PEST analysis (sometimes referred to as STEP analysis) is a marketing instrument designed to reveal political, economic, social and technological aspects of an external company environment that affect its business. In PEST analysis, politics is studied because it determines the authority that forms the surroundings of the company and receiving the key resources for its functioning. The main reason of studying economics is creation of resource distribution map at the state level, which is an essential condition of entrepreneurial activity. Consumer preferences are of the same importance and are determined by the social component of the PEST analysis. The last factor is the technological component. The goal of its research is considered to be the identification of trends in technological development, which are often causing changes and market losses, as well as the emergence of new products. In this research paper, the PEST analytics will be applied to study the entrepreneurial environment of Hong Kong.
The analysis in PEST is performed using a specific "factor - enterprise" pattern. The results are documented in the form of a matrix, the subject of which are macro environment factors, and the predicate of which are the powers of their influence, estimated in points, ranks and other units. PEST analysis makes it possible to evaluate the external economic situation developing in the sphere of production and commercial activities.
PEST analysis is a powerful instrument for financial analytics and business management of the highest levels. It determines whether a given enterprise will be able to adjust to the conditions of the local market and at what rate is the possibility of success of this enterprise. To meet the target of research, it is important to study every component of it more thoroughly, and review how this component manifests itself in the entrepreneurial environment of Hong Kong.
The political environment. This is one of the most important factors that must be studied primarily in order to have a clear idea of the intentions of the federal (municipal, local) authorities for the development of society, the regulation mechanism of money in the state, creating conditions of resource support for each organization, changes in legislation, legal regulation and taxation, as well as about the means by which authorities will enforce their policy. For the organization’s management the aspects of policy such as the stability of the government, capabilities and strength of opposition political structures, possible changes in business after the legislative elections are of the highest importance. The political stability of the country is a key factor that can reduce the economic uncertainty of the organization in areas defined by the chosen strategy. The factor of political stability is very important for organizations operating in the markets of different countries. Hong Kong is a very politically stable country, where the government is not continuously changing. This allows Hong Kong to follow a straight policy of reforms that the government provides.
Among other aspects of the political environment the entrepreneur must track such aspects of the political factor as the credit policy and restrictions on obtaining loans, agreement on tariffs and trade between countries, customs policy, subsidies, tax breaks, placement of forces among leading political parties and unions, the structure of large financial-industrial groups, structure influence and power of trade unions and associations for social movements to protect the professional interests of workers etc. In this respect, Hong Kong I a great location to start a business. Tax fees are very low for consumer goods and services which will not overburden the enterprise.
The sources of information for the analysis of the political environment include: data of opinion polls conducted by various institutions and public organizations; reports and speeches of political leaders and government officials; agenda of the parliament; private interviews of government officials; programs of meetings and visits of foreign politicians and government leaders of foreign countries etc.
The political information allows to build an overall picture of the political situation in the country, to develop a forecast of its development for the future and create own mechanisms of adaptation to the environment. The latter include the formation of a system of external relations, minimization of security risks when entering into agreements, developing appropriate social environment programs to support employees and so on.
The political peculiarities of Hong Kong are the following: there is no minimum wage policy in the country, the country is politically stable in general and what is especially important, there are low goods and services taxes. These are the positive factors. A significant threat of the political environment of Hong Kong is the fact that there are a lot of work unions and parties that support the lower class, which is not always convenient for entrepreneurship.
The economic environment. Changes in the economy are one of the most important factors determining the normal functioning of any organization. The global economy can greatly affect the cost of imported resources and therefore the ability of organizations to buy certain products. In fact, analysis of macroeconomic component is aimed at understanding the fact both are formed and distributed resources. The weak state economy dramatically reduces the possibility of obtaining credit for the organization and other resources necessary for normal functioning. The main indicators analyzed in the study of economics include the following: the value of gross domestic product, inflation, employment, balance of payments, economic growth, unemployment, interest rates, productivity, the level of taxation, regulations, accumulation etc. The economy of Hong Kong is perfect for entrepreneurship and has all the required elements to provide its successful functioning. The unemployment rates are low. The interest rates in Hong Kong are app. 1% nowadays. The role that the government of the country plays in its economy is traditionally not extensive, with little attention to industrial policy and almost no import and export controls.
In an analysis of economic factors attention should be also paid to such indicators as the level of economic development, mining, natural resources, the level of competition development, the structure of the population, the level of workforce education, wages and so on. Analysis of economic factors should be conducted systematically and be directed to its comprehensive assessment to determine the existence of opportunities for efficient organization.
Hong Kong is one of the leading financial centers in the world. It has a well established international trade market. Hong Kong dollar is pegged to the US dollar. According to multiple studies Hong Kong has the highest level of economic freedom in the world. The strengths of the economic state of the country include strong banking and legal systems, ample foreign exchange reserves, strict measures of fighting corruption and no foreign debt. However, Hong Kong economy has recently experienced a downturn, regardless of which the country is able to quickly adapt to the economic challenges.
Social environment. The organization is also interested in information relating to factors such as demographics, social security of population, labor safety and health of workers, the traditions, the dominant life values and attitudes of people and others. One important aspect is demographic, as markets made up of people and their potential growth depends on the dynamics of demographic indicators.
In light of the strategic behavior of the firm interest is information on: the dynamics of fertility; family structure; lifetime; age-sex structure of the population; level of education; migration. Forecasting changes specified factors allows organizations to anticipate changes in the expectations of society as a whole or its individual segments or groups and take action to improve their service faster than their competitors.
The social factors of Hong Kong entrepreneurial environment are generally positive: the population generally has high income rates and prefers a corresponding lifestyle.
Technological environment. Technological macro factor is one of the most important components of the PEST analysis. Technology is both internally and externally variable factor of great importance. The speed of technology development is increasing. The analysis allows to see the possibilities of scientific technological progress in time for the production of new products and improvement of output, and production of technological products and their application. It should be remembered about two opposite effects of scientific technological progress:
1. The emergence of new technologies and products stimulates the creation of new businesses and the growth of new industries, which ultimately leads to an increase in the number of jobs and improves the solvency of demand;
2. Introduction of new technologies leads to increased productivity, release of employees and an increase in unemployment.
Scientific technological progress is a source of enterprise self-development, manifested in the need to ensure constant innovation at the level of individual products, technologies and management practices. Thus, the main purpose of the analysis of the technological environment is a provision of the information that will enable the response to new products of science and technology.
Hong Kong is called “the China’s new tech hub” (Denlinger 1). At the moment different scientific technologies of the country are advanced. The most developed are software technologies, especially mobile apps development. Hong Kong is a county with one of the highest rates of electronic commerce popularity. The Hong Kong websites are not controlled and censored by the Chinese’s government Golden Shield.
Hong Kong has perfect entrepreneurial environment opportunities to offer.
Works Cited
Denlinger, Paul. Why Hong Kong Is China's New Tech Hub. Forbes. Web. 12 Apr. 2016
