PESTLE Analysis of the USA - Case Study Example

Case Study Analysis of the United States Name Institution Case Study Analysis of the United States Introduction With the rising competition in the global markets, it is critical that companies undertake a market research and analysis before the venture. In this case, the analysis would focus on the United States. The US is the third most populous country globally and fourth by total area. Currently, the country has a population of more than 318 million with diversification in ethnic backgrounds and the largest economy in the world. Therefore, the country attracts a significant number of investors making competition so stiff that would be important for businesses to have a plan before investment. After the 9/11 attack, the country economic growth slowed down and with the economic recession that occurred in 2009, the country’s economy contracted significantly. Nonetheless, the country’s economy is currently moving to the desired and steady direction with such changes attributed to the increment in business investment, expenditure of the consumers, and substantial decline in unemployment. Political The United States enjoys a strong democratic setup and consequently the effective rule of law. The two factors ensure fair and transparent elections. Moreover, the country enjoys massive influence associated with political and economic activities from the local and international policymaking process as it is recognized globally as leading superpower (Markandya, Pedroso-Galinato, & World Bank, 2009). With all the political influences the country enjoys, it faces various criticism internationally owing to its interventionist policies on the ‘War on Terror’, which mostly sour the foreign relations and similarly fuelling the terror groups. As a result, the country increases the threat of terrorism. Economic Performance For a long period, the country has been enjoying stable economic performance until the occurrence of 9/11 attack and economic recession. The country has a GDP of over $16.760 trillion making it the largest economy globally. Moreover, the U.S enjoys a stable economic system associated with properly developed industries and gathers much of the strength from its services and manufacturing industries. In 2009, the economic recession greatly affected the economic performance o0f the country and increased the rate of unemployment at an alarming rates. However, the country’s economic performance bounced back registering a 4% growth in the third quarter of 2014 as both the consumers and business entities increase the spending. The increasing budget deficit puts the country’s economic success at great risk as it currently stands at staggering level of $506 million. Despite the modest growth rate of the US since it ended its Great Recession, accommodation and employment rates have gained some tractions in the recent quarters. However, with increasing mortgage rates, low growth of quality jobs, and declined disposable income, there are concerns over the performance of the economy. The economy of the country has expanded with 3.9 percent in the first quarter within the three months to June 2015. Compared to the previous growth of 3.7 percent, the growth is mainly attributed to increased consumer spending and construction activities. In relation to expenditures, personal consumption rate in the country accounts for 68 percent of the Gross Domestic Product (GDP) constituting both the goods and services standing at 23 percent and 45 percent respectively. According to the Commerce Department, both consumer spending and cheaper fuel prices are the major factors that contributed to the growth (Richardson, Pan, Park, & Moore, 2015). The economy of the country entered 2015 on the stronger streak of consumer spending years. However, the released first growth figures of 2014 indicate inadequate vigor in the current expansion. Initially, many American drillers invested over the years expanding their investment; however, with such reductions, the country recorded decline in investment by more than $25 billion in the first quarter. In the first three months, the country showed signs of weakness in its economy, which contributed, to the anticipation of low GDP growth for the first quarter by the market. Social Factors A Huge number of potential employees with adequate skills and experiences endows U.S. However, like most developed countries, it faces several challenges associated with the aging population which contributes to serious problems such as shortages in the labour pool and increment in the tax rates in the near future. However, the country enjoys proper educational and health system, which is considered one of the best globally. Most of people in the United States have liberal mind-set; yet, the increasing racial intolerance is a major concern. Moreover, the increment in illegal immigration is another issues of concern considering the currently more than 11.7 million people live in the country illegally which further increases the risks associated with racial discrimination. International Trade The country is one the most important economic markets whose international trade involves both import and exports of products and services. Besides, the country cannot enjoy the growing economy, lift the wages of its citizens, and acquire the products it requires without engaging in international trade. More than 38 million jobs in the U.S. depend on trade. Although few Americans know that the country is the largest exporter of products and services in the world, in 2014, these products, and services reached $2.345 trillion as per the statistics of the Department of Commerce. Globally, there is a large amount of U.S. dollars circulating in the market reflecting the operational base occupied by the country about international trade (United States, 2010). After suffering from the Great Depression, the country emerged among the best global trade policy-makers with its trade regulations constitutionally vested in the