2023).

Social Factors

Brazil is a culturally diverse region with a population of more than 216.4 million people. The country has developed on the social front through increased urbanization and improving the life facilities for the population. Despite the positive developments, there are certain social issues that are holding it back from making rapid economic progress.

High crime rate is one of the major challenges for Brazil, as businesses have to deal with issues such as cargo stealing and extortion. A high rate of such crimes lowers the level of confidence of the businesses, which reduces the likelihood of potential investors making investment decisions (Almeida & Montes, 2020).

During COVID consumer behavior has shown altered buying patterns as a larger number of people spent their income on healthcare related items. A smaller ratio of spending was directed towards purchase of non health and luxury items such as clothing. Another change that was triggered by pandemic was a preference of online shopping over physically visiting the stores.

The online purchase trend has maintained the momentum even after the lockdown has ended, showing the long term changes made on consumer buying behavior. Pandemic has also affected the brand’s market share as customers responded to price difference and opted for lower price brands (Fernandes, et al., 2021).

Technological Factors

Brazil has invested in the development of its technological capability and has shown improvement in terms of technological advancement. Despite this growth, the country has not been able to fully utilize the growth potential offered by different technologies. Strengthening of the country in this sector can help its different sectors in growing and innovation.

The government has taken steps to use digital development to create a favorable business environment. An example of the increased focus on this domain is development of Brazilian Digital Transformation Strategy with the aim to use digital education and skills to boost organizational productivity and country’s economy (Mari, 2022).

Legal Factors

The legal environment in Brazil is facing challenges of high corruption and poor enforcement of laws. There are regulations that have been developed to facilitate businesses to operate smoothly, however the high corruption creates unwanted barriers to business growth. In spite of these challenges, the country is trying to develop a more robust legal framework.

There are laws related to employment, labor management and consumer rights. Moreover, there are regulations for the foreign employees working in the country. Improvements are required in legal framework to make it encouraging for entrepreneurs and start ups. Taxation is another problematic area that needs to be modified to create a favorable business environment (The World Bank, 2022).

Environmental Factors

Environmental changes have propelled the governments and environment protection agency to take the needed steps to lower the environmental damage. Some countries have been able to implement sustainable and green practices, while some other regions find it challenging to adhere to eco-friendly business requirements.

Brazil is included among those countries that are lagging behind in making significant improvements in the business operations in terms of environmental standards. The country is renowned for having the largest rainforests which are threatened due to deforestation and the high degree of emissions from the different industrial units.

According to The World Bank (2022), the government has not been able to develop a clear and comprehensive strategy to deal with the ongoing climate issues. There have been some guidelines for the businesses and the development of goals for reducing carbon emission. But there is an evident lack of strategy to achieve these targets.

Conclusion

Brazil has a challenging business environment due to the slow economic development and issues pertaining to economic and environmental factors. However, with the adoption of suitable policies and regulations, the negative impact of these factors can be curtailed.

References

Almeida, A. F. G., & Montes, G. C. (2020). Effects of crime and violence on business confidence: evidence from Rio de Janeiro. Journal of Economic Studies, 47(7), 1669-1688.
Andrade, V. (2023). Brazil Riots Sap Investor Sentiment After Rocky Start to Year. Bloomberg. Retrieved from: https://www.bloomberg.com/news/articles/2023-01-09/brazil-riots-sap-investor-sentiment-after-rocky-start-to-year#xj4y7vzkg
Fernandes, P., Frnacis, T., Hoefel, F., Lima, L., Pitten, G. H., & Zaroni, C. (2021). Survey: Brazilian consumer sentiment during the coronavirus crisis. McKinsey & Company. Retrieved from: https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/survey-brazilian-consumer-sentiment-during-the-coronavirus-crisis
Mari, A. (2022). Brazilian government amends digital strategy to include govtechs. ZD Net. Retrieved from: https://www.zdnet.com/article/brazilian-government-amends-digital-strategy-to-include-govtechs/
Martuscelli, P. N. (2023). What are the big economic challenges facing Lula’s government in Brazil? Economics Observatory. Retrieved from: https://www.economicsobservatory.com/what-are-the-big-economic-challenges-facing-lulas-government-in-brazil
The World Bank (2022). The World Bank In Brazil. Retrieved from: https://www.worldbank.org/en/country/brazil/overview

Being a part of UB group, the Kingfisher airline started its operations in 2005 but failed badly despite of having the loyal customers, wide network and brand visibility.  It has however submitted a rehabilitation plan to take a fresh start. PESTLE Analysis is carried out to understand the risks from various factors which may result in the growth or decline of any company.

