PESTLE Analysis of Petronas Chemicals (Malaysia)
Petronas Chemicals is one of the leading producers of integrated chemicals in Malaysia. The reason for conducting this PESTLE analysis of Petronas Chemicals is to identify all the macro business factors of the company that impact the overall manufacturing of chemicals in Malaysia. PESTLE is the acronym for political, economic, social, technological, legal, and environmental factors. It is also important to mention that PCGB (Petronas Chemicals Group Berhad) is listed on Kuala Lumpur stock exchange. This critical analysis of the company will give a clear idea to its managers about its working and performance.
Petronas Chemicals works in a highly competitive business environment. So, the influence of PESTLE factors is huge on its business performance at both local and international level. Today, we are going to discover these factors to understand the challenges that Petronas Chemicals can face. So, let’s get started!
Political Factors | PESTLE Analysis of Petronas Chemicals
A company’s success and failure is directly linked to one factor: the political factor. The level of political maturity is high in Malaysia as compared to other Southeast Asian countries. Government policies, governance system, and local government are some of the most crucial political factors in PESTLE that can impact the business of Petronas Chemicals.
1. The political stability in the Asian region is not so good. Being a global brand, Petronas Chemicals is highly exposed to governmental rules and regulations. Each country or region has different laws for chemical manufacturing companies. However, the political system in Malaysia is very sound. So, it is a perfect country for doing business. But, the increasing trend of populism can lead to political instability in the country.
2. The influence of non-government organizations, pressure groups, and other stakeholders is huge on the company. They can play a big role in the working of Petronas Chemicals. To avoid the risk of any conflict with these groups, the company should collaborate with them. They can help to achieve the company’s goals and targets.
3. In Malaysia, the importance of local administration or government is huge. They can play a critical role in the performance of the company. When making policies, the local government can help a lot. It is imperative for Petronas Chemicals to work closely with the local government and stakeholders to achieve its goals.
4. There is no risk of armed conflict in Malaysia. The military supports businesses and protects them as well. In short, the Malaysian government and the military are on the same page. But, in difficult situations, the company’s working could be impacted.
5. The current governance system in Malaysia is fulfilling its duties by supporting the chemical industry. Their governance system is very robust and it is a good indicator for the sound working of Petronas Chemicals. It is necessary for the company to keep a close on the policies and strategies of the governance system.
6. The current Malaysian government aims to improve the chemical industry’s infrastructure. They are providing resources to companies like Petronas Chemicals. They are taking good initiatives to enhance the company’s growth in other regions of the world.
Economic Factors | PESTLE Analysis of Petronas Chemicals
The inflation rate, exchange rate, the economic condition of the country, taxation rate, labor market condition, and consumer disposable income are the important economic factors. These factors can make or break the business performance of a company like Petronas Chemicals. Below, we have listed some crucial economic factors that Petronas Chemicals can face.
1. The impact of the Malaysian economic condition on Petronas Chemicals is big. If the economic condition of Malaysia is good, the company will perform well, and vice versa. The recent growth of the brand is because of the strong economic condition of the country. For global expansion, the company should analyze the country’s economic condition before venturing into it.
2. When it comes to the skill level of employees, Malaysia has a strong position. They have enough manpower and a skilled workforce required to run a company or business. The company can take advantage of this by hiring talented and competent staff. As a result, they can improve their manufacturing process and the overall quality of the products.
3. The rising trend of liberalization in the Malaysian trade policy can help the brand to invest in other regions and countries. In this way, the company can earn more.
4. The volatility in the exchange rate is a sign of threat for the company. This can impact the revenue and profitability of Petronas Chemicals. The company should analyze the exchange rate closely in order to make the right decisions accordingly.
5. The current economic recession and inflation have destroyed the spending power of consumers. These factors are creating significant pressure on the customers and influencing their buying decisions. This is because of the growing inequality in Malaysia. They can also discourage them from buying expensive products.
6. According to economic experts, the economic condition of Malaysia will become more robust in the next 5-10 years. This will give a huge boost to the business performance of Petronas Chemicals.
Social Factors | PESTLE Analysis of Petronas Chemicals
The business performance and policy of a company is highly based on the culture of the country in which it operates. By understanding the society and culture of a country, a company like Petronas Chemicals can perform well. The most important social factors are gender roles, societal norms, entrepreneurial spirit, leisure interest, health & safety attitudes, and traditions.
1. Both traditional and modern media are so popular in Malaysia. They can use the brand to make their public image better using media outlets. The growing media industry can play a critical role in the success of Petronas Chemicals. The company can take advantage of media to enhance its brand image.
2. When it comes to migration rate, it is huge in Malaysia and negatively impacts the growth of its economy. This leads to a shortage of skilled workforce in the country. As a result, the company has to hire foreigners and international managers to run the business smoothly.
