Fast food internationalisation: PEST analysis of India and the United States

Internalization of Fast Food Business

Internationalisation of Fast-food Business

PEST Analysis for India

Political

Economical

Social

Technological

PEST Analysis for United States

Political

Economical

Social

Technological

Comparison between the two Countries

Changes in the Global Environment due to Financial Crisis

Impact of Financial Crisis on Internationalisation

Fast food has transformed the eating habits of the entire population, whether they are resided in UK, U.S., Asia or any other country. The changing trend of the eating habits evidently exhibits that fast food industry is one of the industries that have developed over the time. Even though fast food consumption has shown an increasing pattern of factors that has affected the health in many ways such as increased overall calorie intake, contribution to weight gain, and elevation in the risk for various diseases, yet, the consumption trend at the same time has represented an escalation in the recent years (Parsa & Kwansa, 2002).

The popularity of the fast food restaurants has escalated the level of competition within the industry marketplace, especially in UK and even in the rest of the world. In fact, the trend of extreme high competition is being alleged to remain the same in the future as well considering the fast life, time convenience, cost of living, changing habits of food intake and so forth (Parsa & Kwansa, 2002).

Globalisation and the increased demand of fast food restaurants are the leading and prominent aspects that persuade to internationalise our operations from the UK and European market to other countries as well. In this regard, it is vital to gain an insight about the environment of the country so that future trends can be analysed on the basis of how the changes would affect the company and its operations in the future (Parsa & Kwansa, 2002).

PEST (Political, Economical, Social and Technical) analysis is one of the most appropriate and effective tool that facilitates in evaluating and forming the most effective strategies to determine the opportunities that can lead to growth. According to Griffin (2010, p. 127), "PEST analysis is a useful strategic tool for understanding business position, market growth or decline, potential and direction for operations of business."

Considering the prospect countries to which the operations of our fast food franchise can be expanded, India and the U.S. seems to be promising and feasible options when internationalisation is concerned. However, the PEST analysis is the tool that would help in determining the overall environment in association with the strong and weak points for business expansions to these countries.

PEST Analysis for India

India is a country with culturally diverse people, which clearly signifies that different cultural taste is present at large. This also means that fast food industry is likely to grow and succeed at the national level due to different cultural appetite and tastes. However, the deep analysis from PEST would explicate the clear position of the overall environment of the country.

Political

The political environment is one of the external forces that are characteristically controlled by the government. Moreover, the change in policies, legislations, regulations, trading standards and the quality of the product are also enforced by law (Mehta, 2006).

Considering the Indian market of the food and fast food industry, political liberalisation is one of the attributes of the country that allows the international companies of the industry to easily enter into the market and run business operations. The government promotes the international fast food and other companies to come and operate in India, for which the Indian government has removed and minimised the tariff and non-tariff barriers from the boundaries (Mehta, 2006).

Economical

Taking into account the economic trends, it typically incorporates the disposable income, employment, inflation, exchange rates, distribution trends and market routes, and so forth. The economic environment leaves a huge impact on the competition prevalent in the market. Employment is one of the most significant factors with reference to the fast food industry. Furthermore, the trend of the fast industry has significantly elevated even at the time when the world has experienced the economic downturn (Nagle, 1999).

Taking the Indian market into consideration, it is one of the emerging markets for the global players in the fast food industry. The economic trend of the country apparently demonstrates the fact that the rapidly growing population especially in the middle class is changing the overall lifestyles of the people. This indicates the fact that more people are being engaged in the work life, which leaves them less time for preparing the foods. Due to this reason, fast food market within the country is growing at an unprecedented rate (Nagle, 1999).

Another factor is the recovery of the setup costs of fast food restaurant. Since the potential Indian market is growing at a constant speed, thus the increased sales alleviate the recovery of the costs involved in the setups and lead the industry towards growth and profitability (Nagle, 1999).

Social

The socio cultural environment is substantial to consider while international expansion is concerned, because it has a direct relationship to the costumer behavior which is the key driving force. The demographic structure of markets, formation of attitudes and opinions are the imperative aspects to observe (Whit, 1995).

However, from the current social trend of the Indian market, it is noticeable that the competition in the overall life of the common people has transformed the simple life into a busy lifestyle. This means that more members of the families are working, which is leaving them less time to make prepared foods at home. This is eventually making them shift on the fast foods, which is quickly prepared with not spending huge amount of money (Whit, 1995).

Technological

Technology and its advancements in the recent times have entirely changed the ways of doing businesses, regardless of the industry. Technological factors typically include the industry focus on technological effort, speed of technology transfer, rates of obsolescence and so on. In this regard, various new advancements in technology such as SAP (Business Information Systems) have resulted in faster bill processing, global tracking systems and like that with the prime motive to facilitate the consumers with convenience as well as enable the management to pull out information in just few clicks regarding the sales and turnover (Mukherjee & Patel, 2005).

India, in this regard, is already a state that constantly makes investments in technological systems. With matured technological industry, India is one of the potentials for the fast food industry that would facilitate the company with hi-tech applications and experts (Mukherjee & Patel, 2005).

PEST Analysis for United States

United Stated on the other hand is also a country where millions of people reside belonging to diverse cultural backgrounds, which indicates the fact that this country is also culturally diverse when taste and fast food consumption is concerned. The fast food industry in the U.S. is one of the dominating industries, as the incline towards the fast food consumption is relatively high amongst all age groups. In relation to the overall country analysis, the in-depth PEST evaluation would provide a much better understanding of the trends of the people.

