Demonstrate an understanding of PEST analysis (macro-environmental assessment) by identifying the key factors of change in the environment for an organization of your choice. Critically analyze the impact of these changes on the market and the corresponding strategies to tackle these changes.

I would like to propose milk powder in the mainland China as an example to illustrate the PEST analysis.

Political - The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses.

➢ In the mainland China, the government had passed regulation limiting families to one child each in 1970s. People used to have four or five children in their families and now reduced to one or two. As a result, the birth rate had been declined significantly in the past decades. Less and less infants are born which means that the sales of the milk powder to the families for their infants would be declined as well.

➢ The Chinese government was running protectionism which meant that it imposed heavy taxes on the imported good. Most of the milk powder was transported to mainland. The selling price of milk powder was very high.

Economical - Marketers need to consider the state of a trading economy in the short and long-terms in which affect the consumer purchasing power and spending pattern.

➢ The economy in China had been booming in the past decades. People’s incomes have been increased among the cities. They are willing to spend more on their child. They are much more affordable to purchase the milk powder for their child

Social & Cultural - The social and cultural influences on business vary from country to country. It is very important that such factors are considered.

➢ For the traditional Chinese people, most of the people feed their infant with their breast milk. As a substitute, milk powder thus becomes less important. However, the education level is much higher than that before. People know the advantages of using the milk powder in stead of the breast milk and they are much easier to adopt new things. It helps the sales of milk powder.

➢ As we discussed, the population structure in the mainland is changing. Fewer children and more elders are the factors directly affecting the growth of milk powder.

Technological - Technology is vital for competitive advantage, and is a major driver of globalization.

➢ Milk powder was considered as a luxury good because the price was high and it was not a must for the infant. As technology is much more advanced, the cost of producing milk powder is much lower. It makes more people could afford.

➢ The advanced technology allows manufactories produce the milk powder with richer nutrition
Strategies

➢ In order to cope with the drop in the number of infants, the milk powder companies try to invent different kind of products for different ages and gender. They will produce the milk powder with high calcium and other nutrition for the teenagers’ growth. They will also produce milk powder with low fat for the ladies and with some anti-ageing nutrition for the elders. It enlarges the targets in the market and makes less dependent on one target.

➢ To reduce the selling price, the most efficient way is to reduce the cost. Nowadays, companies move to the mainland for the production. The low labour cost and the cheaper material can lower the production cost. It can stimulate the sales of the milk powder.

➢ To cater the customers’ taste, companies produce different flavors, such as chocolate, vanilla, strawberry etc which are attractive to the people.

➢ More advertisements can help the sales of the milk powder since all the customers may consider all different kinds of milk powder more or less the same, or even identical. Therefore, promotion is important to increase the reputation.

➢ The technology breakthrough may also help to reduce the production cost with higher efficiency. Customers are willing to buy.

➢ The appearance and the fitness are more and more important to the women. Milk powder producer can focus on the point that breast milk feeding would affect the body shape and time consuming. It can stimulate the working wives incentive.

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