3. If we talk about societal norms, the country has different norms than the company. It is necessary for the brand to collaborate with the local staff and teams in order to build a powerful culture in the company. In this way, they can fulfill the demands of the customers easily.
4. Most people in Malaysia are fans of Petronas Chemicals because of its high quality and affordable services. The overall demographics of Malaysia are very young and growing. The company can take advantage of this segment to cater to the needs of other customers.
5. In Malaysia, people love buying products that ease their lives. It means they prefer quality and comfort over quantity. Petronas Chemicals should invest in other areas and segments in order to build customer-oriented products.
6. The overall literacy rate in Malaysia is high. It shows that they have no shortage of skilled and educated people. So many people in Malaysia want to be a part of the chemical sector. The brand can leverage it to grow its business in Malaysia and other parts of the world.
Technological Factors | PESTLE Analysis of Petronas Chemicals
The impact of technology on any business is big. It is disrupting every business. The use of technology for companies like Petronas Chemicals is a must. They can enhance their production and other factors with the help of technology. It is necessary for the company to take advantage of the latest technology to streamline its supply chain and logistics network. They can also strengthen their brand image and customer service using AI and other technologies. The following are some of the most crucial technological factors of Petronas Chemicals that can impact its business in the future.
1. Regarding the basic materials sector, the latest technology has affected it the most. It is bringing development in this sector. Petronas Chemicals can exploit the latest technology to innovate its product line. This will help the brand to stay ahead of the competition.
2. Getting a license is easy in Malaysia. The company can venture into areas and segments by getting a license. Moreover, they can also transfer technology to other areas to build a strong culture in the company. This can aid the company to come harder in the competition.
3. It is imperative for Petronas Chemicals to incorporate the latest technology in the supply chain and logistics network. The company can get the latest information quickly and easily with the help of technology. It can strengthen their supply chain and will boost the confidence of stakeholders.
4. The role of technology in the empowerment of the supply chain is undeniable. Technology allows the company to produce innovative products. But, it creates a big pressure on Petronas Chemicals to keep its suppliers happy. They can produce a variety of great products without any hassle.
5. The use of technology by competitors could be a threat to the brand. However, it also allows the company to identify the next move of its competitors. This factor can transform the whole business model of companies like Petronas Chemicals.
6. If we talk about the maturity of the technology in the chemical sector, it will take so much time. Many companies in this sector are still not using the latest technologies. They should exploit new technologies to become a market leader in Malaysia.
Legal Factors | PESTLE Analysis of Petronas Chemicals
In PESTLE analysis, legal factors hold a special status. These factors can play a big part in the development of the company. Data protection laws, copyrights laws, discrimination laws, IPR, and the system of justice are some important legal factors that Petronas Chemicals should consider very carefully. We have listed some critical legal factors below that can impact the brand:
1. The company should focus on health and safety standards. They should know how to improve them. As a result, they can achieve their desired business goals.
2. It is the responsibility of the government to protect the data of every company in the country. The government is very strict when it comes to data protection laws. They have a strong mechanism for protecting data.
3. Some countries follow international justice norms. The company should be careful about lawsuits and legal actions. They can take their time and money. Thus, not great for the company’s growth.
4. Petronas Chemicals should reduce its carbon footprint. They should take proper initiatives to meet environmental laws to keep pressure groups and environmental activists happy.
5. The Malaysian government safeguards IPR rights, patents, and copyrights. If a country doesn’t provide support, it can keep its business environment sound.
6. Being a national brand, it is imperative for Petronas Chemicals to know the employment laws and how they can impact their business.
Environmental Factors | PESTLE Analysis of Petronas Chemicals
For businesses, sustainability and environmental norms have become very critical. The pressure from government and environmental groups is affecting the business of companies like Petronas Chemicals. Some critical environmental factors are water pollution, land pollution, climate change, hazardous material, and sustainability.
1. Paris Climate Change has affected the business environment of Malaysia. The strict scrutiny from the environmental agencies is creating pressure on the businesses like Petronas Chemicals.
2. The drastic change in weather is also a big problem for companies. This factor is increasing the cost of products. It is necessary for the company to make its supply chain and logistics network more flexible.
3. Waste management is another big problem for Petronas Chemicals. Being a chemical company, they are polluting the land and water. Due to this reason, the government is imposing strict rules and taxes on chemical companies.
4. Environmental standards are affecting product innovation. Products that do not meet the expectations of environmental standards will be rejected immediately.
5. Nowadays, people are more aware of the environment and climate change. It is necessary for Petronas Chemicals to make a strong image by adopting green methods to produce chemical products.
6. These days, every company is investing in renewable energy sources. The Malaysian government is fully supporting these companies. Petronas Chemicals can take advantage of this and invest in renewable energy sources.
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