PEST Analysis of Spain - Political, Economic, Social, Technological Factors

This report provides a detailed analysis of the external environment in Spain, covering political, economic, social, and technological factors that can affect business operations in the country. It includes information on Spain's political system, economy, labor laws, tourism industry, and more. The report highlights the challenges faced by businesses in Spain and the ways in which the country's unique cultural and geographical diversity can impact operations. The PEST framework is used to analyze the different factors affecting the business environment in Spain.

Running head: PEST ANALYSIS OF SPAIN
PEST ANALYSIS OF SPAIN
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Table of Contents
Introduction....................................................................................................................2
PEST analysis of Spain..................................................................................................3
Political factors...........................................................................................................3
Economic factors........................................................................................................4
Social factors..............................................................................................................9
Technological factors...............................................................................................11
Conclusion....................................................................................................................13
References....................................................................................................................14

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Introduction
Spain is a country that is located in Europe on the Iberian Peninsula. The territory
mainly includes two major archipelagos that include, the Canary Islands located off the coast
of Africa and Balearic Islands located in Mediterranean Sea. The enclaves in Africa are able
to make Spain a country that shares a physical border with Morocco that is African country.
The Spanish territory contains many small islands that are located in Alboran Sea. Spain is
also considered to be the biggest country in Southern Europe with a land area of total 505,990
square km. Spain is a country that has locations that look like they are a part of a story
(Naranjo-Valencia, Jiménez-Jiménez & Sanz-Valle, 2016).
As discussed by Boasson and Wettestad (2016), the country is culturally and
geographically diverse in nature and is able to attract people from all over the world. The
tourist based attraction of the country has been increased in the last few years and Spain has
created a position as the cultural heritage in Europe. Chemicals are the major exports that are
made from the US to Spain. Other exports from the US to Spain include, aircraft, equipments
based on water resources and pollution control, electric power based systems. The major
agricultural growth based sectors of Spain include, tree nuts, seafood, distilled spirits,
planting seeds and consumer oriented products.
The report will be based on the analysis of external environment in Spain and the
ways by which it can affect the operations of different organizations that wish to enter the
country. The different factors that will be considered for analysis in this case mainly include,
political factors, economic factors, social factors and technological factors. The PEST
framework will be implemented for the purpose of completing the analysis.

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PEST analysis of Spain
Political factors
According to Briones Peñalver, Bernal Conesa and de Nieves Nieto (2018), political
form of Spanish State is considered to be a parliamentary monarchy and the state was headed
by King Felipe VI. Legislative power resides in Spanish Parliament that is responsible for
monitoring the executive branch. Spain is a multi-party based country and the political
condition is quite unstable. The unstable political condition has a major impact on the
business environment of Spain. The business organizations that operate in Spain need to
follow some specific regulations and rules.
As discussed by Prajogo (2016), the start of business operations in Spain is quite easy
as compared some other countries in the European Union. Political system of Spain is quite
unique in nature in comparison to many other countries. Spain consists of 17 major
communities that have financial, legislative and executive independence. The control of the
government in the country is highly decentralized in nature. The King of Spain is considered
to be the Head of State who has the responsibility to control military operations in the
country. Corruption is considered to be a major issue in Spain and it is closely related to the
business organizations and the politicians in the country as well.
According to García-Holgado, Cruz-Benito and García-Peñalvo (2015), Spain has
been stated to be one of the highest corrupted areas in the European Union. More than 60% of
the total population in Spain is affected in negative manner by the corruption based levels.
Many politicians in the country have been involved in different corruption scandals that have
taken place in Spain. Religion has also played a major role in the history of Spain. Political
environment of the country is highly dependent on the religion. Religion has an impact on the
cultural and social environment that has been developed in the country. The two significant

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political parties that operate in Spain include, Spanish Socialist Workers Party and People’s
Party.
According to Del Río, Peñasco and Romero‐Jordán (2015), the labour laws which are
followed by different organizations in Spain are provided with high levels of importance in
the country. Agriculture is able to provide the highest levels of contribution to the economy
of Spain and the GDP of the country as well. The industrial sector of Spain is able to
contribute 21.6% to the GDP of the country. The stability of political environment in Spain
has been affected in a negative manner after appointment of a new prime minister. The
division of powers in the environment is considered to be an important factor that has an
impact on the political conditions in Spain.
As discussed by Parga-Dans, Castro-Martínez and Sánchez-Barrioluengo (2017), the
coalition of more than 150 deputies have to be satisfied by the Prime Minister in order to
maintain his position in the government. The government also aims at reaching out to a larger
number of citizens with the help of different policies that are developed. The stability of the
environment is considered to be an important factor for the business organizations that plan to
enter the country.
The major challenges that are currently being faced by the company and can be faced
in the future have an impact on the efficiency of its operations and the ways by which people
in the country are managed as well. Proper stability of government is however based on the
ways by which different business organizations are able to operate in the environment
(Martínez, Fernández & Fernández, 2016).
Economic factors
As discussed by Devece, Palacios-Marqués and Alguacil (2016), the economic
freedom score that has been gained by Spain is 65.7 which has provided the country with a

