Pestel: Retailing and China

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The PESTEL analysis `The PESTEL analysis stands for political, economic, socio-cultural, technological, environmental and legal analysis of forces that impact the business environment. It will be utilized to find the circumstances surrounding the market and as an instrument for understanding the market situation such as market growth/decline, business position, market potential and the direction of a company’s operations. It is very important for a company to consider its environment before starting to perform activities. As a first step on the way to enter and perform successfully on the Chinese market, knowledge about the macro environment will have to be created.50 In the following the six parts of the PESTEL analysis will be presented with reference to the conditions on the Chinese market effecting branding.` 5.1.1 Political `The political situation has a huge influence upon the regulation of the economy, and the spending power of consumers and companies. Consequently areas such as political stability and trading agreements must be considered.51 Through the last decades China has evolved from being a totalitarian communistic regime with a centrally governed economical system to a more open market economy with wider economic and social freedom for its citizens. The Communist Party of China (CPC) still has an absolute power monopoly and an actual liberalization of the political area is not taking place.52` 50 51 Marketing Teacher Ltd - Value Based 52 Ministry of Foreign Affairs of Denmark - A – 31 `The Chinese administration has also shown signs of more openness and transparency and the judicial system and legislation is starting to build a constitutional state founded on the rule of law. It has for example been decided to implement the right to private property in the constitution. As a consequence private initiative has become more important in the Chinese society.53 Following the rapid economic development and inequality corruption has become a big and growing problem. China is number 72 of 179 countries on Transparency Internationals Corruption Perception Index, and is given 3.5 points on a scale from 0-10, where 0 represents the most corrupt country.54 The government is trying to solve it by issuing severe punishments for committing the crime. The political development has been positive, especially concerning individual rights, but still problems needs to be addressed when it comes to human rights. Death penalty, torture and detention without charges or conviction are still widely applied, and in spite of more openness in many areas freedom of speech is still reduced and censorship is used.55 From this it can be said that China has a stabile political situation with the one-party system. The system is opening up and there is no opposition trying to destabilize the country thus the development can be expected to continue in the coming years. The government’s policy on the economy is favourable for the business life. First of all China has been made a market economy and there is a strong political will to make China an important player in the world economy. The membership of World Trade Organization (WTO) in 2001 had huge consequences, opening China’s economy to the world, and making the country a very active player in foreign trade.` 5.1.2 Economical `The Chinese economy has gone through an intense restructuring from being a state governed planned economy to an economy more or less controlled by market forces. Parallel with the economical reform process, China has experienced exceptionally high growth rates on approximately 9% a year.56 This has had an immense effect on the Gross Domestic Product. As shown in figure 1 in the introduction, it has been raised to a level 12 times higher from 1978-2005.` 53 54 Ministry of Foreign Affairs of Denmark - A – Transparency International – 55 Ministry of Foreign Affairs of Denmark -...
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