PESTEL Analysis of Ayala Corporation
PESTEL analysis of Ayala Corporation includes macro business factors that impact the business performance of the organization. It includes political, economic, social, technological, environmental, and legal factors. Managers at Ayala Corporation should examine three interrelated environments in order to create an effective business strategy. The organization is the oldest Pilipino conglomerate which is still controlled by the Zobel de Ayala family. Today, we are going to conduct its PESTEL analysis in order to fully understand the business operation and model of Ayala Corporation.
Importance of PESTEL Analysis:
In strategy management and the planning process, the importance of PESTEL is huge. It requires five steps given as,
- Choosing the mission, vision, and reasons of existence for Ayala Corporation.
- Analyze the external competitive environment of the organization in order to identify the possible opportunities and threats.
- Analyze the internal competitive environment of the organization in order to identify strengths and weaknesses.
- Developing strategies that can help to convert weaknesses into strengths and totally reduce the impact of threats.
- Execution of the plan and creating a feedback loop.
Political Factors | PESTEL Analysis of Ayala
The role of political factors is huge in making any decision or strategy. It is necessary for Ayala Corporation to analyze all the possible political aspects of the surrounding for smooth operation. These factors play a huge role in the process of doing business. They are crucial for long-term sustainability. Chance of armed conflict, law & order, democracy, governance system, and military invasion are some important political factors.
Changes in Policy and Change of Government:
The consistency in the business operation is heavily dependent on several factors such as the stability of government and political party. It is necessary for the new government to follow all the treaties proposed by the previous one for the betterment of national organizations and companies.
The Threat of Attacks:
It is hard to survive in the post-9/11 world. The risk of terrorist attacks can disrupt the business operations of companies like Ayala Corporation. Working under the shadow of terrorism can slow down the efficiency and performance of the organization. The organization must develop prudent policies to mitigate the risk of a terrorist attack.
Chance of Entering into an Armed Conflict:
Entering into an armed conflict can be fatal for the profitability and revenue stream of the brand. Moreover, armed conflict between two countries can be possible which can impact the business largely.
Separation of Political Responsibilities between Different Government Bodies:
Some political, as well as government agencies, can increase the cost of doing business in the country. It is because of getting clearance and certification from different departments usually takes so much time.
Responsibility of Non-Government Organization and Pressure Groups:
Ayala Corporation should cooperate with civil society and non-government organizations in order to reduce the working gap. They can play a major role in building a strong strategy and robust narrative.
Role of Local Government:
The role of local government in policymaking is very huge. They are also responsible for the implementation of these policies. So, their involvement and influence can’t be ignored at any rate.
Democracy and Democratic Institutions:
According to experts, the democratic institution’s strength must be enhanced for the smooth and better working of the organization. In such an environment, a business can flourish at a very fast speed. It also leads to transparency, reduces corruption levels, and strengthens the brand.
The size of the government budget also matters, whether national or local. They are necessary for sustainability and long-term growth. A budget deficit can lead to several problems in the business system of the company.
Economic Factors | PESTEL Analysis of Ayala
The impact of economic factors is very huge on the business performance of an organization such as Ayala Corporation. It is vital for the organization to analyze some important economic factors like inflation rate, disposable income level, GDP growth, and more before venturing into new markets.
Productivity of WorkForce:
Over the last few years, the productivity of the workforce has increased by 25 to 30 percent in the United States. Although the salaries are not reflecting these achievements there is a chance for Ayala Corporation to hire a competent workforce at attractive salaries.
Impact of Inflation Rate:
The demand of Ayala Corporation can be impacted by several factors such as the inflation rate. It has a greater impact on the demand for products. In case of a higher inflation rate, Ayala Corporation needs to increase product prices continuously. As a result, customer loyalty will reduce and they will start switching to other brands. In these conditions, a cost-based pricing strategy can be disastrous for the brand.
Level of Domestic Income and Savings Rate:
The savings rate and level of domestic income predict the spending power of consumers. To be honest, it has increased in the US and people don’t think much while spending money on products. It shows that people don’t have much to save. The organization must consider the factor “purchase on credit” while developing a marketing strategy.
Fluctuation of Price in Both International and Local Markets:
The products and services of Ayala Corporation are very popular and their prices are also sticky in the US. It is because of price fluctuation in both local and international markets.
Accessibility of Capital at Affordable Rates and Structure of Financial Market:
Availability of capital at reasonable prices can offer plenty of growth opportunities to Ayala Corporation to borrow cheaply. But, this factor also carries some risks too. For example, the company can face perks when the interest rate will go up.
Demand Changes from Service Economy to Goods Economy:
The trend of sharing services is gradually growing. It is shifting from a goods economy to a service economy.
Fiscal and Monetary Policies:
The culture of tax breaks has also grown the deficit and can lead to economic trouble for the economy in the future.
Social Factors | PESTEL Analysis of Ayala
Demography trends, the role of women in society, workforce availability and skill, attitude towards leisure, savings, and societal norms are some important social factors that Ayala Corporation must consider. They have an immense impact on the performance of the brand.
The trend or culture of saving in China and the United States is completely different. The saving rate in the US is below 15 percent whereas in China it is above 30 percent. It shows the mindset of people and their consumption patterns .
Hierarchy and Societal Norms:
It is imperative to find out what kind of norms and hierarchy are acceptable in society. Also, find out the influence of these factors on people.
To predict the future of an economy, the role of demographic trends is big. For example, if the population in Europe and America increases then it will lead to an increase in the demand for products. The organization must consider demographic trends to better predict growing demands and needs.
