Kool Kitchen was founded in 1997 in London, U.K. by John Doe. Kool Kitchen is a manufacturing company for kitchen appliances such as refrigerators, freezers, ovens and dishwashers and washing machines, but is primarily known for refrigerators. It is currently one of the biggest refrigerator manufacturing companies and quality pioneers in the U.K. with prices ranging from medium to upper class. Apart from the United Kingdom, the company has also expanded in Ireland and France and is currently exploring opportunities in Asia and Europe (India and Cyprus respectively).
How to evaluate the two countries
When companies want to globally expand their activity, it is crucial they do some market research and environmental analysis (Zekiri and Angelova, 2011). In order to do that, they have to follow the PESTLE analysis model and part of the SWOT analysis (only Opportunities and Threats).
PESTLE is an acronym for Political, Economic, Sociological, Technological, Legal and Environmental and those words represent the factors that constitute the research method. PESTLE analysis is a useful method for evaluating and understanding the environment within which the organization is operating, the risks that exist in the market and the potential of the organization (Morrison, 2010a).
SWOT analysis is a tool used to apprehend the Strengths, Weaknesses, Opportunities and Threats that are involved in a business. The strengths and weaknesses are internal factors to the organization, positive and negative (or potentially negative) respectively, whereas the opportunities and strengths are external factors, beyond the organizations’ control (Morrison, 2010b). All four factors must be taken into consideration when an organization wants to achieve certain objectives, in order to make the right decisions and pursue the correct path. In this paper we will only focus on Opportunities and Threats that each country represents for Kool Kitchen since we are evaluating the factors external to the organization.
PESTLE analysis for Cyprus Political Cyprus has a certain political stability, although the island is divided in half since the Turkish invasion in 1974. The northern part of Cyprus is currently occupied by the Turks. In 1983 the Turkish occupied area declared itself “Turkish Republic of Northern Cyprus” but it is only recognized by Turkey. The only widely recognized state is the Republic of Cyprus. (CIA Factbook, 2012). There is still Turkish military presence in the occupied part of the country which accounts for a certain menace.
Despite its own political stability, Cyprus is geographically positioned very close to Egypt, Israel and Lebanon, which is a very unstable region, often putting Cyprus in a compromised position as well.
Cyprus has joined the European Union (EU) along with nine (9) other countries in 2004 as part of the widening of the EU. Therefore, ever since, trade with other countries within the European Union has been easier.
Economic Cyprus is currently deeply affected by the global economic crisis mostly because of the economic situation in Greece. Cyprus has an immediate relationship with Greece: two of the biggest banks in Cyprus are among the largest holders of Greek bonds in Europe and the first country Cyprus imports from and exports to is Greece. Further to the world financial crisis, an explosion in July 2011 at a naval base caused power outages all over the country, thus triggering a collapse in the coalition government and further economic problems.
The CIA Factbook states that according to estimations in 2011, 10.2% of the country’s exports and 9% of the country’s imports are done with the United Kingdom, thus making the U.K. the 2nd biggest export partner and the 3rd biggest import partner for Cyprus.
Although the Cypriot economy is in recession and the consumers’ buying behavior has become somewhat more conservative, food is essential. Therefore, the cuts in the food area are not so big. What is more, when times are so difficult in the economy, there is a tendency for people to eat less out and eat more in. This is good for a refrigerator company.
However, the construction and development sectors are down. Fewer new houses and apartments are built, thus the already existing homes will generally not buy a new refrigerator unless they have problems with their old one.
Sociological Because of the economic crisis, more and more single young people do not move out from their parents’ house, hence no new homes are created and no new refrigerators are needed.
Cypriots are becoming more energy conscious since electricity rates have dramatically increased due to the local Electricity Authority’s deficit after the explosion in 2011. Hence Cypriot consumers are looking for appliances that are more energy saving and environmentally friendly.
