PEST analysis for the car industry

Topics: Automotive industry, Renault, Automobile Pages: 8 (2140 words) Published: February 28, 2007
Research question/Purpose

The Car Industry is changing its structure quickly. While Toyota earned some 124 billion SEK last year, GM lost about 65 billion SEK. Many mergers have happened and more changes are bound to happen. Write an essay pointing out the PEST-factors you find having a strong impact and causing these changes in the car industry. Also, reflect on the changes you think will happen in the years to come.

1.Introduction [1]

PEST analysis is a process of checking and analyzing information relating to the environment. The PEST analysis is a useful tool for understanding market growth or decline, and as such the position, potential and direction for a business as a business measurement tool. It involves monitoring the changes taking place in the environment and forecasting the future position. The PEST analysis could be a framework reviewing a strategy or position, direction of a company, a marketing proposition, or idea. It helps the firm to formulate its corporate strategy in line with the opportunities emerging in the environment. Strategic response to environmental changes is the end purpose of PEST analysis. PEST is made up of the first letters of the four key factors: political, economic, social, and technological factors. It assists in identifying the key environmental influences, predict the changes in environment, and understand the interconnections between influences pertaining to macro environmental factors and environmental factors specific to the industry. Most industry firms would carry out a PEST analysis to assess the prospects of their business and viability of their investment.

Specifically, these four PEST factors cover all aspects of external environmental analysis. Political factors changes involve government rules such as on planning. Economic factors changes include the health of the economy, how likely people are to be able to afford property, and changes such as the rate of interest rates, currency exchange rate. Social factors changes include changing lifestyles and attitudes in population trends. Technological factors involve changes such as creating opportunities for the new products and product improvements and marketing techniques.

Car industry makers nearly 60 million cars a year, and employs millions of people around the world. Its products are responsible for almost half the world's oil consumption, and their manufacture uses up nearly half the world's annual output of rubber, 25% of its glass and 15% of its steel. No wonder the car industry accounts for about 10% of GDP in rich countries [2]. In this paper, above four PEST factors involved in car industry are detailed explained and investigated in order to provide a clearer developing trend for global automotive industry.

2.Influences of political factors on car industry

1)WTO and China [3]

Since I come from China, the Chinese auto industry is more familiar for me to investigate. As is known, China becomes one of the great growth areas for the industry. Recent figures show that in 2003, China built over 1.4 million passenger cars, a volume closely comparable with, for example, Italy, Spain or the UK. As China has entered WTO (World trade organization), this important political policy change has caused large impacts on auto industry in China. China's WTO entry has a good deal of positive influence on the domestic automotive industry. WTO accession may advance the rapid growth of the auto market. Losses in terms of resources and social welfare caused by excessive government protection over international trade is reduced and then eliminated. Entering the WTO may lower the prices of products used in the automotive industry. Trade liberalization spurs the development of international trade and stimulates automobile exports. The WTO entrance accelerates the development of the private auto market, as individuals could become the major force behind auto purchases. Due to a change from a political policy, car...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Essay on Pest Analysis of Textile Industry
  • Pest Analysis of Paint Industry in India Essay
  • Pest Analysis Essay
  • Pest Analysis Essay
  • Pest Analysis Essay
  • Pest Analysis of Automobile Industry Essay
  • Pest Analysis Essay
  • Car Industry Essay

Become a StudyMode Member

Sign Up - It's Free