PEST analysis of British Manufacturing multinational enterprises

Economic recession

In economics, a recession is a business cycle contraction, a general slowdown in economic activity over a period of time (Wikipedia, 2010). The economic recession is the worst period that any country can experience. It has many impacts such as unemployment, inflation, and many others. During economic recession, most companies fail to operate properly, others collapse.

The economic recession has brought upon many disputes to the countries that have experienced it. Disputes such as inflation, unemployment, social unrest, and decline of productivity of many firms. Despite all of these negative effects, some firms still manage to survive.

British manufacturing multi-national enterprises (MNE)

Multinational enterprise (MNE) is a corporation or an enterprise that manages production or delivers services in more than one country (Wikipedia, 2010). A manufacturing industry deals with the process of producing the products from raw materials to ready finished products which are ready for use.

Britain is one of the countries that are well developed in all important sectors, including the manufacturing industry. The manufacturing industry is well established in such a way that they operate beyond boarders.

PEST analysis for British manufacturing MNE

PEST analysis is an analysis of the external macro environment in which a business operates. These are often factors which are beyond the control or influence of a business, however are important to be aware of when doing product development, business, or strategy planning.

The following is PEST analysis for British manufacturing industry:

Political

Political analysis is the most important and influential part in analyzing a country before a company decides to do business there. All other factors like economical, social, and technological are influenced by politics. Hence, political analysis is a very crucial fact that any company should analyze before entering.

For Britain, the manufacturing multinationals enterprises are influence by various political factors; such as:

Trading policies; these are policies that govern all the business bodies in Britain. The trading policies in Britain are not very harsh to the manufacturing industry; in fact, the policies are a bit favorable to the manufacturing industry in terms initiatives. When in to labor policies, the rules and regulations are very difficult to follow.

Funding, grants, and initiatives; this is a very crucial fact since that Britain is in an economic recession. The manufacturing industry is badly in need of grants and funds from the government due to the economic recession but the funds and grants are not equally distributed by the government due to various economic problems.

Wars and conflict; at the moment Britain is engaged in the war against terrorism in Afghanistan. This war has impacted the manufacturing industry and its international branches especially in the Middle East; the image of British products in the Middle East has a bad reputation due to the war.

Economical

For any country, the economy is the back bone that holds the country together. In business terms, the economy of the country is the number one priority that when it’s favorable it is highly considerable.

For Britain, the manufacturing multinationals enterprises are influence by various economical factors; such as:

Home economy situation; at the moment, the home economy is not doing well. Most of the British manufacturing multinational enterprises depend on profits from its international branches. The home economy is not doing well due to the recent economic recession, but Britain is slowly recovering from the economic recession.

Overseas economy situation; as mentioned early, the overseas economy situation is doing very well, as a matter of fact, the British manufacturing multinational enterprises manages to cope up with the economic recession due to the profits received from its overseas investments.

Taxation; in Britain, taxation may involve payments to a minimum of two different levels of government: the central government (Her Majesty’s Revenue and Customs) and local government; central government revenues comes primarily from income tax, national insurance contributions, value added tax and fuel duty (Wikipedia, 2010).

Unemployment; the rate of unemployment is gradually increasing every year. Britain is experiencing its worst unemployment rate ever. At the moment it’s more than 20%. Also the labor force in Britain is very low compared to other countries; the labor force is 31,100,000 compared to 798,000,000 of China (Daniels et all, 2009, pp-462).

Inflation; the inflation rate in Britain is about 3.4% and rising (BBC, 2010). This is not bad at all compared to other countries. This is also very good for the manufacturing multinationals since the price wont fluctuate much, it will remain standard.

Social

The social factor usually has much impact on the brand image of the company. In Britain, there are many social factors that impact the manufacturing multinationals, some of them are:

Consumer attitude; most of the British consumers are not price sensitive, they are quality sensitive (Daniels et all, 2009, pp-447). This means that the companies will not worry about price related issues, they will concentrate on the quality of the product only.

Media views; the media is a very strong organization in Britain; it can destroy a company very quickly. For the manufacturing MNE’s, the media is a huge threat to them. The media influences things like labor strikes and destroying the brand image which is bad for the company,

Brand image; the brand image of the British manufacturing multinationals is highly admired internationally due its quality products. In Britain, the brand image is average shared by firms due to intensive competition.

Ethnic and religious factors; Britain is a country filled with a lot of ethnic and religious groups, but they don’t impact the businesses. Every person in Britain is concerned with his or her own issues.