Power Structure in the Society:
Any organization like Ayala Corporation should identify the power structure in society. How it can impact society and people? For example, the power structure in China and US is in the hands of an older generation. So, their influence on purchasing products is high.
It is vital to conduct ethnographic research to analyze attitudes toward leisure. Why do people prefer a product or service? The answer is that they find convenience or leisure.
Attitude towards Immigrants and Types of Immigration:
Latest developments like Brexit and immigration laws have brought so many troubles for people. What is the behavior of people towards immigrants and what sort of immigrants come under the radar? Ayala Corporation must find out such sensitive factors before entering into new markets.
Awareness and Rate of Social Concerns in Society:
A higher rate of social concern and awareness in society can lead to a higher activism rate and pressure from pressure groups and non-governmental organizations.
Nature of Contract between Society and Government:
The brand must analyze the type of contract between society and government before venturing into new countries or markets. For example, it is almost impossible for the US health system to penetrate into UK’s health system because it is mainly based on the nationalized system.
Technological Factors | PESTEL Analysis of Ayala
Technology can be advantageous and fatal at the same time. If you exploit technology in the right way at the right time, then it boosts your business. Factors like artificial intelligence and machine learning are important for predicting consumer behavior, preferences, and tastes.
Readiness for 5G Related Infrastructure:
Several countries in the world are installing 5G infrastructure. The brand should identify which countries are completely prepared to provide 5G connectivity.
Investment Level in Research and Development:
By investing in research and development, Ayala Corporation can get immense benefits in the form of product development and innovation. A higher level of investment increases the chance of success. Moreover, the company can hire the best people through such a process.
Internet Penetration and Usage of Mobile Phone:
It is important to figure out the penetration of the internet and the usage of mobile phones in a country. It is because most businesses are running on mobile phones and the internet such as websites and online stores. So, the impact of these two factors is also big in this situation.
Chance of Technology Glitch:
If a country or society is heavily influenced by technology then there is a high risk of technological disruption. It is totally on Ayala Corporation whether it can go with evolving technology or not.
Digital Drive and Transparency:
Only digitalization of everything can reduce the level of corruption in society and increase the transparency rate.
Protection of Technology and Property Rights:
The brand should identify the legal structure of the country in which it is planning to operate. Moreover, laws regarding intellectual property rights and the protection of technology are also important in this regard.
Encouragement of Suppliers and Supply Chain Partners:
Ayala Corporation must find out ways that can empower suppliers or supply chain partners. It is really useful to make the whole supply chain network flexible and transparent.
Penetration of Technology into Business Processes and Society:
Do you know the reason why Uber failed in China? They tried to enter the Chinese market before the widespread of smartphones. In its business model, Ayala Corporation should keep some factors such as the infrastructure of the country, societal norms, and business strategy.
Environmental Factors | PESTEL Analysis of Ayala
These days, everyone is concerned about environmental factors. They are gaining attention rapidly. The brand must consider climate change, carbon emission, waste management, and renewable technologies while developing a marketing strategy.
Per Capita Carbon Emission:
The company must evaluate the per capita carbon emission of the country before entering it. In this way, they can easily understand the environmental policy of the country.
Effectiveness and Influence of Environmental Bodies:
In protecting environmental norms, the role of environmental agencies can’t be ignored. But, in some countries, these agencies are not working so effectively just because of corruption and bribery. It is important to identify these factors before venturing into a new country.
Paris Climate Change:
What are the actions of the country towards the Paris Climate Change Agreement? It shows how much a country is concerned about climate change and the planet.
Climate Change Influence on Business:
Climate change can disrupt the business of any organization. It has a huge impact on different factors such as supply chain, manufacturing, and more. A company can face criticism for not following climate change rules and green initiatives.
Corporate Social Responsibilities Culture:
Are Ayala Corporation show CSR efforts relevant in the new markets? Does it need to possess a new initiative to meet the demands of the prospective market?
Attitude towards Waste Management:
What is the company’s policy or country’s policy regarding waste management? It is imperative for the company to follow all the waste management rules and regulations.
Focus on Renewable Technologies:
How much budget is dedicated to renewable energy sources? How much Ayala Corporation can invest in renewable energy sources? These are some questions that hold significant importance.
Legal Factors | PESTEL Analysis of Ayala
In order to fully venture into a new market or country, it is crucial to fulfilling all the legalities and legal factors. Factors such as consumer petitions, independence of the judiciary, labor laws, and more are some of the most important legal factors that Ayala Corporation must consider.
Independence of Judiciary and Its Influence on Government:
The independence of the judiciary reflects the credibility and strength of the institution in society or in the country. It gives a sense of relief to companies and they can consider that country for expanding its operations.
Customer Protection Laws:
What are the customer protection laws in the country? What is the attitude of higher authorities or concerning departments about these laws? These are some important factors that the brand must identify.
Time Taken from Courts for Proceedings:
If a country has a strong judicial system then it does not mean that it can complete court proceedings or cases on time. The company should do complete research on this aspect in order to handle future problems without any trouble.
Transparency in Judicial System:
For consistent and fair decision-making, transparency in the judicial system is essential. A company like Ayala Corporation can plan its business strategy with great conviction if the judicial system in the country is fair, consistent, and transparent.
Adherence to Law:
Is the country following common laws (both domestic and international)? If they are not following common laws then it is not suitable for doing business.
Laws Regarding Trade Practices and Monopoly:
As a new entrant, Ayala Corporation should be worried about monopoly and trade practices law. They are important for existing companies or players not for new players.
Intellectual Property Rights Protection:
Ayala Corporation must evaluate the level of protection that IPR (Intellectual Property Rights) gets under the legal framework of the country or region. They must complete their research on these factors carefully.
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