P5: Explain the External Factors that influence a selected business considering
trading internationally.
PESTLE Analysis of Innocent
Political Factors that Impact Innocent Drinks
Size of government budgets - Both municipal and national governments are running deficit
budgets. Budget deficits occur when expenses exceed revenue and indicate the financial
health of a country. This boosts GDP in the near term but may lead to an increase in inflation
in the longer term. The national government's bond rating is investment grade. Innocent
would need to plan carefully in the long term as an increase in inflation will most likely
decrease their revenue due to more of the population saving than spending.
Threat of Terrorist Attacks - After numerous violent terrorist attacks, companies like Innocent
Smoothie must operate under the threat of a terrorist assault. To limit the losses caused by
terrorist attacks, a wise strategy should be to purchase insurance and other forms of hedging
mechanisms. This would allow innocent to feel more at ease from the consequences if an
attack were to happen as they would have insurance to cover part or all of the losses.
Local Governments Role - Local governments have a significant impact on policy
development and execution since most policies and regulations are administered by local
governments, and enforcement agencies often report to local governments in their
respective states on different laws. Innocent's daily functioning of the business may one day
be affected by the laws that local governments enforce.
Economic Factors that Impact Innocent Drinks
A country's and region's economic characteristics have a direct influence on a market's
prospective appeal. Innocent Smoothie should consider the following economic
considerations in both its current market and the market it wishes to enter: inflation rate,
GDP growth rate, and disposable income level.
GDP Trends & Rate of Economic Growth - The economy's demand is expanding, as
evidenced by the increased GDP growth rate. By extending its product line and targeting
new customers, Innocent Smoothie may capitalize on this trend. One place to begin is to
track changes in customer purchasing behaviour and develop value propositions. This gives
Innocent the opportunity to increase revenue and profits whilst expanding brand awareness.
Consumer Disposable Income - In comparison to the US market, where family income is still
below 2007 levels and has not climbed in real terms since the early 1980s, the country's
household income has steadily increased over the previous decade and a half. By utilizing a
distinctive marketing approach, Innocent Smoothie may use this tendency to extend its
market beyond its typical clients. The US healthy drink market was valued at
$33,568,000,000 in 2019, which shows the huge growing market that Innocent can capitalize
on.
,Employment Rate - If the employment rate is high, it will affect Innocent Smoothie's strategy
in two ways: first, it will supply enough clients for Innocent Smoothies products, and second,
it will make hiring talented and skilled personnel more expensive. However, if the
unemployment rate is high then Innocent will likely lose customers as disposable income will
decrease across the nation and also they may have to make employees redundant.
Social Factors That Impact Innocent Drinks
Attitude Towards Health & Safety - The quality of goods and the cost structures of
manufacturing processes typically reflect a company's approach toward health and safety.
Innocent Smoothie has severe health and safety standards, thus it may have to compete
with players that may not have the same high cost structures as Innocent Smoothie in
emerging markets.
Immigration Policies and Level of Immagration - What are the country's immigration policies,
what is the volume of immigration, and which industries favor immigration? This will allow
Innocent Smoothie to decide whether it can employ people from around the world to work in
that market if necessary. This can make Innocents workforce more skilled and diverse which
may increase productivity and show them in a positive light as they do not discriminate.
Attitude Towards Savings - The saving culture in the United States and China is vastly
different. While China's savings rate is about 30%, it is much below 15% in the United
States. This consumption and savings culture has an influence on both the kind and volume
of spending. During the apex of the pandemic's effect in the United Kingdom, the highest
ever recorded household savings ratio was 27.4%. Because this is the greatest amount ever
recorded for the UK, Innocent is likely to have had a decline in income during this time
period as savings rose owing to the nature of the economic condition at the time.
Technological Factors That Impact Innocent Drinks
Across a wide range of sectors, technology is rapidly disrupting business paradigms.
Artificial intelligence advances, the use of machine learning and big data analytics to
forecast customer behavior, the rising significance of platforms over service providers, and
so on are some of the technological trends that are influencing the macro environment.
Level of Acceptance of Technology in the Society - Before introducing new goods, Innocent
Smoothie must determine the amount of technology adoption in society. Frequently,
businesses enter the market without the necessary infrastructure to sustain the technology-
driven strategy.
Research and development levels - There is a good potential of creating a self-sustaining
ecosystem that encourages innovation if there is a lot of money invested in technological
development. Innocent Smoothie can take use of such an opportunity to recruit the top
professionals in the industry.
Cost of Production and Trends - What are the cost of production trends in the economy and
the extent of automation that Innocent Smoothie should assess? Manufacturing and
production, I believe, will be the industry most affected by technological innovation in the
, near future. As a result, innocent smoothies must pay close attention to technology
innovations and be on top of their game when it comes to adjusting to and capitalizing on
them.
Environmental Factors That Impact Innocent Drinks
Environmental issues are quickly gaining popularity among consumers, regulators, and
policymakers alike. By the turn of the century, climate change and shifting ecosystems will
have wiped off more than 20% of the world's species.
Influence and Effectiveness of Environmental Agencies - Environment standards
enforcement organizations play a key role in maintaining norms. However, in emerging
nations, these organizations frequently use delaying tactics to extort bribes. Innocent
Smoothie should be aware that such tactics exist in several countries so they are not caught
out.
Paris climate agreement and commitment of national government under the agreement -
What are the country's commitments under the Paris Agreement, and what is the overall
degree of agreement in the country on the Paris Climate Agreement? For example, Trump's
failure to honor US agreements has fostered a climate of uncertainty. Innocent people need
to be aware of the various laws and regulations so they do not conflict with the climate
agreement set.
Logistics For Innocent Smoothies - The transportation of Innocent Drinks goods is critical
because if all of their products are transported by carbon-emitting equipment, Innocent's
carbon footprint would increase. If this is the case, many customers may refuse to buy their
items since they are not actively attempting to reduce their carbon footprint, which is harming
the environment.
Legal Factors Impact Innocent Smoothies
Conditions to access the market, regulations to operate in the market, and procedures to
settle any disputes with other stakeholders are all generally governed by legal issues.
Innocent Smoothie may face a variety of obstacles if the legal system is weak, ranging from
consumer petitions to government shakedowns.
Health & Safety Laws - What are the country's health and safety requirements, and what
does Innocent Smoothie need to do to comply? Because various nations have varied
attitudes regarding health and safety, Innocent Smoothie should perform extensive research
prior to entering the market.
Employment Laws - What are the country's labour regulations, and are they compatible with
Innocent Smoothie's business model? This is vital for Innocent to do their research because
they do not earn to be breaking employment laws to avoid being sued. For example, the
Uber employment structure does not comply with French legislation, and it is currently facing
legal difficulties in France.
Food labelling - - In several countries, corporations and firms are prohibited from adding
illicit chemicals to food and drink goods by legislation. This is generally because they have
