PESTEL Analysis of Australian Business Environment

This assignment delves into a comprehensive PESTEL analysis of the Australian business environment. It examines the interplay of various factors such as political, economic, social, technological, environmental, and legal influences on businesses in Australia. The analysis aims to shed light on how these factors impact business operations, growth, and development within the country.

Running head: STRATEGIC MARKETING
Strategic Marketing
Name of the Student:
Name of the University:
Author Note:

1STRATEGIC MARKETING
Executive Summary:
The report puts forward a discussion on strategic marketing. The company chosen here is Tesco
that plans for a market entry in Australia. The report therefore puts forward a PESTEL analysis
of Australia. Further, the report also helps in identification of the factors that Tesco must
consider for market entry in Australia. This is done in terms of analyzing the political and legal
factors, the economic factors, the social and technological factors. There are also
recommendations in terms of market size, growth, stability and competition for enhancing the
marketing attractiveness thereby increasing the chances of market entry.

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Table of Contents
Introduction:....................................................................................................................................3
PESTEL Analysis of the Chosen Country:......................................................................................3
Political Factors:..........................................................................................................................4
Economic Factors:........................................................................................................................4
Social Factors...............................................................................................................................5
Technological Factors..................................................................................................................5
Environmental Factors.................................................................................................................6
Legal Factors................................................................................................................................6
PESTEL Factor that the Company Should Consider.......................................................................7
The Importance of the Political and Legal Factors......................................................................7
The Importance of the Economic Factors....................................................................................7
The Importance of the Social Factors..........................................................................................8
The Importance of the Technological Factors.............................................................................9
Recommendations Concerning Market Attractiveness for Entering...............................................9
Conclusion:....................................................................................................................................10
References:....................................................................................................................................11

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Introduction:
The report gives an overview on strategic marketing. The company chosen here is Tesco
and the chosen country is Australia. Tesco is a multinational general merchandize and grocery
store in United Kingdom measured by its revenue (Tesco.com 2018). The company gas stores in
twelve Asian and European countries. However, Tesco remains the market leader of UK with
around 28.4 percent market share. The report predicts Tesco’s analysis of the external business
environment of Australia to determine a market entry. Australia has a highly developed mixed
market economy with a GDP of around AUD $1.69 trillion in the year 2017. Australia is
considered as one of the wealthiest nation after Switzerland. The report thus puts forward a
PESTEL analysis of Australia. There is also discussion of the PESTEL factors that the company
needs to consider. The report also ends with recommendations concerning the market
attractiveness that would provide encouragement to Tesco in entering the market.
PESTEL Analysis of the Chosen Country:
Australia, a country in Southern Hemisphere comprises of Australian continent, the
Tasmanian Island and various other smaller islands in the Pacific and Indian Ocean (Davies
2012). Australia is the thirteenth largest economy that is prosperously developed. The country
attains a higher rank when compared internationally in terms of quality of life, health care, public
education, life expectancy and protection of civil liberties, economic freedom and the political
rights.
PESTEL analysis refers to the various factors in macro environment that influences the
decisions of the managers in an organization. PESTEL in the expanded refers to political,

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economic, social, technological, legal and environmental. Typical examples of macro changes
include new law, trade barriers, demographic change, tax changes and government policy.
However, for analyzing these factors specific to the country they are categorized using PESTEL
model.
Political Factors:
Australia represents a safer destination for the purpose of investment. The regulatory and
political environment of the country is open, progressive and stable thereby providing the
investors with higher degree of certainty and confidence (Foucault 2013). The strength of
Australia as an investment destination stems from the highly effective political system in
responding to the policy direction and the economic challenges. The policy of Australian
government is highly adaptable to the changes taking place in the economy and ranked amongst
top two countries of the region. At the same time, the policy is considered effective and
transparent. Australia has a legal framework that is efficient, open and transparent and has a
lower corruption level. There is a strong system of balance and checks along with a respectable
law enforcement and judicial system that is responsible for portraying the importance of the
Australian market to the multinational companies (MNCs) in Asia-Pacific region.
Economic Factors:
Australia is one of the largest capitalist economies of the world and is highly dominated
by the service sector. The economic growth of Australia depends primarily in the agricultural
and mining sectors (Banwell et al. 2012). The country stands at the tenth position in the index
representing the ease of doing business. There are various factors that ensure the ease of doing
business in Australia. This includes, constant economic growth, lower unemployment, index for