Technological The wide use of Internet sources has made it possible for Cypriot consumers to search for all the available products in the market, compare them and choose what the consumer feels suits his or her needs. There is, therefore, fierce competition with all the available models from different companies.
Legal Cyprus has a “mixed legal system of English common law and civil law with Greek Orthodox religious law influence” (CIA Factbook, 2012). The fact that Cyprus partly follows the English common law makes it easier for companies from the United Kingdom to deal with Cyprus.
They are currently trying to modify taxation laws in Cyprus, which could discourage foreign organizations from entering the Cypriot market. But even that so, Cyprus still has one of the lowest corporate tax rates (10%) and VAT rates (17%) in Europe (Wikipedia).
Environmental More and more Cypriot consumers are environmentally conscious and they are looking for energy saving, environmentally friendly appliances in order to avoid expensive electricity bills; hence, there is a considerable turn towards new, innovative, cost-cutting refrigerators, dishwashers and washing machines.
PESTLE analysis for India Political India has signed the Climate Change – Kyoto Protocol along with other environmental agreements and regulations and is, therefore, subject to environmental control (CIA Factbook). This could be a good opportunity for energy saving refrigerators and other appliances.
India has reduced control on foreign trade and investment (CIA Factbook) which is good for foreign organizations that wish to enter the Indian market either to trade or to invest.
In November 2008, terrorists from Pakistan organized a series of attacks in Mumbai, India’s financial capital.
Corruption scandals that took place in India have slowed the legislative work in 2011 and thus, little economic reform was made (CIA Factbook).
Economic According to the CIA Factbook on India, although India rebounded from the global economic crisis in 2010, in 2011 the country’s economic growth slowed because of high inflation and interest rates and there was little progress in economic reforms.
For imports and exports, India mostly deals with China, the United States, the United Arab Emirates, Hong Kong and Saudi Arabia (CIA Factbook).
Sociological According to the CIA Factbook, India has a young population. Thus there is possibility and potential for more homes to be created, hence more new kitchen appliances -and refrigerators- will be needed.
CIA Factbook goes on to say that India has pressing problems of important overpopulation, extensive poverty and widespread corruption.
Technological There are over 60 million internet users in India who have the possibility to search and learn about Kool Kitchen’s products in case they want to find out more about the quality and the characteristics. However, this is not enough people if we take into consideration that the population of India in July 2012 was estimated to be 1,205,073,612 (CIA Factbook).
Legal As a former British colony, India’s legal system is the “common law system based on the English model” (CIA Factbook), thus making trade with the United Kingdom easier.
Environmental India has environmental degradation. According to the CIA Factbook it is the 4th highest country in the world for carbon dioxide emissions from consumption of energy with 1.696 billion Mt.
Opportunities and Threats in Cyprus and India Opportunities Both of the countries examined in this paper (India and Cyprus) are former British colonies and their legal systems are partly following the English common law. In addition to that, Cyprus is also a member state of the European Union. Trade amongst EU countries is easier and Cyprus deals a lot with the United Kingdom in terms of imports and exports. This situation could work in favor of Kool Kitchen since it is a UK company and trade with these countries could be facilitated.
Furthermore, the reduced control that India has on foreign trade and investment could also present an opportunity for Kool Kitchen there.
Threats The global economic crisis has affected the consumer behavior of Cypriots. Young people are more and more reluctant to leave their parents’ home and live on their own; the construction industry is down; hence few new homes are built and this has impacted the sales of kitchen appliances in general.
There is fierce competition in the refrigerators market in Cyprus as well as in India. Kool Kitchen will have to compete with long-running quality refrigerator manufacturers that are well known in both countries of interest, such as Electrolux, Whirlpool, Samsung, LG, Sharp, Siemens and Bosch among others.
The political climate in India could be characterized as unstable, since terrorist attacks occurred in November 2008 in Mumbai by terrorists from Pakistan. The political climate in Cyprus is a bit more stable, although there is a Turkish military presence in the northern part of the country which poses a constant threat despite the political efforts to reconcile the two parts. What is more, Cyprus is geographically located in an area of further political instability, since it is very close to Egypt, Israel and Lebanon.
