External Analysis of Magpie PTY Limited - Assignment Example

EXTERNAL ANALYSIS OF MAGPIE PTY LIMITED Introduction When launching a new product in a market, or, when pursuing business in foreign markets, it is important that a company get to understand the culture and behaviors of the new market. Such market analysis should be carried out prior to entering the new market. The most commonly used effective techniques of carrying out this analysis are by the use of tools such as PESTEL, STEEP SWOT. In this paper, the application of PESTEL will be use to carry out an analysis of a Japanese company called Magpie Pty Limited. Magpie Pty Limited is a company that manufactures electronic cigarettes in Japan. PESTEL analysis is the best tool for making market analysis for external factors that might affect the operation of a business. External factors affecting Magpie Pty Limited include environmental factors, political, social cultural, technological, legal and economic factors. Consequently, in order to capture or maintain maintain a market, strategic measures to curb changes in these factors must be enforced by a company (Berg, 2009). Political analysis The political environment of any nation is crucial in operating a business. Some of the political factors likely to affect the operations include, government stability, corruption levels, tax policy which includes rates and incentives, freedom of the press and government involvement in trade unions. It is important to have good relations with the political class in foreign markets. This is because of the value of political lobbying in business. This is not different in Japan as several laws have been enacted to deal with electronic smoking in the country. The Japanese health sector enacted some laws in 2003 inhibiting smoking of electronic cigarettes in public. The implementation of the laws about smoking electronic cigarettes in Japan operates on a two tier system. The first tier allows partial permission for smoking electronic cigarettes on the condition that they are nicotine free. The government has not yet given out a medical license to electronic cigarettes that contain nicotine. Magpie Pty Limited must adhere to the regulations set including analyzing the transport industry, local authorities and property owners. The transport industry includes airports if the cigarettes are meant for export and further distribution. Some airports however do not allow use of electronic cigarettes. The political environment in Japan is partially seen to be supporting sale of electronic cigarettes. This can be evident by the fact that electronic cigarettes are not exposed to the same tax laws as compared to traditional cigarettes. This means that the Magpie Pty Limited should utilize this opportunity to its maximum value benefit to the business. Provision of an enabling working environment by the government contributes to either the success or failure of any business. Considering that the Japanese government is stable with their corruption levels being minimal it shows that Magpie Pty Limited with proper management levels it can succeed in Japan (Babb, 2001). However, Magpie Pty limited faces the challenge of limited press freedom in Japan. The level of bureaucracy is high amongst the Japanese culture, which makes decision-making and approval of projects take a longer period. The press therefore cannot express their views freely and this poses a great difficulty for Magpie Pty Limited to operate considering the nature of their business and the product. Their product requires adequate marketing and advertisement hence Magpie Pty Limited will be affected because they will do minimal or limited advertising. This will consequently affect the company’s revenue levels. Social-cultural analysis The organization the culture adopted by their target market is crucial to a business. Social cultural elements likely to influence Magpie Pty Limited include health consciousness, education levels, religious beliefs and minorities. For Magpie Pty limited to thrive well in Japan cultural values of Japanese are important. The fact that Japanese do not value their women means that decisions are mostly made by men and this consequently affect their buying habits. Hence as Magpie Pty Limited operates their target market should comprise men at most so as to increase their sales levels. Magpie Pty Limited operates in an environment where literacy levels are high, Japanese are considered educated and intelligent. The literacy levels in Japan are increasing and therefore Magpie Pty Limited should utilize the opportunity and increase their sales. This should however be strategically approached by advertising the health benefits of smoking nicotine free electronic cigarettes. However, the fact that demographics of Japan indicate an aging population and a fewer youth population, the advertisements should also be in a conservative manner (Kohlbacher and Hersatt, 2011) However critics have also been established in relation to electronic cigarettes, most smokers are less informed about the risks and benefits associated with electronic cigarettes. They believe that electronic cigarettes contain high levels of nicotine and they should be banned due to their effect on the social well being of smokers. Magpie Pty Limited should deal with such challenges by educating the public more about the product and their benefits. They should focus on upgrading the social well being of the people by participating in corporate social responsibility programs (Levitt and Dubner, 2014). Economic analysis The fact that Japan is economically stable means that Magpie Pty Limited has an enabling environment to operate and maximize their profits. Economic environment entails inflation rates, interest rates, exchange rates, and unemployment levels, fiscal and monetary policies. As stated in American Chamber of Commerce in Japan and United States (2006), Japan is a country that has experienced deflation in the recent past. This means that the Japanese people have money but they are not willing to spend and this is a challenge for Magpie Pty limited. Economic changes in a market may either cause a boom or a recession. It is therefore important for Magpie Pty Limited to strategize on dealing with these changes since they affect their revenues and expenses and this consequently affects their survival as cited by Hodgson, Sano and Graham (2008). Technological analysis Magpie Pty Limited operates in an environment that is characterized by several technological advancements. Technologically Japan is doing well having efficient infrastructure levels, spending largely on research and development, and their rates of technological change are high. However according to De Mente (2011), the internet infrastructure and internet penetration levels in Japan are sufficient enough to enable product education. Magpie Pty Limited must clearly understand their environment and have strategies to deal with technological changes so as to ensure they are on the edge in terms of technology by ensuring that they come up with new ways of production, distribution and communicating with their target market. Legal analysis Magpie Pty Limited should ensure that they are operating legally, this entails adhering to consumer protection laws. Electronic cigarette should not contain harmful substances that endanger the health of consumers. Additionally, as the company advances in technology and product development, it is important that they get into agreements with their stakeholders to obtain intellectual property rights in technology, copy rights and patent for their product (Bederman, 2008). Environmental factors The success or failure of Magpie Pty Limited depends on its environmental relations which include ecological elements such as environmental pollution laws (Gorgenlander, 2010). Public relations to any business are important hence the company should ensure it has close ties health regulatory bodies and ministry of health. There have been changing consumer trends in Japan and this has influenced the progress of use of electronic cigarettes. The fact that consumers want an odorless product makes electronic cigarettes favorable in terms of pollution. The Japanese consumers have accepted various reports that have been written showing it. Consumers think that the product is less harmful as compared to traditional cigarettes. Magpies Pty Limited should therefore make sure that it delivers what the consumers want and that which is environmentally friendly. They should invest in carrying out research aimed at analyzing the consumer trends in the market. They should observe consumer tastes and preferences and ensure that integration programs are affected including direct investment (Phisalaphong, 2011). Conclusion The analysis of a foreign market is normally carried out to ensure that there is a sustainable business environment for a company. The culture and trends of a market enable strategic decisions to be implemented so as to ensure the company’s profitability in a new market, or when launching a new product as stated by Cellich and Jain (2012). PESTEL has enabled Magpie Pty limited to effectively analyze the macroeconomic elements affecting their business. 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