Pestel Analysis Russian Federation

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4.1.1PESTEL Analysis
This part of the dissertation will analyze main political, economic, social, technological, environmental and legal issues within the Russian Federation. All of the Interviewees outlined the political aspect as the most important when investing into Russia, however the Author would like to acknowledge that the economical and legal factors have a critical weight in the issues of FDI, therefore their analysis will play a comprehensive role in the thesis, assuming that the initial reader has no background knowledge of the environment. Please refer to section titled Analytical Tools (3.2.3) for the theoretical underpinning of the model used.

PESTEL Analysis
Political

New democracy
Internal conflicts: Terrorism
External conflicts with neighbours and powerful economies, e.g. USA, UK ◊Corruption
Nuclear power
Strong political presence in Eurasia
Good diplomatic relations with ChinaEconomic

Rich in natural reserves
Stabilized economic condition
Dependent on export of oil and gas
Large size of GDP
Double digit inflation
Uneven distribution of income
Comparatively low levels of FDI
Volatile currency
Social

Highly skilled workforce
Social unrest due to diversity
Wide class divisions
Decreasing population
Low life expectancy (men) – 59 yearsTechnological

Strong industrial sectors
Powerful think-tank for scientific research (especially military) ◊Outside regional centres IT communications are poorly developed Environmental

Low awareness of ecological issues (global warming, recycling) ◊Nuclear waste deposits in Siberia
History of environmental accidents – Chernobyl
Harsh climate conditions
Vast territory is hard to manage
Coastal access is vast but strategically more costlyLegal

The legal system is new
Bodies of conflicting and intertwining laws
Federal government system makes the legal co-ordination complicated ◊Poor human rights (e.g. freedom of speech)
Corruption affects law enforcement

Political
Through historical analysis (please refer to Appendix A), it is evident that authoritative rule has played an important part in Russian political culture, irrespective of the government type. The democracy is relatively young, but the system has been stable for a long period of time to ensure economic progress (i.e. there have not been any radical changes in government structure since 1991. The elections were conducted according to international standards and without any major complaints from the International Supervisors. There are internal problems with terrorism in the South Caucasus region and small military conflicts in the region (Chechnya, South Ossetia) have been unpopular with the EU and USA and are still causing tension in the geopolitical arena. Internally the corporatism does not ensure a fair business environment to everyone. Structurally speaking, ‘the decisions are not made on business; they are made on other things…’…’it’s more about who’s got a bigger pistol.’ (Question no. 12, Deputy CEO, 2010). Since most academics tend to associate Russian democracy with oligarchy, such favouritism can be seen to diminish the business environment within Russia, as there is no basis for fair competition. The Deputy CEO outlined that in Russia it is extremely important to know who is ‘boss’, this can be seen as a side effect from the historically prominent forms of leadership. Comparatively, fellow members of the Commonwealth of Independent States (CIS) (former Soviet Republics such as Kazakhstan, Azerbaijan and Turkmenistan) that are also command economies where the hierarchy is clear, are progressing much faster in national and international stages (Question no. 12, Deputy CEO, 2010). The relationship with Europe is unclear. Europe is the largest destination of Russian exports. Despite the mutual dependence; there is still enough a lot of diplomatic conflict between both...
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