Question-   Aspects of PEST Analysis

Solution-

With China economic growth rapidly, more and more business people like to invest on chinese market. Meanwhile, multinational investment is always a good condition for economics’ grow and prosperity as well. In order to attract foreign direct investment and run a successful business in China, it is important to analyzing the macro-environment, and identify the factors that could affect the organization’s economy, such as supply and demand and its costs. A PEST analysis is one of strategic tools for analyzing the environmental influences including political, economic, social and technological factors on the business. (Porter, M. , 1985)

In this essay, it is going to explain about current china economy and analyze it with PEST tool, to see if there is a good business condition for running a business in China. In addition, there are some recommendations for local or foreigner investors and business people, so that they can access chinese market and share information like high-technology, cultural and management skills with local business people, to create competition and stimulate chinese economy develop faster.

Main Aspects of PEST Analysis:

Political factors: Political factors are related to law, regulatory, and government policy, which influence Economic factors, and government decisions. After the economic reform in 1978, the economic is growing spectacularly in China. The reform comprises of motivating the development of private business, foreign trade liberalization, foreign direct investment, and industrial production investment as well as the employment profile. From 1979 to 1994, more than 42 percent chinese economic rate has been grown up. (Mohsin S.Khan, 1997)

In the labor law, government changes the structure of jobs and becomes less strict, which create opportunities for unemployment, such as for graduated students who have not found any jobs, and for some people with lower education, so that at least there is a place for them to work, then being accepted new skills training. Otherwise the higher rate of unemployment, the more social problems might cause, that also discourage investment. As data shows, china’s urban unemployment rate reached 4. 2% in 2008, since the employment immigrate from rural to urban; and increase to 4.6% in 2009, because of the world financial crisis leading to export economy more than import.

However, since 2008, the central government finances in the labor-intensive sector to provide more job availability. (Yingzi T, 2009) For the consumer rights protection, after open up china door and the economy reform, people increase consumer’s awareness and protect their rights. (Shaoping G, 2008) If the consumer protection is improving, the multinational companies will get benefits from doing business in china: open market will be prosperity and the market for the middle level of consumers are expanding . (Suk-ching H,1997)

When it comes to foreign trade policy, the private sectors are moving forward fast after 1978 reforms. Foreign trade opening drives foreign direct investment increasing. In 2008, the foreign direct investment is up to 108 billion dollars in china. (Yadav M, 2010) Furthermore, the well-being relationship between different countries is very important for economic development. For instant, if two countries’ government or organizations have argument causing a war, which will be unstable in economy and society. Then, people feel unsecured about government, jobs and their daily life.

 

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