Economic

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PART B – Question 4

In analyzing the macro-environment, it is important to identify the factors that might in turn affect a number of vital variables that are likely to influence the organization’s supply and demand levels and its costs (Kotter & Schlesinger, 1991; Johnson & Scholes, 1993).  A PEST analysis is one of them that are merely a framework that categorizes environmental influences as political, economic, social-cultural and technological forces. All these factors are beyond the control of the company and it plays an important role in determining the success of the company. Applying this analysis can be conducted on each company, whether large or small to allow companies to compete and survive much longer.

The use of PEST analysis can be seen effective for business and strategic planning, marketing planning, business and product development and research reports. PEST also ensures that company’s performance is aligned positively with the powerful forces of change that are affecting business environment. When a company decides to enter its business operations into new markets and new countries, PEST analysis are very useful. Furthermore, the results can then be used to take advantage of opportunities and to make contingency plans for threats when preparing business and strategic plans.

Observation over the strategic possibilities open to Yeo Hiap Seng Company (Yeo’s) has been conducted using PEST analysis technique. The Yeo’s is involved principally in the production, marketing and sale of food, beverages and sweetened condensed milk locally and internationally. This company has used PEST analysis technique in order to have an effective and success business.

Politics is one of the main aspects of PEST analysis. This factor refers to the political situation in the country. This is the most important aspect for each company, especially companies that are developing or already operating in the foreign countries. Any country that is facing political problems will not be able to attract foreign investors or local investors in that country. For Yeo's company before they entering an international market, they will assess and investigate the earlier background of the country either the country is suitable or not to market their products. Most of Yeo’s products are only available in Asia because of the political situation in Asian countries relatively safe compared to the other foreign countries.  This is because the Yeo’s goal is to become Asia’s leading drinks producers.

Thompson (2002) states that economy analysis is affected on how easy or how difficult are to be successful and profitable at time because they affect both capital availability and cost and demand. This factor is important to local as well as foreign companies to invest in a country. There is no doubt that a country with strong economic position of the rate of economic growth was be able to attract large companies to come and invest to their companies because investors often look at a country's economic growth rate as a guide in making any investment. For Yeo’s Company, profitability is the main motif. It can be seen in the financial year 2007 has been an increase of 7.9% over 2006. In addition, Yeo's company also has investment of companies that have strong economic background. This is to ensure the company will have not a problem in the future compared to companies with the financial burden. The export market also continues to show a strong growth, especially in Indonesia. At this time the company was able to attract and convince more companies to invest. The rising of economic has helped Yeo’s Company to become a leading beverage company in Asian with the increase rate of profit every year.

According to Thompson (2002) the socio-cultural environment encapsulates demand and tastes, which vary with fashion and disposable income, and general changes, can again provide both opportunities and threats for particular companies. This...
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