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PESTEL Analysis of Saudi Aramco
For a company like Saudi Aramco, making strategic decisions is not easy. PESTEL Analysis of Saudi Aramco can make this process easier because it helps to figure out all the perspectives of the company. The word PESTEL itself stands for Political, Economic, Social, Technological, Environmental, and Legal factors. This method also helps to unearth the other important aspects of the company that can impact the business of Saudi Aramco at a large scale.
In this article, we will conduct a comprehensive PESTEL analysis of Saudi Aramco. It is important to remember that this PESTEL analysis is only market specific. It mainly covers the external business factors of the company. These factors change with the passage of time when the market condition changes. So, let’s get started!
PESTEL Analysis of Saudi Aramco
Political Factors
1- Stability of the Government
- A company’s growth depends on the stability of its country’s government. It is necessary for its constant development and improvement.
- This stability also enables the company to expand its business globally.
- It also allows the company to establish strong trade relations with other international companies. In this way, Saudi Aramco can manage its affiliations and offshore businesses effortlessly.
- On the basis of this stability, the government and the company can attract foreign investors and stakeholders. This is very helpful for the growth and development of the company’s infrastructure. Plus, it also boosts the international image of Saudi Aramco.
- Government stability can also bring so many growth resources for the oil and gas sector which ultimately helps Saudi Aramco. In this way, the company can maintain its competitiveness and performance in the market.
2- Tax Policies
- When the government offers favors in tax, companies like Saudi Aramco get so many expanding opportunities.
- Tax relaxation from the government also enables the company to maintain its competitive position in the market by making its business operations cost-effective.
- The above-mentioned factor will enable Saudi Aramco to facilitate its consumers by offering affordable products and services.
- Tax policies that support companies are one of the biggest sources of growth and development in the business of Saudi Aramco. They can add economic value to their business and the country’s economy.
3- Competition Limitations
- The oil and gas sector is very competitive in Saudi due to the presence of Shell, BP and ExxonMobil.
- It is imperative for political as well as government institutions to monitor market conditions in order to maintain healthy competition.
- Make sure that every company is running its business fairly and transparently. Make sure that they are using the right business strategies and campaigns.
- This monitoring will help the government to regulate and restrict businesses in terms of imports and exports. It is necessary for the growth of local businesses.
- By regulating competition, the government can offer some kind of protection to stakeholders and investors.
4- Advantage of Trade Treaties
- Saudi Aramco can exploit trade treaties and blocs in order to run and grow its business smoothly.
- Trade treaties can support Saudi Aramco in terms of lowering production and refining costs. It is also a big source of exchanging talented workers.
- With trade blocs, companies like Saudi Aramco can increase their sales by expanding their offerings in different locations of the world. As a result, more and more people can utilize their products.
- Industrial ties can be created and maintained under the trade treaties across boundaries. This will result in the exchange of technologies and skilled workers.
PESTEL Analysis of Saudi Aramco
Economic Factors
1- Inflation
- Inflation rate is an important factor in any economy. In the case of Saudi Aramco, a moderate inflation is required so that it can flourish.
- A slight change in the inflation rate can also support the company’s business and grow its business positively because it increases customers’ confidence.
- This factor will give a much needed boost to the economy of the country and its disposable income will rise.
- However, the higher inflation rate can also hurt the business growth of the company because it decreases the disposable income which leads to lower spending.
- Similarly, the lower inflation rate causes an increase in disposable income. It increases competition and also affects the pricing strategies of companies like Saudi Aramco. It gives a huge advantage to consumers.
2- Interest Rate
- A slight (or moderate) change in the interest rate can encourage Saudi Aramco to take loans from financial institutions like banks.
- These loans are used for development and growth purposes.
- These loans can also be used to improve the infrastructure of the company.
- It also encourages small businesses and individuals to take loans.
- A moderate interest rate is really useful for businesses and companies to grow at a large scale.
3- Customer Spending Behaviors
- Being an oil and gas company, Saudi Aramco highly depends on consumer spending behaviors for its sales and revenues.
- If the consumer spending trend is higher, it will increase the sales and consumption of Saudi Aramco’s products.
- It also indicates the strong purchasing power of the people. This plays a big role in the strength of the economy.
- The higher purchasing power also leads to a better quality of the products and marketing campaigns.
- This factor is mostly influenced by several economic factors such as unemployment trends, inflation and interest rate.
4- Unemployment Issues
- The lower disposable income is caused by higher unemployment rate. This could impact the business performance of Saudi Aramco.
- Higher unemployment rate can also create a big gap in knowledge and labor skills. It is not good for the quality and quantity of the products. It also increases the cost of running business and increases the price of products.
PESTEL Analysis of Saudi Aramco
Social Factors
1- Demographics
- Gen Z is one of the biggest strengths of Saudi Aramco. It helps the company to strengthen its customer base. This kind of population is responsible for purchasing and consuming its products.
- A younger population can also provide a much needed boost to the company based on their knowledge and skill level. The company can hire skilled and educated people that can play their roles in enhancing the company’s position. It also provides an excellent opportunity for Saudi Aramco to boost its talent pool.
- Lower and middle-class customers are incredibly beneficial for the company in terms of its sales and profitability.
- The younger population can act as brand ambassador for the company. When compared to other customers, they are one of the loyal customer bases.
2- Literacy Rate
- The higher literacy rate is highly beneficial for the company in many ways.
- The literacy rate indicates that there is no shortage of educated and skilled people in the country. So, the company can find the best people that contribute their roles to its success.
- The higher literacy rate also indicates that people are very much aware of the purchasing and consumption trends.
