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UNDERSTANDING THE BUSINESS & ECONOMIC ENVIRONMENT

Introduction
This is an essay is written on the PESTLE analysis. To analyze the market to start a new manufacturing
company. In this essay, it is written the PESTLE analysis and factors that are affecting the business while
starting and running the business.

Company
JBS USA Holding, Inc is an American food processing company and wholly owned subsidiary of
JBS S.A. Brazilian Company that is the world's largest processor of fresh beef and pork. In this
essay, we are going to start a JBS manufacturing company in India. In this factory we are going
to start cow meat processing factory.

S1501531
Suaadh Yoosuf
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UNDERSTANDING THE BUSINESS & ECONOMIC ENVIRONMENT

PESTLE ANALYSIS
The PESTLE analysis is framework used to understand the business macro environment.
PESTLE stands for Political, Economic, Social, Technological, Legal, and Environmental
factors. PESTLE analysis is used to identify how these factors influence the business and the
possible changes (Dcosta, 2015). As business strategies are affected by these factors. The
PESTLE analysis measures the market. The PESTLE analysis are used mostly when a
business is going to launch a new product, entering to a new country, discovering a new route
and also it is useful to do strategic planning (FME, 2013).

PESTLE FACTORS
 Political Factors refers to the government policies that influence the business. Some
political factors are government stability, tax regulations, corruption level, and trade
restriction.
 Economic Factors represent the changes come to the economy. Some factors are
exchange rate, interest rate, inflation, GDP, employment and unemployment rate.
 Social Factors are the factors that bring changes to the social trend. Those are
education level, demographics, ethics and religion, lifestyle and distribution of wealth.
 Technological Factors are factors which are affected due to the changes come to the
technology.
 Legal Factors are related to the legal environment in which business work. Some
factors are taxation, import and export and laws for employees and consumer.
 Environment Factors includes laws such as waste disposal and environmental
protection.

Time series forecast trends for one of the chosen element of each
factor up to 2020 to JBS USA Holdings, Inc.

1. Political: Government Stability


The government stability is very important to the countries. According to data provided by The
World Bank the India political stability in 2014 was -0.96 point which in less than 2013 and this
may decrease in the future. Already from 29 states 24 states have banned cow slaughter in
India (Khan, 2015 ). And the next governments that come may ban cow slaughter for remaining
5 states.

S1501531
Suaadh Yoosuf
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UNDERSTANDING THE BUSINESS & ECONOMIC ENVIRONMENT

2. Economic: Inflation
12.00%
Inflation rate
9.94%
10.00% 9.50% 9.54% 9.44%

8.00%

5.93%
6.00% 5.33% 5.54% 5.33%
5.29%
4.93% 5.03%

4.00%

2.00%

0.00%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: (Statista, 2016)

Inflation means increasing the general price level and decreasing the value of money over
period of time (Makinen, 2003). According to the figure above, India inflation rate have decrease
in 2014 very much. And after that the inflation rate is changed little in every year.

3. Social = Ethics and religion

India Religious
Others

Skih
Religions

Christian

Muslim

Hindu

0 10 20 30 40 50 60 70 80 90
Percentage

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Suaadh Yoosuf
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UNDERSTANDING THE BUSINESS & ECONOMIC ENVIRONMENT

Source: (Indexmundi, 2016)

From the population of 1,266,883,598 (July 2016) peoples, 79.8% of peoples belong to Hindu
religion (Indexmundi, 2016). And according to the Hindu religions, slaughter cow is not allowed.
As they believed the cow as a god and this is against there are ethics.

4. Technological: Information and Communication

If a host country is improving the broadband connectivity like India is very important to the
multinational business. As this will be easier to establish and maintain the process of the
business in effectively.

5. Legal: Import and Export

India Export and Import will be increased in the future. According to the Trading Economics;
India Export is projected to trend around 28900.00 USD Million in 2020 and India Import is
projected to trend around 39000.00 USD Million in 2020 (Economics, 2016) and (Economics,
2016).

6. Environment: Carbon footprint


Mass meat production produces a huge amount of carbon dioxide. The estimated value of
carbon dioxide produced by the meat industry is 9 percentages (Roots, 2012). In future this is
likely to increase.

S1501531
Suaadh Yoosuf
Page 4
UNDERSTANDING THE BUSINESS & ECONOMIC ENVIRONMENT

The implication of the findings in terms of risk, costs and benefits for
JBS USA Holdings, Inc.

1. Political: Government Stability

a. Risk
The changes comes to the government, the states in which the cow slaughter is not banned
may be banned. This will be closing the factories that are producing the meat using the cow.
Which will become huge lost to the JBS Company under meat processing industry. As if there
start now they may have to close immediately.

b. Costs
If the JBS Company starts the meat manufacturing in India there may face problem of from the
government, as government majority belongs to the Hindu religious peoples. As they have
objection on starting the JBS Company manufacturing base in India.

c. Benefits
If the government stay as it is, then JBS Company can establish and run the business in the
remaining states that is not banned for cow slaughter. India is the country which have the
largest population of the cows. It’s around 283 million cows.