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ease of doing business, constant inflation, lower public debt, stable and stronger financial system
and a open market with minimum restrictions.
Social Factors
The environment of Australia consists of diverse people and the widely used language in the
continent is English. The country does not have any official religion while the education level of
Australia has increased compared to the past decades(Ulm 2013) However, the factors
responsible for shaping the national culture include the female population compared to men that
is believed to lay the foundation of an ideology of mate ship. The country is made vibrant with
various multicultural benefits and have closer network with the multicultural communities
having newer and booming economies. Moreover, the country also have broader business
horizon and over the years have become open to the world. The multilingual workforce and the
cultural diversity ensure a distinct competitive advantage to the global economy.
Technological Factors
The influence of technology can not only reduce cost and improve quality but also lead to
the process of innovation. Such developments not only benefit organizations but also its
consumers. Two organizations in Australia support the research and development of the
Australian government. The first is the Commonwealth Scientific and Industrial Research
Organization (CSIRO) found in the year 1926 and has headquarters in Melbourne (Brown,
Campbell and Crook 2014). CSIRO is an independent agency of the government that helps in
supporting development and research in the field of biological and physical sciences. The second
is Defense Science and Technology Organization (DSTO), mostly supported military
development and research by providing technological and scientific assistance to the Department
of Defense and the Australian Defense Force. This organization is headquartered in Canberra.

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There are however several issues that dominates the present science and technology of Australia.
This includes the concentration of development and research in the national research centers and
the tensions between the researchers of the University regarding allocation of the resources for
funding. Issues related to effective communication between the government, industry and the
university researchers and the increasing role where Australia is playing in technology and
international science collaboration dominates the science and technology in Australia. Australian
continent has a high tech exports close to $ 1.5 million and government funds about 55 percent
whereas industry funds about 40 percent of all the development and research.
Environmental Factors
In Australia, the environmental factor refers to the non-living and living things that
surrounds livelihood. This also include climate and weather change (Keast 2013). There are
many industries that get impacted by the change in temperature and this includes tourism,
farming and insurance. The combined factor of global warming along with greater environmental
awareness is a significant for consideration by the firms. The increasing desire of protecting the
environment is impacting industries including transportation and travel. In addition to this, the
general move towards the environment friendly process and products influences the patterns in
demand thereby leading to the creation of business opportunities (Williams et al. 2012). Water is
also a scarce resource in the continent and therefore the availability and quality of water is a
continuous concern. Australia also faces another significant problem in the form of inland
damage caused due to the soil erosion. Moreover, the saline also affects the soil quality. The
country however has around 145 million hectare of woodland and forest along with an extensive
mangrove area covering an area of one million hectare.

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Legal Factors
The legal system of Australia depends on the fundamental belief in the rule of justice, law
and the independence of the judiciary. Everyone is treated equally before the law. The Australian
constitution established federal system of the government where power is distributed between the
states and the federal government (Derbyshire 2016). However, the country is primarily affected
by the criminal laws of the state and the territory thereby effecting life on a daily basis.
PESTEL Factor that the Company Should Consider
The PESTEL factors that Tesco needs to consider for entering the Australian market are as
follows:
The Importance of the Political and Legal Factors
Before making a market entry to Australia, Tesco must consider the importance of the
political and legal factors. Absence of the bureaucratic hurdles, streamlined procedures and
incentives represents better indicators and the willingness of the government in inviting the
foreign partners for further development of the host country (Foucault 2013). The attitude
towards the foreign investment along with political stability plays a vital role in encouraging the
participation of the multinational corporations. Political stability somewhat refers to the
continuation of the policies. Any changes in the policies of the government can lead to
difficulties in the profitability potential of the business. The retailer must also impose a check on
the structure of the tax and existing legal procedures and systems before making a market entry
(Xing 2012).

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The Importance of the Economic Factors
Western retailer giants like Tesco should realize that to serve a new market they require
an entirely new set up for manufacturing and marketing. Thus, every business possesses the
single goal of earning maximum profit (Smith 2013). This is possible only when the organization
is able analyze customer demand and maintain quality good and service. However, there are
certain economic factors that have a direct impact on the progress of the business. This includes,
inflation, recession and demand and supply. The economic growth and development of a
country plays a vital role in determining the amount of revenue Tesco can earn in the chosen
country. Economic growth implies the amount of finances generated by the foreign market and
development refers to the volume of money invested in various channels. The retailer giant must
also consider the amount of inflation of the new market that it plans to enter. Inflation refers to a
situation when there is excess money supply in the economy without sufficient output of goods
and services. The presence of excess money increases the prices of the goods thereby making it
unprofitable for the business to sustain in the long run. The rate of interest also directly impacts
the business of the retailer in driving and sustaining their growth. The higher interest rate makes
it more difficult for the organization to survive. There another factor that comes into play when a
company is planning to make a market entry in country (Chaney 2016.). This includes
consideration of the conversion rate of the currency. This implies that if the buyer have a
stronger currency then it becomes beneficial for business. On the other hand, lower exchange
rates implied that retailer would have to pay a higher price. Thus, before making an investment
in Australia, Tesco must consider how the economic conditions of the country influence the
purchasing power of the potential customer and thereby have an impact on the revenue of the
company.