- This knowledge encourages them to pay attention to positive consumption. It will give a huge competitive advantage to Saudi Aramco.
- They will prefer quality over quantity if they are enlightened. It will encourage them to become your loyal customer.
- As a result, the company will only focus on its quality.
3- Population and Family Structure
- The family structure and population size will help the company to determine the nature and frequency of purchase completed.
- By identifying this factor, the company can also find out the actual consumption pattern of the people.
- Based on the above factors, companies like Saudi Aramco can easily make its targeting policies and strategies.
- The company can easily implement different strategies to figure out what works or what’s not.
4- Wellness Trends
- A large number of people are adopting wellness trends because they are very health-conscious.
- Both health and wellness factors have changed consumers’ purchasing patterns and consumption decisions.
- The company has introduced new health aspects in its campaigns and marketing strategies.
- Saudi Aramco has collaborated with several health companies in order to promote mental and physical wellbeing.
Technological Factors
1- Technological Developments
- In terms of technology, the company’s overall structure is very strong.
- They are making technological developments and advancements on a regular basis.
- For companies like Saudi Aramco, it is important to have constant up-gradations and innovations in their business in order to make their operations efficient and effective.
- The company can take a progressive lead by making technological advancements.
- Based on innovation, the company can easily attract major foreign investors and businessmen for further growth and development.
- This is the best opportunity for Saudi Aramco to gain a competitive advantage by making technological advancements. They should explore the latest technologies that can improve their business operation and cycle.
2- Penetration of Internet
- In the country, internet penetration is very strong and consumer markets are enjoying a high rate of it.
- The internet is mostly used for personal and social purposes.
- They use the internet on their smartphones, laptops, and computers.
- This type of higher internet penetration represents the higher literacy rate in the country which is directly or indirectly beneficial for the company.
- The company is also exploiting the internet to reach customers, get feedback, and interact with customers.
- This higher internet penetration rate has allowed Saudi Aramco to improve its product quality and efficiency.
3- Social Media Trends and Its Usage
- The population mostly consisted of youngsters in the country. However, the ratio of middle aged people is also growing.
- The youngsters are very well-connected with social media. This is the major source of connectivity in the country.
- Saudi Aramco is also using social media in order to collect consumer data and information in order to make marketing strategies.
- They also interact with the consumers, gather feedback, and discuss important topics through their social media pages.
- Saudi Aramco is using social media for different purposes such as recruitment.
4- Investment in Research and Development
- Both local and international companies are investing in research and development. This makes the country highly innovative and ahead of other countries.
- This investment allows the country to improve its industries and companies like Saudi Aramco. This helps them to streamline their business processes and operations.
- This has enabled the company to increase its innovation rate in the industry.
- Companies like Saudi Aramco can utilize the latest technological advancements to grow their business globally.
- It also enables the company to maintain its competitive advantage in the competitive market.
PESTEL Analysis of Saudi Aramco
Environmental Factors
1- Recycling
- The growing environmental concerns are very healthy for the company and for the country as well.
- These days, customers are more enlightened than before about the environment.
- Consumers are likely to buy recycled products.
- The company is also reducing its carbon footprint as well as pollution.
- Saudi Aramco is also trying to develop greener products for eco-friendly consumers.
2- Waste Management
- The country has strict rules and regulations for waste control and management.
- The company has collaborated with waste management companies to maintain waste management properly.
- Saudi Aramco has successfully developed ways to control and manage waste. Their approach to becoming a green company is quite commendable.
3- Green Approach
- The growing awareness of sustainability has given a perfect opportunity to Saudi Aramco to adopt a green lifestyle.
- Customers in the country or across all nations prefer to purchase green products. They are adding it to their marketing strategies and production methods.
- More and more companies are following this trend and trying to make green products and services for users.
- Saudi Aramco participates in all environmental-friendly CSR campaigns and activities.
- The company has launched a complete range of green products. It shows that the company is playing a significant role in saving nature.
- They also collaborate with distributors and suppliers who strictly follow environmental laws.
4- Investment in Renewable Energy Sources
- Saudi Aramco is trying hard to use renewable energies for business processes and operations.
- The company is taking this initiative to decrease its carbon footprint.
- They are investing a considerable sum of money in solar energy and hydroplanes.
PESTEL Analysis of Saudi Aramco
Legal Factors
1- Health and Safety Laws
- The company is very cautious about its employees’ or workers’ health and safety.
- Health and safety institutions regularly monitor the company to determine whether they implement these laws.
- It involves several things, such as the mental and physical wellbeing of the employees.
- Saudi Aramco is also working very hard to improve health and safety measures at the workplace.
2- Employment Laws
- The company is highly concerned about employment laws such as legal contracts.
- The official bodies or authorities wholly authorize these contracts.
- These contracts are made to avoid the risk of misunderstanding.
- The company informs the candidates about the employment laws at the time of hiring.
- Saudi Aramco also conducts workshops and training sessions in order to train and engage new employees.
3- Anti-Discrimination Laws
- The oil and gas company in the country is based on a diverse population.
- The number of immigrants is growing daily in the country because of the employment opportunities.
- The company also likes diversity in its operations and workforce.
- In all its business processes and operations, the company follows all the anti-discrimination laws.
- The company offers employees equal recruitment and promotional opportunities without discrimination.
- It has helped Saudi Aramco to develop a toxic-free and constructive work environment.
We hope this PESTEL Analysis of Saudi Aramco will serve you for the study purpose. Keep reading this post also for better understanding of the Saudi Aramco Company.
Read:
SWOT Analysis of Saudi Aramco – A Leading Oil and Gas Company in the World
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