2. Economic: Inflation

a. Risk
India is in deflation since 2014 and according to the forecast this will be continued till 2020. This
will be affecting the JBS Company profit, as profit increasing will be may not be happen due
deflation.

b. Costs
Deflation is very dangers. As this will be making the JBS suffer from the lower growth. And also
the peoples will be unwilling to spend the money to for hoping that the prices will decrease
again.

S1501531
Suaadh Yoosuf
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UNDERSTANDING THE BUSINESS & ECONOMIC ENVIRONMENT

c. Benefits
The benefit that JBS Company is having due to deflation is that the cost of the production will be
decreasing. This means the JBS Company will be able to produce more products in a low cost.
This will be increasing the purchasing power, which will be increasing the sales of JBS
Company.

3. Social = Ethics and religion

a. Risk
The ethical group of peoples may take action against the JBS Company. Which will be affecting
the JBS Company image brand and reputation of the JBS Company.

b. Costs
As many people related to Hindu religious, the people of India may buying the red meat which is
produced from Buffalo instead of cow meat. As this will be according to they are religion and
ethics. Which will be decreasing the sales of the JBS Company.

c. Benefits
In India there is more than one religion and in that other religious allow to consume cow meat.
So the JBS Company can sell they are product to that religious peoples.

4. Technological: Information and Communication

a. Risk
The changes comes to the technology should be updated regularly. Other was the JBS
Company may be unable to connect with other branches in other countries.

b. Costs
The cost that the JBS Company will be facing is they have to update the changes that come to
technology in order to being touch with the India branch.

c. Benefits
In order communicate with the manufacturing base in India JBS Company without travelling. As
the technology have improved that much, which is fast and easy.

S1501531
Suaadh Yoosuf
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UNDERSTANDING THE BUSINESS & ECONOMIC ENVIRONMENT

5. Legal: Import and Export

a. Risk
The changes that may occur to the import and export laws will affect the export of the JBS
Company product and import of product for production.

b. Costs
The JBS Company has to pay tariff and quote for export and import of the product. Which is
increasing day by day.

c. Benefits
India is one of the largest countries which export meat throughout the country. This will be
helping the JBS Company to export the meat product they produce to export to other countries
easily.

6. Environment: Carbon footprint

a. Risk
The government may increase the pollution tax, which means the JBS Company have to pay a
huge amount to the government then before.

b. Costs
The JBS Company has to pay the tax, as they are producing pollution to the country. This may
have to pay a huge amount of the money to the government.

c. Benefits
Due to the carbon footprint, they will be no effect to the business.

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Suaadh Yoosuf
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UNDERSTANDING THE BUSINESS & ECONOMIC ENVIRONMENT

Bibliography
Dcosta, A., 2015. Components of a PESTLE Analysis. 29 June.

Economics, T. (2016) India Exports [Online]. Available from:


http://www.tradingeconomics.com/india/exports/forecast [Accessed 31 Octorber 2016].

Economics, T. (2016) India Imports [Online]. Available from:


http://www.tradingeconomics.com/india/imports/forecast [Accessed 31 Octorber 2016].

FME, T. (2013) PESTLE Analysis Stratergy Skills. http://www.free-management-ebooks.com.

Indexmundi. ( 2016) India Demographics Profile 2016 [Online]. Available from:


http://www.indexmundi.com/india/demographics_profile.html [Accessed 31 October 2016].

Khan, S. ( 2015 ) Beef ban: States where cow slaughter is legal and illegal [Online]. Available from:
http://www.ibtimes.co.in/beef-ban-states-where-cow-slaughter-legal-illegal-649249 [Accessed 31
October 2016].

Laloo, R.V. (2010) PESTLE ANALYSIS OF THE PAPER INDUSTRY [Online]. Available at:
https://www.scribd.com/doc/27208431/Assignment-on-PESTLE-Analysis-of-The-Paper-industry-in-India
[Accessed 31 October 2016].

Makinen, G. (2003) Inflation: Causes, Costs, and Current Status. U.S: Government and Finance Division.

Mullerbeck, E., 2015. SWOT AND PESTEL. unicef, September. pp.1-12.

Roots, L. (2012) Effects of Food Production on the Environment [Online]. Available at:
http://www.landroots.org.uk/ [Accessed 31 Octorber 2016].

Statista. (2016) Inflation rate in India from 2010 to 2020 (compared to the previous year) [Online].
Available from: https://www.statista.com/statistics/271322/inflation-rate-in-india/ [Accessed 31
Octorber 206].

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Suaadh Yoosuf
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