P3: Describe how the environment and culture of another country affects a business operating internationally
M2: Compare how cultural differences and foreign business environments affect multi-national corporations.
P3 & M2: Describe how the environment and culture of another country affects a business
operating internationally and compare how culture differences and foreign business environments
affect multi-national corporations.
Pizza Hut is an international company and will use PESTLE analysis to identify any factors which could
cause them issues. This analysis focuses on political, economic, social and technological factors.
Political factors involve the government making laws and regulations which must be imposed on
different sectors- education, jobs, welfare, housing, trade and banking. Economic factors relate to
changes like the cost of goods, services, interest rates, wages, exchange rates and inflation. Social
factors include things like lifestyle, religion, family and wealth.
Political
Factor 1- Tax policy and tariff controls
Pizza Hut has restaurants across Europe and over 5,000 in the US. This political factor would have a
huge impact on this business because of the different taxes which they are obliged to pay, including
corporation tax. Corporation tax in the USA is 39.1%, which is one of the highest in the world, only
exceeded by Chad and UAE. This means Pizza Hut would have to pay the government 39.1% of any
profits they make in the US; this is bad for them because they could have been spending this money
on new technology or investing into new branches or projects. Tariffs vary depending on a
company’s imports and exports, as Pizza Hut operates internationally they would need to import
products, tariffs will therefore apply to them which could cause problems.
Factor 2- Employment legislation
There is employment legislation in the US which must be regulated and enforced in a business; an
example is health and safety. All aspects of the health and safety act must be regulated to ensure
employees are protected, if they aren’t they could take legal action if they were not safe in their
work place. Another example of employment legislation is equal pay, this ensures that everybody on
the same level, doing the same job must be paid the same, no matter of their gender, ethnicity or
whether they have a disability or not. The final example I will give is minimum wage, the government
set a new minimum regularly of the amount an employer must pay their workers, this variates
depending on age. Pizza Hut must ensure they abide to all of these laws, if not they could face legal
action.
Factor 3- rule of law, corruption, democracy and freedom
The government in the US create different laws to benefit different kinds of businesses. Pizza Hut
can operate well in the US as it is a democratic country and there are low risks of political instability,
they can also open many new branches without worrying about sudden law changes which can
dramatically affect them, meaning the company have freedom to what they want with their business
and branches as long as they pay taxes and abide by the law.
The most influential political factor I have discussed is tax and tariff control. This would affect Pizza
Hut because they would have to give a percentage of their profits to the government and would
have to pay a charge on any imports they receive from other businesses in different countries. Both
of these factors will help a business determine whether they want to operate in certain countries,
businesses may choose to open branches in countries with low tax and tariff controls. This is due to
the fact, in countries with high tax the company will have to end up giving the government more of
their profits.
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