In topic 3 we have learned how to assessing IB opportunities and risks by different methods, such as PESTEL analysis, the Harvard country analysis model, economist model of country analysis, market potential index and grids and matrices for comparing locations.
The common tools and more general analysis methods to assess a country’s opportunities and risks of investment are The PESTEL Analysis, the Harvard Country Analysis Model and the Economist Model. In below, I am going to review the above analysis briefly.
THE PESTEL ANALYSIS provides a framework used by global and multinational corporations to set the stage to develop specific tactics to mitigate the risks involved in executing their vision in unfamiliar environments. To analysis the factors of political, economic, social, technological, environmental and legal, we can use the PETSEL model.
Political factor: This is referring to government policy on the business environment in industry policies, foreign investment and fiscal measures. Political can be an impact on many vital areas for business such as the education, the nation health and the quality of the infrastructure of the economy such as the road and rail system.
Economic factor: Economic change is a major impact of a consumer’s behavior. This includes interest rates, exchange rates, taxation changes, economic growth and inflation. For example:-
* higher interest rates it costs more to borrow the money from the bank * a strong currency may make exporting more difficult as it raise the price in terms of foreign currency * inflation it costs more on rental, wages or equipment
Social factor: This factor involves the population growth rate, cultural norms and expectations, health consciousness, career attitudes, age distribution, education and religion. It may influence the organization’s behaviour and attitudes and will a major part in determining the particular location is attractive as a market and as a production basis....
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