PEST Analysis of Starbuck in China Coursework Example | Topics and Well Written Essays - 1750 words

PEST Analysis of Starbuck in China - Coursework Example The object of analysis for the purpose of this assignment is Starbucks, an American coffee company which is operating in many countries worldwide. It has the title of being the largest coffeehouse company with around 25,000 stores. It is renowned for providing hot as well as cold beverages, pastries as well as snacks. It was founded in the year 1971 and has since then, opened up stores in around 62 stores. It was opened by three students who were inclined to sell high quality coffee beans as well as coffee equipment. In 1996, Starbucks opened its first location outside North America in Tokyo, Japan. People`s republic of China is the most populous country of the world and is located in the East Asian region. With around 1.35 billion people in the country, China is now being considered as the fastest growing economy of the world. It has become the second largest economy in terms of nominal GDP and purchasing power parity, after the United States of America. The first Starbucks in china opened in Taiwan in March 1998. The increase in consumer interests and appreciation of coffee resulted in the opening up of new stores in Beijing, Hong Kong as well as Macau. In all, Starbucks has around 1000 stores in China. PEST analysis includes political, economic, social as well as technological factors which have a direct impact on the operations of a firm. Political factors involve the intervention of the government in the economy in terms of tax policies, policies of export as well as other environmental and legal laws. Overall, it also includes other influences which the government can have on an organization`s operations. With regards to the political factors in Hongkong, it has been under the rule of mainland China but it has been allowed to implement its own business laws in the economy. This has made it easier for Starbucks to operate in China. However, Starbucks is required to comply with all the laws and regulations of the country. The Chinese government has introduc ed positive policies to encourage FDI by protecting the interests as well as the legal rights of foreign companies. China also has a consistent political environment as well as lower labor costs which attract foreign companies to start operations in the country. The local government policies including free trade zones and loans have encouraged Starbucks and other multinational to start operations as well as expand its business in China (Business Environment In China: Economic, Political, And Cultural Factors 2013). Another important factor is that these favorable governmental polices do not change with changes in the governments. This makes it easier for the foreign companies to operate. However, it has been observed that these policies and laws are not implemented in the country which affects the sustainability of Chinese economy. Furthermore, the company has lower and inefficient transportation, communication as well as energy resources. The city of Hong Kong, for example, is know n as the most tax-friendly economies of the world because of its low tax system as well as direct taxes only on profits, salaries and properties. The tax rates have remained constant showing the political stability in China, especially in Hong Kong (Starbucks in China, 2013; China Business News-Starbucks soars in China 2013). Economic factors: Economic factors include the inflation rate, interest rates, economic growth and exchange rates which have an impact on business operations. The factor of exchange rates, for example, has an impact on the costs and prices of exports and imports. Interest rates affect the cost of capital of firms which is further related to the growth and expansion of companies. Economic factors i