We have examined and assessed the external factors for the British refrigerator manufacturing company called Kool Kitchen in order to entry the markets of Cyprus and India. This assessment was done using the PESTLE analysis -looking at the Political, Economic, Sociological, Technological and Environmental factors that surround the countries in question, as well as the Opportunities and Threats each of this country represents for Kool Kitchen. The global financial crisis definitely poses a big threat during this period of time for any company that wants to make a new business move, as well as the fierce competition, but there are also some opportunities and other environmental and technological factors that could work in favor of Kool Kitchen, should the company decide to pursue these new markets.
An Example Of Transition Economy Economics Essay
Around 1.21 billion people currently living in India, which is about 17.4% of the global population or one, can say 2.4 per cent of world GDP in US dollar terms and 5.5 % in PPP terms.
The universal wellbeing too is linked to progress in India as reflected in the eager global interest in India. But, India seems to instigate and disappoint at the same time.
Where some countries raced ahead in the development process, India lagged behind. It took 40 long years for India’s real per capita GDP to double from 1950-1951 to 1990-91. But, for India 1991-92 was a significant moment in modern economic history because of a severe balance of payments catastrophe prompted far accomplishment economic reforms, unlocking its growth potential, and the result was that in only 15 years, India’s per capita income doubled again by 2006-07. If India will maintain its current growth rate then, India’s per capita income could definitely double by 2017-18 in next some years.
The key policy reforms since 1991-92, reviewing the economic progress made so far
Policy Reforms before 1991
Macroeconomic crisis of 1991 discernible a turning point in India’s economic history for two reasons.
First, fiscal arrears driven external payment mishap with a dip in foreign exchange reserves to below US$ 1 billion in 1991.
Second, concurrently efforts were made towards wide ranging structural reforms surrounding areas of trade, management of exchange rates and industry, public finance as well as financial sector.
The main objective was to create a competitive environment to improve output and efficiency. New industrial policy fostered competition by
Abolishing monopoly restrictions
Terminating the phased manufacturing programmers
100% foreign direct investment
Import of foreign technology
De-reservation of sectors till then reserved for the public sector.
Only five industries are under licensing presently, mainly on account of environmental, health, safety and strategic consideration and two industries are reserved for the public sector and those industries are:
Reservation of industrial products for the small scale sector is still an enduring issue. FDI i.e. Foreign Direct Investment up to 100% is allowed under the automatic route in most sectors, but with a few exceptions.
The infrastructure sector is being in the hands of private sector. Because of the large requirements of funds for infrastructure, 100% FDI has been allowed in all infrastructure sectors. There are unmitigated tax holidays to encourage the business of development, operation, and maintenance of infrastructure facilities.
The monetary policy framework and its operating procedures in India have evolved over time with the changes in the macroeconomic structure and financial markets development.
After the deregulation of the financial sector, the stability of money demand became deduce. Because of that, Reserve Banks switched from monetary targeting framework, to a multiple indicator approach. In this approach, many indicators available on a high frequency basis. The various indicators are:
Rates of return in different markets
Movements in currency, credit, fiscal position, inflation rate, exchange rate etc
Refinancing and transactions in foreign exchange
The objective for the financial sector was to provide operational litheness and functional self-sufficiency to all the financial institutions so that they could allocate resources more efficiently. Some of the important initiatives in the financial sector were:
Reduction in statutory preemptions so as to release greater funds Interest rate deregulation to enable price discovery Allowing new private sector banks to create a more competitive environment The trade policy reforms comprised
withdrawal of the quantitative restrictions on exports and imports
phasing out of the system of import licensing
Lowering the level of nominal tariffs and its dispersion as well.
India embarked on a well sequenced opening up of the capital account. Its framework was based on a preference for non-debt creating capital inflows like foreign direct investment and foreign portfolio investment.
