Pest Analysis Of China And Hong Kong Research Paper Example

Introduction

PEST analysis is one of the analytical tools that are used in strategic management. The business environment that any business entity or an organization is influenced by a number of factors that determine whether the organization will achieve its maximum performance while utilizing limited resources. Some factors can be controlled by the management (internal) while others are beyond management control (external). Under PEST analysis, the external factors that are beyond organization management control are critically analyzed (Oxford University Press 31). Similarly, the same analysis can be conducted to analyze the market viability of a country, region or an emerging market. Therefore, PEST analysis can be defined as a scan of the external macro-environment where a given business entity, organization or a nation operates in.
Under PEST analysis, the unpredictable external factors are classified into four categories: Political factors, Economic factors, Social factors and Technological factors (Oxford University Press 31). The political factors refer to the magnitude in which the national government of a given country intervenes with the economic activities. These include factors such as labor laws, employment laws, consumer protection laws, environmental regulations among others. Economic factors affect the cost of capital and the purchasing power of a particular organization or markets in a certain country. Economic factors include inflation rate, economic growth rate, employment and unemployment rates among others. Social factors influence the consumer’s needs and potential market size for the consumers goods and services of a particular organization or a particular country. These include factors such as population growth rate, age demographics, career attributes , health consciousness among others. Technological factors refers limiting factors as well as opportunities that a given organization may face as a result of technological advancement. Technological factors include innovation, R & D activity, the obsolescence rate among others. This paper will analyze the PEST analysis of China and Hong Kong is analyzing the market opportunities.

PEST analysis of China.

Political factors.
The People’s Republic of China has established a stable political environment for business organizations to operate in the country’s market. The nation is ruled by a single party state known as the communist party of China. The national government of the People,s Republic of China is a communist with a unicameral legislature. The legislative branch is known as the National Peoples Congress and is comprised of 2987 members who are elected from municipal, regional and provincial level. The rule, of laws is implemented by the judicial branch which is independent from the national government. In addition, the constitution of the republic of China also stipulates the commercial laws that govern the commercial sectors of the economy. This includes licensing laws, employment laws, consumer protection laws among others. The government also protects the ownership of trademarks and patents of business entities.The national government has formulated fiscal policies in terms of tariffs to regulate trade in the country. For instance, the government has issued ban policies on certain console games and other online games (bbc.com). These kind of bans has negatively affected business entities that specialize in the production of video games in the country. However, the government regulations in terms of tariffs have been declining in the recent past. For instance, the government has enacted policies that allow financial openness in the country. Such policies have created a serene climate for the foreign investors, venture in business entities in China.

Economic factors.

The People’s Republic of China has the third largest economy in the world. Despite global economic crisis of 2009-2010, the country’s economy has continued to grow at a steady rate (Leah 20). However, it is notable that a large portion of the current economic growth in China has been financed by financial debts. As the country’s economy entered the recovery phase after the financial crisis,the national government formulated and enacted appropriate fiscal policies to enhance long term sustainable growth. The national government increased its level of investment by initiating the infrastructure development programs. However, despite the majority of economic activities in the country being financed by debts, rapid economic growth has enabled the China’s economy to successfully finance the debts which Have led to an economic growth in the country.

Social-cultural factors.

The People’s republic of China has the largest population in the world. It is estimated that the country’s population is four times the population of the United States of America. In gender perspectives, male comprise about 51.27 of the total population, while female consists of 48.73 percent (Leah 22). The majority of the Chinese population is Buddhist with an estimate of 50 percent. Other religions include Taoism (30 percent), Muslims (2 percent), Christian (4 percent) and other Chinese folk religion 14 percent (bbc.com, 10). The literacy level of the republic of China was estimated to be 92.8 percent in 2014. Due to the rapid economic rate being experienced in the country, there has been an increase in the growth of industries especially in the urban centers. As a result, there has been a rapid migration of the potential Chinese working class from rural to urban centers looking for better employment opportunities. This has lead to an increase in the number of Chinese kids who are being brought up in the absence of the parents. It is estimated about a fifth of the total number of the Chinese kids resides in the rural areas without parental care (Leah 22). However, the increased number of the working population has lead to an increase in the level of disposable income with East China more income prosperity as compared to West China.

Technological factors.

In the Republic of China, the technological advancement has been embraced in all sectors of the economy. It is estimated that the internet users in 2011 were about 500 million (Leah, 21). One of the areas where the use of internet has been widely adopted in the country’s economy is the use of e-commerce. The majority of the Chinese working population usually spends their monthly income while conducting shopping online. The most famous Business to Consumer e-commerce website in the country is known as Taobao.in 2010, the Chinese E-commerce had an estimate turnover of $80 billion, which was an increase by 87 percent from the previous year.in addition, it is estimated that the Chinese population normally spend more than Billion hours in a day surfing internet.
The number is expected to increase rapidly in the next five years as the republic of China continues to invest more in research and development to support technological innovation. For instance, the world fastest supercomputer which is known as Tianhe-1A was manufactured in China (Leah 24). It is estimated that the country’s telecom serves more than 55 million broadband subscribers daily. However, despite the positive impacts of the technology growth, cheating and sale of counterfeit products usually characterize the Chinese e-commerce (Ricky 21). The majority of the Chinese still prefers face to face shopping due to low trust associated with the online shopping. However, the national government has introduced stiff laws to curb counterfeit products. It is therefore fair o say that Chinese online shopping provides the most convenient way of doing shopping.

