PESTEL Analysis of China - Assignment Example

The country that we have chosen in order to open a manufacturing plant for the company “Toyota” in order for them to produce cars is “China”. The reason being for this location is because we see that it has in itself a great potential in the following factors, population and then labor, and finally access to a lot of raw materials with in China itself. China holds a population of 1.328 billion people, holding almost 22% of the world’s population which means that when we say china, we are talking about over a fifth of the world.

Also opening a manufacturing plant will of course mean that you will have to have a lot of labor, in China it is known that you can find very cheap labor which will help reduce cost massively. Talking about the PESTEL analysis we have with in the word six factors: Political, Economic, Sociological, Technological, Environmental, And Labor. Political: China is ruled by the communist party of China. Many people believed that it is being badly governed and hence this would start a downward spiral where it would see a stunt or cease in the growth cycle that it has been experiencing for more than two decades.

This bad governance may affect the entry of Toyota to China really badly. This would mean that there would be no stability in the policy and Toyota will not be able to plan ahead with absolute certainty. This will affect the profitability of their operations in China and may lead them into making bad choices and decisions. Economic: Economy of China has shown great growth during the last two decades. Its GDP has risen at an accelerating pace and it is very near surpassing the Japan’s GDP.

China’s government is also pouring money into the domestic sector in order to sustain its growth. This great investment in China’s infrastructure will make sure that Toyota will enjoy great success in setting up their supply-chain policies and there would be no or little contingency planning needed. This will be good for the entire economy as the spending in the economy would raise the people’s purchasing power and hence will have positive effects on Toyota’s business and will set up multiplier effect in China.

Sociological: There are also evidences of high level corruption in the governmental posts in China. This has lead to many protests being carried out against the China’s current regime. Similarly, there may be a case that Toyota will also have to pay some money to the corrupt officials to make its entry into China easy. This will be an additional cost and hence will increase the total cost bill of Toyota. Technological: China has around 86% literacy rate. China’s population is the world’s largest internet using nation.

This would mean that people in China are aware of technology and can cope with any new innovations or technology that Toyota brings to the country. China is also large innovator in the technological industry and this means that Toyota can use its technology that it has in China and can hire labor easily which can use the same technology as it being used in Japan and other Toyota plants. Environmental: China is second largest country in the emission of carbon-dioxide. This would mean that China government might ask Toyota to pay for its contribution on the environment and they may have to buy right to pollute licenses.

Thus, Toyota may face some resistance from pressure groups if their technology is not environmental friendly. Labor: China’s large population would mean that Toyota will have no problem in finding the labor that it requires for its operations. Similarly, as discussed above that there is 86% literacy rate in China, therefore, Toyota can also find skilled workers easily and may be able to fill the important positions in the company without any hassle due to high literacy rate. References: Richard L.

Daft (1995). Management. The Dryden Publishing Collin Bamford. (2003). Economics. Oxford University Press Lipsey and Chrystal. (2003). Economics. Oxford University Press Thomas Fuller. (2008). Examiner: Pestle Summary of China. http://www.examiner.com/x-9111-SF-Environmental-Policy-Examiner~y2009m4d27-PESTLE-summary-China