Economic Progress after 1991
After 1990, India saw gradually breaking free of the low growth trap which was known as the “Hindu growth rate” of 3.5% p.a. Real GDP growth was increased from 5.7% p.a. to 7.3% p.a. in 1990 to 2000s. The main reason of this growth acceleration was that the growth rate of industry and services increased. Till the end of 1990, the “green revolution” had died down.
The growth patterns altered the structure of the Indian economy with a decline in the share of agriculture from 28.4% to about 15 per cent in 2009-11. There was an increase in services, including construction, from 52% to 65%. The share of industry has remained unchanged at around 20 per cent of GDP.
Items 199-2000 2001-2010 2004-2008 Share in GDP Agriculture 28.4%
The growth acceleration was accompanied by a sharp lift up in the rate of growth of gross fixed capital formation which had more than doubled from an annual average of 7.2 per cent in the 1990s to 15.7%.
The structure of Indian economy also underwent a change. Exports and imports of goods and services have more than doubled from 23% of GDP to 50 per cent in 2011.
The high growth was achieved in an environment of price stability as headline wholesale price index inflation dropped to an annual average of 5.5% in the 2000s from 8.1 per cent in the 1990s. Subsequently, in the post-crisis period the inflation trend has reversed with the headline WPI inflation averaging over 7% and the consumer price inflation crossing double digits during 2009-11.
The uptick in food price inflation was particularly sharp during 2009-11.
(Annual Average Percentage change)
Wholesale Price Index
Food Articles 10.2
Fuel Group 10.6
Non-Food Manufactured Products 6.8
CPI- Industrial Workers
CPI- Industrial Workers Food 9.8
No power on earth can stop an idea whose time has come.
India has launched wide ranging structural reforms and has made noteworthy economic progress over the past two decades. Some of them are:
India’s industrial environment has become more competitive and open
Infrastructural gaps have been sought to be bridged through public-private initiatives with both domestic and foreign sources of funding
Current account has become fully convertible while capital account which is virtually free for non-resident.
As interest rates deregulated, banks gained operational autonomy for commercial lending. If India could maintain the current pace of growth it will elevate millions out of poverty and augment the global economy. While India has come a long way, maintaining the current pace would itself be challenging and require continued reform efforts.
India will continue to face “stagflation-type” situation for some more time. The main reason for this are:
the government’s loose fiscal policy and persistent strong rise in real rural wage growth without an increase in productivity growth
Stagflation means when economic growth of a country stagnates while inflation is rising. RBI lowered the economic growth projection for the current fiscal to 6.5 percent from its earlier estimate of 7.3 percent, stating rising government expenditure poses risks to economic stability.
Its inflation forecast for the fiscal ending March, 2013 has also been raised to 7 percent from earlier projection of 6.5 percent. According to reports, monetary policy has a limited role in this stagflation-type environment. Moreover, the inflation outlook remains challenging. Indeed, given the poor progress of the monsoon, in reality food and overall inflation will likely accelerate in the coming months.
Measures to control Indian stagflation: India may have progressed on paper and on screen but do we see the progress on the streets of India?
There are millions of people still surviving in India on an income of less than one dollar a day. India can never be considered a developed country unless and until the poverty, hunger and pain of the poor on the streets and those living in the slums is curbed.
Lately the government of India has come up with several developmental plans and no doubt it has helped boost the economy of the Country in some ways. But the long term impact of these plans do not seem to serve the purpose, or what should be the purpose of any government, that is, prosperity of the common man. Investment is pouring in from within the Country and abroad, but the poor man is getting poorer.
In order to be considered a developed Country, India needs to focus on the common man.
It is not only the Government’s role to make India a developed nation. People of the country should also take responsibility.
Liberalize financial markets
Increase agricultural productivity
Increase quality and quantity of universities
More importance to rural household
Proper health facilities in rural and urban areas
Raise educational achievement
Citizens must do charity with enough disposable income
Raise educational achievement
Introduce a credible fiscal policy