PESTEL ANALYSIS
PESTEL analysis on pizza hut (from Biswas KC, spring 2017):
Political factor:
The political factor is an important aspect of PESTEL analysis, which focuses on the political elements
that affects the performance of the business. It consists of law related to employment, trading, taxation
etc. why the international organization face difficulties when entering the Nepal is subject of discussion
from a long time. Some organizations believed that Nepalese are more patriotic which affects the
business environment for the international franchises. The factors like consumer taxation, political
instability can also affect the business. The taxation system in Nepal changes from time to time which
can directly affect the franchises business. The changes in quota system is also another challenge for the
franchisees, if the items that can be imported is decreased it would create a problem for a business. E.g.
if the government make a new rule and decrease the quota that the company can import than it would
directly affect the business. Some of the political factors are tax policy, labor law, environmental laws.
The political instability is one of the problems that franchisees should face in Nepal. Frequent strikes by
the political organizations in Nepal can directly affects the sale and overall performance of the business.
The business close due to strikes but the rent, wages need to pay in time which is also a burden for the
franchisees in Nepal. The cheaper price for import products in comparison to other countries can help
franchisees to remain competitive with the local competitors which is a plus point for a franchise.
Economic factors:
The spending capacity of people is Nepal changing from day to day. The inflation makes the price of the
good expensive, which is less affordable for most of, many of people. The trend is change nowadays
where people try to save more for the future rather than spending. People are very often made a
purchasing decision based on the price of the goods which is a direct disadvantage for the renowned
expensive international brand. People focuses more on buying many by spending less. The fluctuation in
the interest rate of the financial institutions and the need of the collateral for the loan makes people
more insecure to take a help from financial organization. The frequent changes in exchange rate is also
the drawbacks for the foreign franchises in Nepal. Some of the examples for economic factors include;
• Economic growth rate
• Exchange rates
• Interest rates
• Inflation rates
• Long-term growth prospects of a country
• Unemployment
Social factors:
Social factors are directly related to the elements like demographic, lifestyle, branding, health and
welfare. In Nepal, there are more than 100 ethnic groups with a unique cultural values and norms as
well as different lifestyle, which is negative prospects for a franchising business. The franchises can get a
manpower at a cheaper cost which is the positive side for the foreign franchising in Nepal. Social factors
contain the demographic and cultural aspects of the external macro environment. It influences the
customer’s needs and the size of the potential market. Examples of social factors are listed below.
• Population growth rate
• Age distribution
• Health consciousness
• Age distribution
• Level of education
• Career attitudes
• Emphasis on safety
Technological factors:
The change in the field of science and technology is out of the control of the firm. Every day the world of
technology is growing and introducing new devices. The company can either replace the old one or
update to improve the production efficiency and quality. The technological impact can be seen in every
field whether it is related to the economic or uneconomic activity. The introduction of billing system,
cards to pay the bill, cameras, computers etc. make easy for the businesses on the other side, it reduces
the employment opportunities for the people. Technology is very key to success in the modern business
world and remain competitive. The technological factors can be R&D activity, automation, technology
incentives etc. Nepal is backward in the field of innovation and technology. The international franchise
operates with the new and innovative technology provides competitive advantages for franchises in
Nepal. Technological factors have the potential to lower barriers to market entry, reduce efficient
production levels, and influence outsourcing decisions. Examples include;
• R&D activity
• Automation
• Technology incentives
• Rate of technological change
Legal factors:
Legal factors are very important to operate in a country. The laws and regulations of a country directly
affects the performance of any business. The organization should strictly follow the laws of the country
where they operate. The legal factors include accessibility law, monitoring, discrimination law, cyber
law, human right, employment law, health and safety law, consumer law etc. It is not easy to
understand the law of a country being an outsider. It needs a lot of effort to understand a legislation of a
country and sometimes it costs money as well. According to, franchises need to be aware of the
legislation of a country where they are going to operate. The carelessness towards the legal issues can
cause a huge problem for the franchises and in some cases, it could close the business. Understanding a
law is very important and it is the obligation for the franchisees. The understanding and following a law
properly lead the business towards the success and it won’t create any trouble in the future. The
legislation should create a similar environment for all the businesses. Treating differently for the one
which is making huge profit and to the one which is struggling to establish in the market create a
problem and the new business lose the hope and confidence. The legislation should not only put the
challenges and create difficulties for the businesses but also need to establish the suitable environment
to operate. The law can be different depending on the nature of the franchises. The franchise, franchisor
and franchisee should understand the business environment and law properly to run business effectively
and smoothly. We can summarize the legal factors as the laws and regulations that the state offers. The
local, national and global legislation affects the franchises. The law can be different from place to place
or from nation to nation. The franchises need to understand the law of individual country where they
operate. The understanding a law of a single country doesn’t work. The franchises need to understand
the present law as well as need to be aware of the future legislations, competitive regulations,
consumer protection etc. The franchisor is not only one who can be affected by the legislation the
people of the country should also need to follow the rules and regulations properly. The legislation may
change the law for the welfare of the local people so the franchises need to be aware of that.
Environmental factors:
Nepal has a various topography. Most of the part of the country is high hills and mountains. Valleys and
southern part of the country is where most of the cities are located. Also, Nepal is a land locked country,
so if the franchise has a product which is based in other countries, easiest way is through the air
transport which can be very high for any franchises. A devastating earthquake in April and May 2015
have damaged various infrastructures and cause a lot of damage. Such kind of calamities are
unpredictable but can damaged can be minimized in the future. So, the environmental conditions in
Nepal is not so good as compared to the other Asian countries. Though various treaties and agreements
with India and China for the connection of the road ways and railways should bring development. As a
franchisor, one should have stuck in big cities like Kathmandu and Pokhara where the population density
is increasing more than ever.
Reference:
KC,Biswas(spring 2017), Case study: Pizza hut,
Available in: https://www.theseus.fi/bitstream/handle/10024/133118/KC_BISWAS.pdf?
sequence=1&isAllowed=y(03/30/2020)