Political Factors

Being a toast of the aviation service once, the Kingfisher airline was exposed to various political issues in India. The government facilitated the monopoly of the Air India and put various limitation for the private airlines. The limited foreign equity and Non Resident Indian investing was another factor. The Kingfisher has remained under a financial crisis since 2012. It shut down its operations after failing to pay the taxes and loans that were due.

Economic Factors

The landing of the Kingfisher airline from the sky to the ground is a result of the turmoil which the Indian economy is facing. The rising fuel costs and strict foreign direct investment restrictions are affecting the sector badly. The changes in the interest rate and the currency value also affected the airline’s revenues and sales.  The business cycle also affects the airline industry as during the recession phase, the people consider air travel as a luxury.

Social Factors

With the improving living standard and the disposable income, the people are now willing to pay for travelling worldwide. Kingfisher has high customer value and is famous among the people. It takes due care of its clients from various religions, cultures and castes. It charges premium price which was easily paid by the clients for an amazing flying experience.  The environment inside the plane is very friendly which makes the customers more comfortable.

Technological Factors

Kingfisher aircrafts are equipped with latest entertainment facilities as a TV is provided on the back of every seat. It is the only Indian domestic airline offering 16 live channels. The online e booking and check in allows the customers to proceed from their mobiles and laptops.  The technology is driving the image of airlines through developing the modern communication, navigation and air traffic management systems. The infrastructure development also helps in reducing the maintenance costs.

Legal Factors

The Indian aviation sector faces various legal restrictions as the state policies, laws and regulations. One reason of Kingfisher airline failure was the requirement of license to fly to the international routes after its venture with the Air Deccan. The tax levies by the central government are now being reduced after understanding the financial difficulties of the airlines. The foreign direct investment regulations are also being revised which will result in more capital inflow.

Environmental Factors

Fuel is the major expense in the airline industry. The revival plan of the Kingfisher airline clearly depicts various environmental friendly solutions. One step is to adopt small sized aircraft which will consume lesser fuel leading to lower carbon emission. Another step will be using one engine instead of two. The fuel efficient aircrafts will reduce the operational costs and reduce the financial burden from the airline. Another environmental challenge for Kingfisher airline is to reduce the noise of the aircrafts. It requires introduction of new technology for producing new jets.

The post PESTEL-PESTLE Analysis of Kingfisher Airlines first appeared on Free PESTEL Analysis.]]> 416 https://freepestelanalysis.com/pestel-analysis-of-tata-motors/ Sat, 13 Feb 2016 18:33:49 +0000 http://freepestelanalysis.com/?p=239 A PESTLE analysis of Tata Motors involves examining the external factors that could affect the company’s operations and performance. The acronym PESTLE stands for Political, Economic, Sociocultural, Technological, Legal, and Environmental factors. Introduction Tata motors is headquartered in India and they are the market leader in India. They also ship to other parts of the […]

Introduction

McDonald’s first started its operations in U.S. in 1940. Since then it has expanded by leaps and bounds and is now present in 119 countries managing more than 36000 outlets, making McDonald’s either the largest or the second largest restaurant chain in the world. It is famous worldwide for its burgers but its initial product wasn’t a hamburger, it was a hot dog. Today McDonald’s is employing every one in eight Americans. Its total number of employees is more than the population of Philadelphia and customer base is more than the population of France and UK. The strawberry milkshake that they offer contains 50 kinds of chemicals but not actual strawberries. (95 Interesting Facts About McDonald’s food, 2014)

Political

Fast food industry has always been on the target of dieticians who believe that more people are dying of obesity and heart problems, which are the result of obesity and fat, than smoking and lung cancer. When tobacco companies are not allowed to market their products than fast food restaurants should be treated the same way. McDonald’s all over the world has taken huge hit as health consciousness is increasing and more and more people have become concerned about a balanced diet. Denmark put restricts and limits on the amount of Transfer that can be used by any fast food chain in their meals. In UK there are restrictions on the amount of salt to be used in food. In Germany they are instructed by law to put labels on their food, mentioning nutritional value of the meal. These situations require being dynamic and responsive.
McDonald’s announces to increase the wages by 10% in order to stop the employees from protesting and going on a strike.

