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The United Mexican States is federal constitutional republic in North America, consisting of 31 states and one federal district. The capital of Mexico is Mexico City. It is the third largest country and also most inhabited in Latin America with more than 100 million people, making it the home for majority of Spanish-speaking population of the world than any other country. Belize and Guatemala in the Southeast, and United States in the North are the border countries to Mexico. Also Mexico has a coastline in Caribbean Sea in Southeast, Pacific Ocean in the south and west and Gulf of Mexico in the East.
Tourism and Oil are the main sources of foreign income, Mexico is the largest world exporter of oil, but the technology of oil refining is not developed at quality level. According to Boniface (2009, p. 593) Mexico has the second largest economy in Latin America.
PEST analysis/ Macro environment:
PEST is abbreviation for Political, Economic, Social, and Technological factors which affect business development. PEST analysis looks at external business environment and is used for diagnostics in the macro environment. PEST analysis - is the useful tool for better understanding market, position of the company, potential and a business direction.
Macro environment are major external and out of control factors with can influence on an organization. Richard P. Bagozzi (1998) illustrates in his study that macro level environment includes five domains in which changes occur that are typically outside the company's control, but which can have both immediate and long-term consequences for a company's ability to market its product or services. These five areas consist of economic, political and legal, demographic, social conditions, and technological.
Political environment studies and analyses how and to what extend government affects and restricts the actions of organizations and individuals in society. Also the way government can create new opportunities for business. This environment consists of various factors such as: laws, taxation policy, regulatory constrain, government agencies, and pressure groups.
The main objective of Law factor is to be in full control of the business, as the government creates laws that businesses should apply. The law protects society from illegal activity of companies, as well as protects companies from illegal actions of officials and regulatory bodies. In addition laws protect companies from unfair competition of other companies. And finally the law resists illegal business.
Main purpose of government agencies factor is to establish a law, apply it into practice and monitor compliance of the law by business organization. The government with the help of legislation and regulatory officials and taxation policy establish set of rules for business. Depending on the degree of democratization of the government of particular country, the easier business can be developed with the compliance of laws.
Pressure groups have an effect on the adoption of certain laws, which are in the interests of these pressure groups. Pressure groups can operate at the local, regional and national levels, depending on how serious are the issues and direct effect from the issues.
Many of legal, economic and social development is society are the result of political activities. Local and national government mainly influence companies that operate in domestic market and these companies must consider the laws that affect their business activity, however companies that have international links should take into account the international laws. In Mexico one of the strictest law is the Employment law, as there are many labor protests, so the business owners who employ personnel are very attentive as this particular law is strictly monitored in Mexico. The factor of territorial proximity with the USA has positive and negative political influence on business development in Mexico. Mexico is only developing country so USA also affects Mexico in the way the laws are amended, often in the way when USA can benefit from it.
Economic analysis is one of integral part of PEST analysis. This branch of analysis considers main economical factors, which has impact on economic environment of the particular country. Economic factor analyses the ingredients of economic efficiency in the production process, and the implications for practical policies, and examines conflicting demands for resources and the consequences of whatever choices are made, whether by individuals, enterprises, or governments. There are several economic factors, which have to be viewed from a vast perspective economical area such as global and domestic economy. Every country measures its economy using specific factors, or "indicators," each of which gives a snapshot of a sector of the economy. These factors help diagnose the country's economic health. These factors are: Interest rates, Inflation rates, Money supply, Business cycles, Unemployment, GDP trends.
One of the major factors is an interest rate. This factor influences a firm's cost of capital and as a result to what extent a business grows and expands, as well as control the flow of money through the economy. When rates are low, customer's spending increase and business could take loan from bank for development and other needs. That factor primary important to the stock market as well as for government, because these tips are not safe in excess of the long term however it gives investors an idea how to invest money and gain profit.
The second factor is inflation. Inflation appears at that time when there is a common increase in price levels. This indicates the amount of money in circulation (money supply), in degree of liquidity. The main inflationary force has the growth of cash and balance on current accounts on demand. Inflation is potentially a very destabilizing power. Even the little inflation in prices can quickly go up and reflect on employees wages, that is why government trying to control inflation.
And third factor which is a GDP trends. This factor measures Economic activity. Gross Domestic Product (GDP) is evaluation of all of the goods and services sold in an economy in a particular period. It is a main measurement of production and is very often positively correlated with the standard of living.