PEST analysis of Hong Kong.

Political factors.
The territory of Hong Kong Special Administrative Region (HKSAR) was established via a joint declaration of one nation, two systems and was registered in the United Nation in 1984 (Saeed & Signh, 13). The government of Hong Kong is made up of the local inhabitants, but the laws remain unchanged. The Hong Kong legislature is also comprised of Local inhabitants who are selected via an election. The government of Hong Kong formulates and implement its own policies without following China’s social systems. However, despite the higher level of autonomy that is being enjoyed by the Hong Kong authorities, the Chines government manages the external affairs in the Hong Kong as well as the defense forces (bbc.com 10). However, it is worthy to note that Hong Kong enjoys a separate membership independent from republic of China in representation in various international organizations. This includes the United Nations, World Trade Organization, APEC among others. The national government has developed appropriate fiscal to attract foreign investors in the territory. For instance, in 2009 it was estimated that more than 1300 Japanese companies were operating in the Hong Kong (Saeed & Signh, 13). Other foreign companies in the region include American multinational companies Macdonalds and Pizza Hut. The authorities in the Hong Kong have established laws which determine the regulations and the management of business entities in the territory. This includes the employment laws, consumer protection laws among others.

Economical factors.

In 1990s, the economy of the Hong Kong was performing very well and was ranked eighth in the world largest economy. The economy’s Gross Domestic Product during this duration was estimated at 7.5 percent. As a result, the territory was classified among the Asian tigers such as South Korea, Taiwan and Singapore. However, during economic recession the Hong Kong GDP started to grow at a decreased rate declining from 7.5 percent to 4.8 percent (Saeed & Signh, 12). Currently, the territory is undergoing through the recovery phase of the business cycle. The authority in the territory has encouraged suitable fiscal policies to enhance sustainable growth during economic recovery. However, the rate of foreign investment remains relatively low as compared to other Asian tigers countries. This is because majority of labor intensive industries has continued to relocate to China and South Asia, where human capital both skilled and unskilled is readily available (bbc.com, 10). However, the local inhabitants continue to have increased levels of income which has lead to an increase in purchasing power and an increase in demand. The territory is also one of the largest consumers in the region with an import total trade of $ 450 billion as compared to $ 230 billion in 2010 (Saeed & Signh, 11). It is also notable that the majority of the Hong Kong export commodities are for re-export. In the recent past, the country has been experiencing an increased rate of inflation. By 2010, the inflation rate was 7 percent. The increased level of inflation is normally associated with imported inflation as the majority of the products and services are imported. In addition, increased demand in the domestic market has also contributed to the inflation rate being experienced in the territory.

Social factors.

The Hong Kong territory is comprised of a bilingual society. The territory national language is Cantonese , which is used as a medium of communication in the territory (Saeed & Signh, 7). However, English is usually used as the official language in the territory of Hong Kong especially in the legislature, executive and judiciary. The Hong Kong populations usually adhere to Buddhism and Confucianism religion. Gender discrimination is live in majority of economic sectors in the Hong Kong with women being discriminated in the workplace by their male counterparts. The families in the Hong Kong usually practice dual family income. In addition, the Hong Kong Chinese usually rely on the gradation of wealth to classify people in the social class. People in Hong Kong are classified into Professionals and top managers, business entrepreneurs, bureaucrats and clerks, semi skilled and unskilled labor. The Hong Kong literacy level remains high with an estimate of 96 percent in 2010. An individual academic qualification and hard work are most recognized factors that influence personal success by the Hong Kong Chinese.

Technological factors.

The territory of Hong Kong has embraced technological advancement in all sectors of the economy in the territory. One of the most successful areas where technology has been intensively adopted is the Hong Kong film industry. The Hong Kong industry has produced the majority of the world renowned film actors such as Jackie Chan, Bruce Lee, John Woo among others. Adoption of the technology has also been adopted in the communication sector. Majority of the Hong Kong Chinese relies on the internet to conduct their daily operations. This has been much enabled by the emergence of smartphones and tablets that have made internet connections easier. The authority of the Hong Kong has also invested heavily internet infrastructure in the territory. This has enabled the emergence of the new trends such as e-commerce in the region. Majority of the Hong Kong Chinese usually relies on the internet, sources to do business online. Other areas where the internet has been intensively utilized include learning institutions through e-learning among others (Saeed & Signh, 11). With rapid adoption of the modern technology and increased economic growth in the territory, Hong Kong provides numerous opportunities for foreign investment in the Asian region.

Works Cited:

Oxford University Press, PESTEL analysis of the macro-environment. 3 October 2011.Web. 8 April 2015.
Saeed, M & Signh, Ajay. The business environment in Hong Kong.Delhi Business Review. 2010 Vol.1(2)
Geoffrey, N. China pest analysis. 2014. Web. 8 April 2015.
Bbc.com, Hong Kong profile-Timeline. 3 December 2014. Web. 8 April 2015.
Leah, Juliet. China PESTLE analysis. 2014. Web. 8 April 2015.
Ricky, B. A PESTLE analysis on Chinese market (e-commerce sector). 2013 Web 8 April 2015.