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position of the 57th freest economy in the whole world. The score of Spain has increased by
around 0.6 point that is related to a significant level of increase in the fiscal health of the
country. Spain has acquired the 28th rank between the 44 countries and has scored below the
regional average in this case. The minority status of the government has an impact on the
ability based on different costly and controversial programs of the organization that are
related to labour, healthcare, educational reforms, tax and pension.
According to Fernández-Mesa and Alegre (2015), the borrowing based costs in Spain
have been reduced due to the ways by which the country has tried to recover from the
economic downfall that had taken place. Spain has started becoming the fourth largest
economy in the Eurozone. The diverse economy of Spain includes different sectors like,
financial services, manufacturing, textiles and apparel, chemicals, footwear and a tourism
based industry as well. The levels of unemployment in the country are however quite high
and this has started increasing after the change that has taken place in the government.
As discussed by Saeed et al. (2015), the combined levels of value gained from exports
and imports together amount to 65.5% of the entire GDP of the country. The trade barriers
that have been implemented by the government of Spain are based on the regulations that
have been formed in the European Union. The income tax based rate of the individuals is
45% and corporate tax based rate is around 25%. Value added taxes are also considered to be
an important part of the tax based system that has been developed in the country. Spain is
currently trying to balance the ways by which it can recover from the economic downturn
that had taken place from the years 2014 to 2018.
According to Soto-Acosta, Popa and Palacios-Marqués (2016), the economy of Spain
has shown a growth rate of 2.7% within the last four years. The construction based sector of
the country is highly active in nature and has led to the increase in levels of public

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expenditure in Spain. The household based consumption in different sectors had decreased
and has led to the lack of proper investments in business. A huge slowdown has also been
expected in the Spanish economy in the years 2019 and 2020. The public finances in Spain
have been affected in a negative manner by the budget based deficit that has been detected at
around -2.7% in the year 2018.
Structural reforms have also taken place in the country based on independence that
can be provided to different autonomous regions that exist in the country. The reforms have
also been able to provide financial and budgetary stability to different regions. Some major
reforms that are required in the country are based on the technological implementations in
different sectors. The employment based conditions need to bed improved in order to
decrease the rates of unemployment that prevail in the country. The improvement of research
and development based environment is also important for the proper operations of different
organizations in the country (Cainelli, De Marchi & Grandinetti, 2015).
According to Mas-Machuca, Ballesteros-Sola and Guerrero (2017), the rates of
unemployment in the country have decreased in Spain, however, the rates are still as high as
15.6%. Another major issue that has faced the Spanish labour based market is related to the
low levels of the active population in the country. The potential workforce in Spain is quite
high in comparison to the people who are already a part of different industries. The levels of
inequalities in Spain are high with huge number of population below the poverty threshold.
Agriculture is an important sector Spain that is able to provide huge contribution to the GDP
of the country.
Spain had acquired the position of the largest producer of olive oil, strawberries,
oranges in the world. The major crops that are grown in Spain include, sugar beet, wheat,
tomatoes, barley, cork, grapes, olives, tomatoes, barley. Industrial sector of Spain provides

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21.6% contribution to the GDP. Manufacturing industry on the other hand contributes 82% to
the economy of the country. The manufacturing sector of the country is mainly dominated by
industrial processing of food, textiles, steel and iron, engineering and the naval machines as
well. Other major sectors that have an impact on the industrial operations are information
technology and the industry of telecommunications as well (Moller, Morcillo & Fernandez-
Crehuet, 2018).
As discussed by Bratianu & Bolisani (2015), tourism sector is an important part of the
economic growth of Spain and has been able to attract tourists from all over the world.
Banking is also an important sector that has been able to provide a major contribution to the
economy of Spain. The recent researches have been able to depict healthy economic activities
in the country in the final quarter of the year 2018. The economy has shown immense levels
of growth in the last few years and has been able to affect the ways by which different
organizations are able to enter the country. The economic growth of the country is however
expected to slow down in the next few years.
The growth of employment rates in the country is also quite slow and has a major
impact on the ways by which investment has been made in different sectors. The importance
that is provided to the tourism based industry of the country has an impact on the growth of
the economy. Tourism has further proved to be a growth engine for Spain and has affected
the crisis situation of the country as well. Spain has aimed at improving its economic
condition with the help of different industries that operate in the country (Oecd.org., 2019).