Demographics; Britain population is about 49,138,831 in 2001 (Wikipedia, 2010). This means that the availability of potential customers is good, and it will attract more investments.

Technological

Competing technology development; in almost all of the European countries, technology is well developed and maintained. In Britain, the people admire technological produced products. Hence, this makes the companies competition in terms of technology to diversify and fierce.

Research funding; discovering and maintaining new technology requires a lot of funds and investment in the research and development department. Most of the companies in Britain fail to fund the research and development due to the economic crisis. The companies are in a dilemma, whether they should invest in R&D or in other departments.

Maturity of technology; in this time of science and technology, the technologies discovered reach maturity stage very early due to discoveries of other new technologies. This is true in Britain.

Technology legislation; in most of African countries technology legislation is not active at all, but in European countries, they are indeed very active. Technology laws help firms to license and patent its technology. In Britain, the technology legislation is doing their best to protect the companies.

Information and communications; the transfer of information and technology in Britain is very fast due to technologies such as the internet, mobile phones, satellite technology, and many others.

Transportation; the transportation system in Britain includes all land, air and water. The transportation authority is very efficient and effective. There are a lot of security threats in transportation system; such threat is of terrorists threats.

Ecommerce; Britain is a country which is well developed in terms of electronic business. A lot of transactions in Britain are made online. Almost all of the companies in Britain are operating online.

Ansoff matrix

The Ansoff matrix is a useful tool that aids businesses to decide their product and market growth strategy. The Ansoff matrix includes four categories:

PRODUCT

Existing

New

Existing

Market penetration

Product development

New

Market development

Diversification

MARKET

Market penetration

The purpose of market penetration is to achieve growth in existing markets with existing products.

This is when a company decides to promote its existing product in existing market.

This is useful when the product is at a decline stage

Product development

This is concerned with marketing new or modified products in existing markets.

This strategy is very important for introducing new product.

Market development

This involves the marketing of existing products in new market.

This is very useful for products which have failed in existing market.

Diversification

This occurs when new products are developed for new markets.

This requires a lot of research and development.

Recommendation

In this period of economic recession, the British manufacturing multinationals may use one of the Ansoff’s strategies. My recommendation is that they should use market development strategy due to the following reasons:

The economic recession has badly impacted the manufacturing industry in Britain; a lot of manufacturing companies are depending on the overseas investment. This is the reason why I recommend using the market development strategy. The companies will explore new markets but the same products will be used.

The availability of labor force in Britain is very low and expensive; by exploring into new markets, like China, the company may produce the same products but at low cost due to availability of cheap labor. This will bring the company a lot of profits.

The brand image of British products is highly respected in most of the countries in Africa. By implementing the market development strategy, the British manufacturing companies will benefit much by selling their products to Africa. This will also build a good relationship between Britain and African countries.

The transportation system in Britain supports the manufacturing multinationals to employ the market development strategy since that it will support them to sell their products outside Britain.

Research & Development

For a company to prosper and grow it must do more than keep up with its competitors and it must in fact get ahead of them whenever possible. Getting ahead means innovation which hinges on research and development (R & D).Research seeks to make basic discoveries and uncover new principles or facts so far unknown or unrecognized.

Research and development is very significant and influence nowadays; in fact, most of the big companies have introduced the research and development department and they pour a lot of money into it.

Research and development may also be considered as a competitive advantage for some companies. The company may use the new ways and new markets from the research and development department and use them against its competitors

New technologies

Technology is very significant to business, especially in this era of science and technology. Technology is a powerful weapon for firms to use them to gain advantage over the market. For example, technology is applied in methods of production resulting to efficient and low cost production method.

Other benefits of new technologies:

Gain first mover advantage. The company will gain the first mover advantage by introducing a new technology for the first time.

The company may use new technology as a secret weapon and use this advantage to gain superiority against their competitors.

The use new technologies by a company will diversify the brand image and the company will be tagged as a modern company by the people.

As time goes on, more new technologies are discovered, leaving the old ones to be forgotten. Companies should be more alert and keep their eyes open for new technologies. New technologies can be found by companies through research and development.

But, globalization is a huge threat to research and development as well as new technologies.

New technologies, Research & Development in an era of globalization

Most companies spend heavily on research and development so as to discover new technologies. Will the benefits of new technologies off-set the investment in research and development for international business in an era of globalization?

The answer is yes, as long as the new technologies are safely guarded by the company and the law. Depending on a country, the law offers the best protection for breach of information about the new technologies. The company can also protect the new technologies by its own methods and techniques..