Congress. Moreover, the country is now partner to several international trade agreements including the International Trade Organization and General Agreement on Tariffs and Trade. Currently, the gross assets held by foreigners stand at $16.9 trillion reflecting the level of engagement of the country in international trade. By the end of 2013, the products and services exported and imported by the country stood at $2.27 trillion and $2.74 trillion respectively. However, there was a trade deficit amounting to $450.3 billion. In 2012, according to the statistics from the Census Bureau, exports of manufactured goods amounted to $2.97 trillion, which supported approximate seven million jobs in the U.S. Whenever there is deficit in international trade, both the local companies and job seekers are affected (International Monetary Fund, 2013). Despite the positive trends associated with international trade over the last two years, the slow growth of the U.S. economy since the inception of the current downturn is reflected is most of the values from its export activities. Just as the free trade among the 53 states creates numerous benefits, so does involvement of the country in international trade. Currently, the major trading partners of the country are Taiwan, Brazil, France, South Korea, Canada, Mexico, China, The United Kingdom, and Germany. Investment Indicators The most essential indicator of the level of investment in the country is the employment rate. On the Friday of each month, the U.S. Department in charge of labour and statistics often release monthly employment reports, which indicate the current unemployment rates. Besides, the statistics also reflect the number of jobs gained or lost by the economy. Within the country, the market participants are always early waiting for these reports. The employee situation often influences several crucial indicators like consumer sentiments and confidence. Consumers make nearly 70% of the country’s economic activities; therefore, the state of the labour market is important to the overall performance of the economy (International Monetary Fund, 2012, 98). With less investment within the country, less jobs are created. Besides, the country has been able to strengthen its labour market through the creation of a conducive environment that attract foreign investors. Most investors also consider the GDP of a country before putting the investments in such countries since it determines the economic health of a country. Over the years, the states have been enjoyment positive economic growth, which attracts more investors. Higher GDP of a country reflects trade laws that attract international investors. Legal Environment Several laws in the U.S aims to protect business activities and prevent consumer exploitations. The common areas in which the state’s legal structure affect international business is the legal setup and incorporation. Within the country, business can be incorporated online for $100, which is carried out easily cheaply, and quickly to prevent inconveniences and inefficiency of business operations. Besides, the structure of the businesses often have implications on the legal environment and tax. Therefore, preparation of proper legal and financial documents are critical to ensuring investments in the market. Egalitarianism is a common factor in the country (United States, 2003). Despite the several differences among the Americans, the concept of equality is critical. With such differences, there is collective understanding of equality notions, which underlie most social relationships within the country. Consumer protection is critical in the country. As a result, several laws have been enacted to ensure consumer protection, trade in legal businesses, and provision of services and goods that meet the required standards. Recommended Entry Mode With the economic, political, legal, trade, and investments, the business should consider using investment modes as an entry strategy into the market. Investment modes involve having the physical and constant presence in the country’s market through making an investment in the form of establishing international branch or subsidiary in the U.S market. However, the modes are based on the foreign direct investment (FDI) as they provide cost of production and direct presence in the global market (Wach, 2014). However, for efficient and effective investment into the U.S market, the company should consider the creation of two investment methods but settle on the most appropriate: brownfield, which involves merging and acquisition (M&A) of local firms and Greenfield which is investment from the scratch. The greenfield strategy has several disadvantages including huge time and patience required, high initial costs, requirements to comply with the local and national regulation, it requires the presence of local workforce, and strongly perceived to foreign workers. However, it could enjoy some merits including the best business sites, modern facilities, clean slate, and economic development incentives. References International Monetary Fund. (2013). The direction of Trade Statistics Yearbook, 2012. Washington, DC: Author. Markandya, A., Pedroso-Galinato, S., & World Bank. (2009). Economic modeling of income, different types of capital and natural disasters. Washington, D.C.: World Bank. Richardson, H. W., Pan, Q., Park, J. Y., & Moore, J. E. (2015). Regional economic impacts of terrorist attacks, natural disasters, and metropolitan policies. Cham: Springer. The United States. (2003). International trade. Washington, DC: U.S. G.P.O., Supt. of Docs. The United States. (2010). Nonprime mortgages: Analysis of loan performance, factors associated with defaults, and data sources: report to the Joint Economic Committee, United States Congress. Washington, D.C.: U.S. Govt. Accountability Office. Wach, K. (2014). Chapter 7: Market Entry Modes for International Business. In International Marketing: Within and Beyond Visegrad Borders (pp. 135-147). Kraków: Wydawnictwo Episteme. Read More