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Figure 1 – Economical data
Source – (Oecd.org., 2019)
The growth of Spanish economy is expected to become moderate in the next two
years. The rates of unemployment will also continue to decline and the country will be able to
develop a stable position in the European Union. The domestic demands of goods have an
impact on the low interest rates in the country. The debt-to-GDP ratio of the country needs to
be reduced in order to develop a structural balance with the government of Spain. The growth
based levels of different reforms in Spain have a major impact on the increased competition

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and levels of innovation in the country. The reforms will be able to generate jobs that are
better paid in nature and have an impact on the reduction of inequalities in the country
(Heritage.org., 2019).
Figure 2 – Consumption rates
Source – (Heritage.org., 2019)
Social factors
According to Hueske and Guenther (2015), the business based culture in Spain is
mainly based on different factors like, business etiquette, business communication, work-life
balance, social media guide and cost of living. The levels of diversity in Spain are high and
different regions that are a part of the country have unique characteristics and the atmosphere
is also quite different. The regions that are a part of Spain have their independent institutional
statute and the laws that are followed by the people in these regions are based on the different
Spanish State laws.
As discussed by Ali, Frynas and Mahmood (2017), the country has a huge history and
was able to flourish in the last few years. Spain is a parliamentary democracy at present and
is also a member of many different international organizations including, NATO and United

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Nations. There has a significant level of shift in the attitudes and values after democracy has
been restored in the country in the year 1975. The social values and the attitudes in Spain
have been modernized and the interaction with outside world has also increased. The entry of
tourists in Spain has a huge impact on the ways by which values and attitudes in the country
have been affected.
According to Martinez-Conesa, Soto-Acosta and Carayannis (2017), the religious
beliefs in different regions of Spain are diverse and lifestyle of people in the country are also
different. The style of living that is followed in Spain is quite different from the other
European countries. Spanish people enjoy life to fullest and they also love good drinks, food
and dancing as well. The people of Spain are also proud of the regions from which they
belong and the culture that is followed in those regions. The rate of smokers in Spain are also
higher in comparison to the other countries in Europe.
The laidback attitude of Spanish people is also a major point of difference between
the people in the country and people in different other countries of Europe. Family is
considered to be an important part of the lifestyle of Spanish people. The country has made
significant progress in providing opportunities to both the males and females. The
government has taken major levels of initiatives in order to provide equal opportunities to
everyone. The barriers that earlier existed based on entry of women in different
organizational positions has been a major issue in different organizations in the country
(Bierwerth et al., 2015).
Spain is considered to be a religious country and the people in the country also
believe in different values. Spain is tolerant and open to different cultures and some major
issues have also taken place that can be avoided with the help of proper conversation with the
people in the country. The population levels in Spain has shown high levels of increase in the

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last few years and this has been able to affect the employment based activities in the country
(Martinez-Conesa, Soto-Acosta & Carayannis, 2017).
The heavy industries of Spain had been developed effectively after the Civil War had
ended. Huge levels of investments had been made by countries like, Italy and Germany. The
tourism based industry has shown high levels of development in the last few years and has a
major impact on the ways by which different industries have operated. The choice and
preferences based on different products offered by various organizations have also shown
high levels of changes (Moller, Morcillo & Fernandez-Crehuet, 2018).
Technological factors
According to Cainelli, De Marchi and Grandinetti (2015), Spain is considered to be a
leader in the advanced telecom and IT based technologies. The technologies have been
applied in an effective manner to the different sectors that operate in the country. Spain
consists of greater than 33,000 ICT based organizations that include, digital content based
organizations as well. The global or multinational organizations that are already operating in
Spain tend to operate in joint ventures with the Spanish organizations.
As discussed by Mas-Machuca, Ballesteros-Sola and Guerrero (2017), the degree
related to the integration of digital economy in different operations of the organization are
affected by the progress of proper digitization in the country. The airports that are present in
Spain can be considered to be a major connecting hub in the country. The connections that
are required with Europe, America and Middle East are developed with the help of airports
that operate in different parts of the country (Refer to Figure 3).

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Figure 3 – Technological capabilities
Source – (Investinspain.org., 2019)
The business sectors of Spain have made significant levels of investment in the proper
implementation of technologies in different organizational processes. Digital transformation
is considered to be an effective growth based strategy of the organization. The organizations
that operate in the country are affected in positive manner by the technology based
implementation in different areas (Soto-Acosta, Popa & Palacios-Marqués, 2016).
Digital economy has been provided with high levels of priority in the country in order
to develop its position in the European Union. International expansion of organizations in the

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country are also based on the ways by which technology has been implemented in different
organizations in an effective manner. The implementation of modern technologies for
business operations has been able to affect the ways by which organizations have tried to
expand the business (Fernández-Mesa & Alegre, 2015).
Conclusion
The report can be concluded by stating that Spain has started showing growth in the
last few years and the economic condition of the country has also improved in the process.
The country has been able to improve the technologies that are used in different industries
and organizations in order to attract the foreign investments. The tourism based industry has
proved to be a major factor that is able to affect the growth of the economy of the country.
Open and welcoming nature of the people of Spain has proved to be a major factor that has an
impact on the ways by which various international organizations can aim at entering the
country. The economic condition of Spain can be further developed with the help of proper
involvement of different industries in order to provide major levels of contribution to the
economy.

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