How do you conduct a PESTEL analysis for a new market entry?

Political factors is probably the hardest, and most unpredictable letter in the PESTEL acronym. You must consider everything, especially if you are doing business globally. Do your homework. Bullet point it. Check off the boxes of what is important. Is it the bottom line? If so, can you still stay true to what your company stands for, or says it stands for? There have been many companies/brands that have been caught in controversies over this. Remember Volkswagen's emission test greenwashing/cheating? U.S. manufacturers went to China to be able to make price points, period. Covid showed our vulnerabilities. If there is a bright spot to the pandemic, it is that businesses are now reshoring, or diversifying manufacturing locations.

Understand the PESTEL framework: PESTEL stands for Political, Economic, Social, Technological, Environmental, and Legal. This framework allows for a comprehensive analysis of the external environment that a business must consider when entering a new market. Conduct an in-depth market analysis: A thorough market analysis is an essential step that helps organizations to accurately assess the new market and identify potential opportunities and threats.

Political factors can make or break your market entry strategy. Stability, government policies, and regulations heavily influence business costs and operational risks. It's crucial to analyze key elements like trade agreements, tax policies, and the level of corruption or bureaucracy. Additionally, stay alert to the potential for political unrest or leadership changes that could disrupt your business. Reliable sources like the World Bank and the Economist Intelligence Unit provide valuable insights to help you gauge political climates and make informed decisions.

Do not ENTER is the P = Political is weak. There's no point in entering a new market if the Political factors are unstable. IBM, Coke Cola had to leave India market in late 70s because there's was so much political instability. On the other hand PEPSI came into India in 1992 when political stability appeared and they have success for a long time.

Political factors are like the weather forecast for businesses. ??? They include things like: Stability and Governance: How steady and reliable is the government in the market you're targeting? Regulations and Policies: What rules and laws does the government have in place that could affect your business? Trade Agreements and Tariffs: Are there any deals or taxes that could impact your imports or exports? Risk of Unrest or Change: Is there a chance of protests, violence, or leadership shifts that could disrupt your operations? Corruption and Transparency: How honest and transparent are the government and institutions in the market?

Economic factors vs political factors are still easy to handle for new market entry. Incase economic activity is weak, a global brand may face headwinds but the cost of entry will be low and help in learning. Emerging economics have an opportunity to grow faster provided they have strong political stability and incase in point is India- stable for last 2 decades and most likely to have a stable government for next 2 decades. Time to evaluate market entry in BRCIS - India is topping the charts.

If you've got a good finance team, you can depend on them to take all of the economic factors in consideration. If you're a curious marketer who likes to be in the know, you work closely with that team to help them figure it out. What is Plan A, Plan B, and maybe even Plan C? Essentially though, if you have a product, it all comes down to price point. If you're selling into Wal-Mart, it is a lot less likely that you're manufacturing out of the U.S. If you are, you definitely aren't based out of California due to the high tax rate and the unfriendly business climate. (As a native of CA, I had to add that in.)

Economic factors are like the heartbeat of a country's business environment. ?? They include: GDP and Growth: How well is the economy doing overall? Is it growing or shrinking? Inflation and Interest Rates: Are prices rising, and how much are people paying to borrow money? Exchange Rates: How strong is the local currency compared to others, and how does that affect trade? Income Distribution: How is wealth spread among the population? Are there rich and poor areas? Consumer Spending: How much are people buying, and what are they spending their money on? Business Cycles: Are we in a boom, a bust, or somewhere in between?

When conducting a PESTEL analysis, examining economic factors is like checking the market’s financial health. Think of it as taking the market’s pulse! ???? Look at key indicators like GDP growth, inflation rates, unemployment levels, and interest rates. Consider the overall economic stability and consumer purchasing power. Are there any economic policies or trends that could impact your market entry? Understanding these factors helps you gauge the market’s potential and economic viability. So, crunch those numbers and get a clear picture of the economic landscape—it’s the heartbeat of your market strategy!

Social factors are extremely important. Your target market fits into this. If you've built your brand, your customers have certain expectations. For example, Tom's Shoes' consumers feel good about buying their shoes because 1/3 of their profits go to grassroots good. The "Wear TOMS. WEAR GOOD." really hits home to them. Consumers have flocked to them for their ESG efforts. If all of a sudden, they decided to scrap their "socially-good" efforts for higher revenue achievement, they would have to say goodbye to a great deal of their consumer base. I mean, would you make a Burberry purse in Vietnam?

Social factors are like the personality of a market. ?? They include: Demographics: Who lives in the market, and what are their ages, genders, and incomes? Culture and Values: What are the beliefs, traditions, and customs that shape people's lives? Education and Religion: How educated are people, and what faiths do they follow? Lifestyle and Social Norms: What do people do for fun, and what behaviors are considered acceptable? Diversity and Inclusion: How inclusive is society, and how does that affect your business practices?

When conducting a PESTEL analysis, delving into social factors is like understanding the market’s personality. ???? Look at demographics, cultural trends, lifestyle changes, and population growth. What are the values, attitudes, and behaviors of the target market? How do education and income levels influence consumer preferences? Analyzing social factors helps you tailor your approach to meet the needs and desires of your audience. It’s about connecting with the people and understanding what makes them tick. So, get to know the market’s social landscape—it’s where consumer insights and strategic opportunities are born!

Technological factors play a critical role in shaping market opportunities. By evaluating the level of digitalization, automation, and connectivity in your target market, you can unlock innovative ways to enhance your business operations. Monitoring trends and emerging technologies gives you an advantage over competitors and helps you anticipate potential disruptions. Tools like the Global Innovation Index and Gartner Hype Cycle offer valuable insights to stay ahead, ensuring your business thrives in an ever-evolving landscape.

Technological factors are like the engine driving business forward. ?? They include: Digitalization and Automation: How much are businesses using technology to streamline operations and processes? Connectivity and Cybersecurity: How well-connected is the market, and how protected is its digital infrastructure? Emerging Technologies: What new inventions and innovations are on the horizon, and how might they shake up the industry? Competitive Landscape: What tech-savvy rivals are out there, and how might they disrupt or enhance your business?

The last five years, I've worked with SaaS, and other tech company representatives whose products are automating, innovating and disrupting the market. Many are doing amazingly well due to one reason, they have great product. But is great product, or ideas enough? Not always. Sometimes, the market isn't quite ready. Years ago, I was at a company that was creating technology where someone could be watching a TV show, and click on a shirt, pair of pants, a toy, etc., and buy it. At a time where streaming was a fantasy, and Netflix was mailing DVDs, we were 20 years ahead of our time. The technology and the consumer had to catch up. Kind of like where Amazon is with drones right now.

The legal and regulatory environment can affect the policies and procedures of an industry, and can control employment, safety and regulations. Common legal factors that companies focus on include: industry specific regulations health and safety regulations employment regulations

ESG (Environmental, Social, and Corporate Governance) is here and not going away. Even if you don't run a "green" company, you must comply with more and more environmental regulations, standards and certifications for your business. Many companies now have a full time person on the job, and rightly so. This is big, confusing, and not going away, so companies must get on board, or be thrown off the train.

I'm from California, we are known to be a "sue-happy" state. If you want to be in business here, (or anywhere), you must be legally buttoned up. Mitigate your risks. That means, hire a extremely competent HR person, and make sure you give them the time to stay up on regulations and compliance. More importantly, that person needs to be high-level enough to be in the c-suite. If possible, have inside and outside counsel always at the ready. Get yourself a fantastic insurance adjuster/group that specializes in your industry. And did I mention cybersecurity?