Nowadays Mexico experience itself all the pressure of worldwide crises in addition the spreading of virus (H1N1) has direct impact on economic environment thus, high inflation, and unemployment almost destroying independents of this country.
According to Weiss (2002) the social-cultural aspect has one of the biggest impacts on the marketing development in the country due to changes of three factors: demographic, cultural forces, that includes environmental and population lifestyle that includes ethnic groups, generation age, as well as the consumer movements.
Jobber (1998, pp. 114 - 119) has proposed that market researchers are keenly interesting in the population structure of costumers. Moreover, while the most useful information is the population level in different areas, age and ethnic mix groups, level of education as well as household parents.
The changes in worldwide population have major impact on market for two reasons. The first one is that the various resources that are producing to support humans' life on the particular level. The growth of population means growing the human's needs, but in this case it does not mean that market can provide at any time and as a fact because of this the prices become very sensitive to changes of demand and supply. The second reason nowadays is age distribution caused by different preferences and needs of age groups.
Secondly, the world market is depending on the subcultures that are known also as ethnic mix groups. By analyzing of lifestyles it is became possible to create the new markets with new level of business conductions that will give some influents on some already created products and services.
Thirdly, the consumer movements have influence on production processes due to individuality of each costumer group. Business is interest in a diversity of behaviors and lifestyles because this segments provides producers and service offerings with new ideas for creating new products and for improving old goods if it is still profitable.
For example these days Mexico is the developing country with rapidly growing population. Nowadays this market is concentrating on young group of people who are the majority of costumers. More over in Mexico is clearly shown cultural different in financial and educational segments between people, and due to this case marketers need to develop such as products that will be accessible for everyone.
The fourth element of Pest analysis is technological environment. Revolution in technology has increased the rate of exchange of information. In the past 15 years the development of technologies allowed public to use technological opportunities in daily work. Technological development has a strong influence on society, as today any work performed is with the use of technology. The research shows () that the factors as new technology, Internet, telecommunications, equipment, and machinery have a specific pressure on the development of every industry.
The most important factor in technological development is the Internet. These days, it is hard to imagine life without the Internet. It is the largest, fast and efficient resource of information. Internet makes our communication easier. Almost every company has its own web page that provides relevant information as well as news on the market. It is also possible to sell and buy products and services via the Internet. There are representative numbers of Internet users as well as numbers of computers in households.
Another important factor is telecommunication, such as Wi-Fi, cell phones, Blackberrys that did not exist for thirty years ago. Today it supports the business in all kind of ways for example call centers are providing different information. With the use of telecommunications public has possibility to access entertainment or use them for business purposes. Telecommunications are put into practice with the use of electronic devices.
Mexico is greatly influenced by technological developments at present time in Mexico call centers provide a communication service in 28 cites of the Republic. Also Mexican System of External Promotion (SIMPEX) helps to promote Mexican exports and attract foreign investors, and it provides information about tends in supply and demand through Internet. This promotional system has a very important meaning for development of the country.
PEST analysis is simple analysis of external influence on the business. This analysis is guideline for reviewing a situation, and can also be used to assess a strategy of company development, a marketing plan, or idea. PEST analysis can be used for business planning, marketing planning, design and development of products and services. This analysis considers the four main factors that are political, economic, socio - cultural and technological those greatly affect the situation of business development in a particular country. Mexico as developing country is greatly affected by all external factors of the PEST analysis.
- Central Intelligence Agency. (2006) Central Intelligence Agency. [Online]. Avaiable at: www.cia.gov (Accessed: 26th September 2009)
- Kotler, P., Bowen, J.T. & Makens, J. C. (2006) Marketing for Hospitality and Tourism, 5th edn. Pearson: Upper Saddle River, NJ (pp 85 - 111)
- Kotler, P. (1997) Marketing Management Analysis, Planning, Implementation, and Control, 9th edn. Prentice - Hall, Inc: Upper Saddle River, NJ (pp150 - 159)
- Lancaster, G.& Reynolds, P. (2005) Management of Marketing, Elsevier Butterwortth - Heinemann: GB (pp 26 - 35)
- Boniface, B. & Cooper, C. (2009) Worldwide destinations. 5th edn. Elsevier Butterworth - Heinemann, Slovenia (pp 592 - 595)
- Bagozzi, R. P., Rosa, J. S., Lelly, K. A., Loronel, F. (1998) Marketing Management. Prentice Hall: Upper Saddle River, NJ
- Weiss (2002) , Competitive Intelligence Magazine, vol 5, pp. 31-32.
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