Economic

McDonald’s is operating in domain where economic crisis actually benefits it, being cheaper alternative to fine dining. During 2008 crisis McDonald’s grew by 4.5% in revenues and increase their marketing spending by 7% when all other companies were cutting their budgets. Burger King sold hamburgers below their cost as a result of which their profitability declined and their franchisers sued them for forcing them to sell at a price which lowered their profits. Except for America sales grew in all markets.

Social

McDonald’s has taken hit worldwide for providing unhealthy food options and the situation is getting worse for them as people are more health conscious now than before. Organic food market is expanding. McDonald’s had to make some healthy changes in its menu by offering fruits, salads, milk and smoothies. They have also spend millions of dollars in marketing trying to shape their image around fun and joy in order to take consumer’s mind off the junk food. In a holly movie Super-Size Me the main character lived on nothing but McDonald’s for 30 days, consuming it 3 times a day and at the end of this period he had gained considerable amount of body fat which could lead to heart diseases and other illness. After this movie McDonald’s faced huge problems in gaining back the confidence of its consumers. (PESTEL analysis of McDonalds and the food industry)

Technological

With the passage of time internet is becoming part and parcel of our lives, some people cannot imagine their life without the presence of internet. It not only connects people but also is a great source of entertainment. This is also how consumers judge their favorite brands these days. If their brand is tech savvy, has a catchy website, interactive and social on social media websites, then consumers tended to have a positive view of them. McDonald’s interacts with its customers on all relevant mediums. It posts videos of it s kitchens where it shows how food is prepared there. It also responds to customers queries online and has a very prompt complaint action system. The deliveries are also managed through a high tech system in place where on call orders are taken by a centralized team and then placed in respective franchises which is closest in proximity to delivery area. The internet facility has also created problems for them as pictures of McDonald’s meat carrying different insects were made public and everybody started sharing those pictures, they were also accused of selling human meat. The power of social media also renders companies helpless as they have less and less control over content that is created.

Environmental

McDonald’s is accused of damaging the environment on a number of grounds: mistreating animals, misleading children, underpaying employees and for McDonalization, which refers to the injecting unhealthy food in the market to the extent that people no longer feel guilty in consuming them and forcing suppliers to sell them on their agreed prices and on their conditions, by taking advantage of their market size. Environmentalists all over the world protest against McDonald’s on 19th July for all the above reasons. In order to counter this negative sentiment McDonald’s has taken a lot of CSR initiatives. They use environment friendly packaging for their food and participate in saving energy by shutting off their electricity for an hour each year.

Law/Legal

Although it is subjective to the country of operations but one law in general that is applied to them all over the world is Health and Safety Law, according to which they have to maintain high standards in preparing and packaging food and also in procurement. The chicken that they are using should be healthy, free of any diseases. Apart from health checks there are certain employment laws that they have to abide by in order to remain in a country of interest. Minimum wage law is a classic example of employment law that they have to adhere to, besides this employee safety and health insurance plans have to be taken care of in case of any accident happening as they are in the industry where accidents happen all the time.

Bibliography

95 Interesting Facts About McDonald’s food. (2014, October 20). Retrieved December 17, 2015, from Random facts: http://facts.randomhistory.com/mcdonalds-food-facts.html

PESTEL analysis of McDonalds and the food industry. (n.d.). Retrieved December 17, 2015, from UK Essays: http://www.ukessays.com/essays/marketing/pestel-analysis-of-mcdonalds-and-the-food-industry-marketing-essay.php