Environmental Forces Pestle Factors
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In order to critically evaluate the environmental forces it is useful to apply the PESTEL factors:- It can be used to analyse the environmental influences on an individual firm or industry in one country, or on a global industry sector.
When carrying out a PESTEL analysis, it may become evident that some environmental forces will have a much stronger influence than others on a prospective strategic decision.
Lynchs framework (GBS textbook, p.38) is also an approach to consider as it incorporates the use of other frameworks and models such as PESTEL and Porters 5 Forces i.e. adding comment regarding customers and substitutes. Ohmaes 5Cs is another useful analysis tool to consider using to provide structured analysis, Porters Diamond Model, which in this instance emphasises the role of government in Disneys decision making, and begs the question whether the generous subsidies offered clouded their judgement.
POLITCAL & LEGAL: The Indian retail market is highly regulated in order to protect its 15 million (approximate) small store owners from foreign players wishing to enter the market. This has resulted in Foreign Direct Investment (FDI) only being permitted to the extent of 51% in multi brand retailers and 100% FDI in wholesale cash and carry and back end logistics. The implications to Wal-Marts strategy is its denied them individual entry into the market and dealing with customers directly and so steered them to seek out a joint venture with Bharti whereby they could provide global retail experience combined with Bhartis extensive knowledge of Indias consumer market.
Each state within India also had its regulations, duties and inspection requirements on goods that were shipped across its borders which meant there was a lack of a single market for consumer and agriculture goods which meant that transportation was slow even for short distances. This would prove a great challenge for Wal-Mart who has historically taken advantage of its transport expertise and capabilities in order to gain competitive advantage.
The Indian government was under increasing pressure from small scale retailers, leftist politicians and NGOs who feared that these foreign companies would ruin the countrys 12 million mom-and-pop shops and the livelihood of 40 million people who depended on retailing. This led the government to state that it would scrutinise foreign companys activities in relation to foreign investment. The implications of this to Wal-Mart is that they would need to tread very carefully in terms of FDI compliance in order to avoid any unwanted publicity.
However, the Indian government also realised that Wal-Mart was a major customer in that purchases almost US$1.6 billion worth of Indian textiles, leather goods and other wares annually. The company also argued that it could create wealth for the country with its expertise in