PESTEL Analysis - Essay Example

1.Main External Factors: PESTEL Analysis Political Factors Mining can be an important source of foreign exchange and fiscal receipts for governments. When managed well, the net foreign exchange and taxes generated by mining can be used by governments as an engine for overall economic growth and as a source of financing to support national budgets for social-sector and poverty reduction programs (Mining and Poverty Reduction online).Economic FactorsMining operations can be found to invest substantially in local economic development, through providing training, public services such as education and health, and public goods, such as clean water, transport, energy, and infrastructure (Mining and Poverty Reduction online).

In countries with large coal resources, coal is an important source of energy contributing to economic growth (Mining and Poverty Reduction online).The presence of mining will inflate wages and keep the exchange rate strong, which can prevent other sectors, for example, agriculture, from being internationally competitive and thus from realizing the opportunity for export-driven growth (Mining and Poverty Reduction online). The higher incomes of mine workers can lead to rising local prices-with the poor left behind; at the same time, the poor and nonmining population may have only limited access to services provided by the mine (Mining and Poverty Reduction online).

Socio-Cultural Factors Mining provides employment. Mining also provides skills transfer to workers and can also be an important source of social services to remote communities (Mining and Poverty Reduction online).The often harsh living conditions for miners in small-scale mining as well as in large-scale mining, along with the lack of information and education about prevention, can contribute to a high prevalence of human immunodeficiency virus (HIV) and other communicable diseases among miners and their families.

Also, work-related injuries and health risks-lung cancer, for example-reduce the miners' life expectancy and often put families in particularly precarious situations (Mining and Poverty Reduction online).Mining activities can have a negative impact on the livelihood of indigenous people, with sociocultural conflicts surrounding the establishment of mining activities in otherwise rural areas or in the "wilderness" (Mining and Poverty Reduction online).Technological Factors The technology in the mining industry is mainly the mining equipment.

Environmental Factors Environmental damage can be caused by mining. Water pollution, water quantity, tailing management, noise, dust, and land disturbance are issues that can adversely affect the health and livelihood of the poor and vulnerable groups with little mobility or means of alleviating negative impacts (Mining and Poverty Reduction online).Legal Factors The mining industry is subject to numerous health, safety and environmental laws and regulations as well as community expectations. Evolving regulatory standards and expectations can result in increased litigation and/or increased costs (Rio Tinto Plc. 8).2.

Porter's 5 Forces Analysis The bargaining power of customersThe customers of the mining industry are those who purchase minerals. Compared to the mining industry, they are more fragmented. The mining industry is dominated by large, often multinational, mostly publicly-listed companies (Mining online). Therefore, the bargaining power of customers is low.The bargaining power of suppliers The bargaining power of equipment suppliers is low. Price competition has resulted from the emergence of major suppliers from China and Taiwan (Kanawati online).

Moreover, the mining industry is an important customer for the mining equipment suppliers, since their products can only be used in the mining industry.The bargaining power of labor is low. Children and peasants complete much of he mining (Hume online).The threat of new entrants The threat of new entrants is low because the cost of the mining equipment is very high.The threat of substitute products The threat of substitute is low. There is virtually no substitute for minerals generally.The intensity of competitive rivalry The intensity of competition is low.

Demand for individual metallic minerals is expected to increase at a modest rate through 2040. Demand for energy minerals is expected to increase moderately in the future (Collins online). WORKS CITEDCollins, F. "An Analysis of the Minerals Situation in the United States: 1989-2040." USDA Forest Service. 1989. 21 October 2006 Hume, Brad D. "Mining Resources." Academic.udayton.edu. 21 October 2006 Kanawati, J. "Mining Equipment." STAT-USA Market Research Reports. 16 May 2004. 21 October 2006 "Mining.

" Wikipedia. 21 October 2006 "Mining and Poverty Reduction." The World Bank Group. 21 October 2006 Rio Tinto Plc. Form 20-F: Rio Tinto Plc - RTP: Filed June 23, 2006 (Period: December 31, 2005). Rio Tinto Plc., 2006.