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The Importance of the Social Factors
Before entering the Australian market, Tesco must understand that countries vary in
terms of practiced religion, spoken language and food consumed (Kramarz and Skans 2014).
These differences are not only significant but also real and the marketers must consider how such
difference facilitates or hinder the marketing efforts of the retailer in the newer market. The
retailer must also make sure that to enter a new market it might have to tailor its marketing,
products and other practices of the business as per the cultural and social aspects of the country.
Thus, if a business do not adapt to the social environment of the country then it would not be
able to survive. Tesco must also be aware of needs and wants of the Australian people since they
keep changing from time to time. Adaption to social environment allows the business to use
advertising and marketing campaigns at their advantage (Ripolles, Blesa and Monferrer 2012).
However, societies that values the higher education ends up providing better workforce that leads
to more productivity and innovation. Therefore, businesses must focus on every factor that leads
to its progress in the international market.
The Importance of the Technological Factors
A company while making a market entry to a new country must also considers the
technological factors (Gruber, MacMillan and Thompson 2013). This is because improved
technology helps businesses in producing the goods at a cheaper cost. Thus, the presence of
improved technology helps businesses in expanding effectively and efficiently. This also helps
businesses in competing with other organizations in the marketplace and determines the
profitability and feasibility of its new venture. Therefore, for ensuring success in the
international market businesses must adopt newer technologies that help in better and efficient
operation of the plants thereby reducing the cost of production.

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Businesses can create uproar in the new market by considering the PEST factors. These
factors ensure bigger advantages to the business as it allows them in focusing on the targeted
areas that helps the business to flourish and reach greater heights.
Recommendations Concerning Market Attractiveness for Entering
The recommendations involving market attractiveness for entry involves:
1. Consideration of the Market Size: The size of the market is an important determinant
in enhancing the attractiveness of the market. Smaller market leads to lower revenue generation
for covering the capital costs, start-up cost and the operating cost. On the other hand larger
market will help in covering the initial cost of the firm and thereby ensure its survival.
2. Consideration of the Growth Factor: Growth considered as an indispensible criterion
for market attractiveness in targeting the market where the business wants to flourish.
3. Consideration of Environmental Stability: The stability of the environment in terms of
distribution system, production system, customer base and technology determines an exogenous
factor in influencing market attractiveness.
4. Ensuring the Presence of Competition: The existences of the competitive firms are
good signal for better market health. Tough market competition results in slower evolution from
the short term to long term market competition thereby making entry difficult.
Conclusion:
The report ends with recommendations concerning the market attractiveness of Australia
that would encourage Tesco to make an entry. There is also discussion about the various

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PESTEL factors that the company needs to consider before making an entry. This discussion
therefore revolves around the importance of the political and legal factors, economic factors,
social and technological factors. Through the analysis one gets to know how these factors
influences in business and hinders its further growth. The report also puts forward the PESTEL
analysis of the chosen country.

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References:
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reflections on heat in Australia with implications for health and climate change
adaptation. Global health action, 5(1), p.19277.
Brown, D.A., Campbell, K.S.W. and Crook, K.A., 2014. The Geological Evolution of Australia
& New Zealand: Pergamon International Library of Science, Technology, Engineering and
Social Studies. Elsevier.
Chaney, T., 2016. Liquidity constrained exporters. Journal of Economic Dynamics and
Control, 72, pp.141-154.
Davies, H.L., 2012. The geology of New Guinea—the cordilleran margin of the Australian
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Keast, A., 2013. Biogeography and ecology in Australia. Springer.

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Kramarz, F. and Skans, O.N., 2014. When strong ties are strong: Networks and youth labour
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of Holocene Australia. Quaternary International, 285, pp.182-192.
Williams, K.J., Belbin, L., Austin, M.P., Stein, J.L. and Ferrier, S., 2012. Which environmental
variables should I use in my biodiversity model?. International Journal of Geographical
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