Political

The government of the United States plays an active role in defining, controlling and monitoring the policies and regulations with reference to the international trade (import and export). Even though, the government encourages international bodies to operate business activities, but at the same time, they have defined very strict policies for the international businesses related to the food industry (Nestle, 2007).

This is usually implemented with the intention to keep the food industry in a good condition. Therefore, policies are a pivotal element within the food industry, mainly due to the reason that the epidemic of obesity in the recent times have escalated, which has affected the health of many of the people, especially the children. Therefore, the policies with reference to the fast food industry have become very authoritative. Additionally, the government and the legislation also implements laws and regulations to keep a check and balance on the fast food industry with the prime objective to offer the population with environmental friendly products (Nestle, 2007).

Economical

The economical environment on a broad spectrum explicates the fact that fast food industry, despite of all the economic downturn and rise, has increased and exposed high profits under all economic circumstances. In addition, the low cost of investment for a fast food restaurant is another economic aspect that has helped the enterprises to grow within the region. This is generally because the modules need to be followed that are predefined from before (Haberberg & Rieple, 2007).

The employees are the major constituents of the fast food restaurants. The cheap and flexible labor in this industry is one of the advantages, who are trained by the companies. The low cost of fast foods make it a demanding item within the industry, while the economic flux does not make the employees lose their jobs, as the demand is not lowered (Haberberg & Rieple, 2007).

Social

From the analysis of the social factor, it is already apparent and noticeable that the life of an average person in the U.S. is busy and fast, due to which the home made prepared foods are not a common practice. This is one of the reasons that fast food industry within the country is so popular and widespread, where all the generations (regardless of their age) are inclined toward foods that are easily and quickly prepared. The fast food industry within the region of the United States is convenient that easily and quickly entertains the fast pace lifestyles of the American population (Schlosser, 2012).

Due to the increasing issue of obesity within the nation, people are shifting towards more healthy options, which have raised the need for more vegetarian food items. This evidently denotes that the population is giving more competition to the fast food industry (Schlosser, 2012).

Technological

Since United States is a technologically advanced nation, thus, the usage of technology in every facet of life is extensive and tremendous. Indeed, the technology and its advancements have made the lives f the people of the U.S. much easy and less complicated. Monitoring of work in new ways have become easier and even cheaper with the technological advanced world of the U.S. (Perren, 2006).

New and advanced software provides the management with the option to identify quantity and quality of inventory at the same time; it could also be useful to avoid waste and unnecessary cost. Online food order has become one of the distinguishing features of the fast food industry that is widely practiced all over the country. This is one of the best options for us to provide value added services to the consumers with the help of the low cost technology (Perren, 2006).

Changes in the Global Environment due to Financial Crisis

The global financial crisis started to exhibit its adverse and drastic impacts in the latter years of the decade 2000. This crisis made the world stock markets to fall with giant financial institutions to collapse. However, taking into account, the global environment, this recent financial crisis or the Great Depression pushed millions of people below the poverty line; innumerable people lost their jobs; thousands of families deprived from their homes; and people in general lost significant portions of their savings (Brauch, 2009).

The overall world economy had come under the dramatic impacts of the global recession with higher detrimental effects to some countries in comparison to others. Almost all the regions are encountering gargantuan challenges due to this recent financial crisis that has slowdown the overall progression of the countries. Shared impacts have also been witnessed that declined the export activities, downtrend the asset markets, reduced credit, increased unemployment rates, escalated poverty levels and many others. Escalated inflation and rise in food prices are also the adverse consequences of the great depression (Brauch, 2009).

As the global financial crisis continued to be a shock to most of the enterprises, it statistically portrayed positive trends towards the growth of the fast food industry on a global platform. This signifies that fast food industry is one of the industries that has witnessed rise in its sales from all over the world. This is predominantly due to the reason that the aftereffects of the crisis changed the gender roles in many of the countries and gave rise to the need that every member of the household should work in order to survive. The lives of the residents of almost every nation have become busy, which made them shift towards the consumption of the fast food (Brauch, 2009).

The facts and figures of many reports have clearly indicated the sharp rise in the consumption of the fast food in the recent times. The incline towards the fast food industry is basically because the fast food items are less expensive and quickly prepared. The recession has forced the people to cut down their spending due to which cheap meals have become the priority. In comparison, dine in cuisines are relatively more expensive for an average person to spend on the daily food consumptions. Moreover, dine in restaurants take more time to prepare foods, which are less preferred for the common people in general, as they have a very busy life with long working hours that leaves them with less time for their leisure activities (Brauch, 2009).

To put it in a nutshell, the economic crisis has brought an emerging trend regarding the fast food industry and has gained recognition as one of the leading industries on a universal basis. The comparative cost advantage and the rapidly increased young population has made this industry grow faster than any other industry. The shifted standard of living due to economic downturn is also an encouraging factor that leads the consumers to visit fast food restaurants.

Impact of Financial Crisis on Internationalisation

The less expansive technological advancements such as technically advanced software to measure sale activities, online portals for taking order and so forth, and flexible governmental rules with regard to international tariff and non-tariff barriers are also the consequence of the financial crisis. These aspects immensely lead to greater opportunities for the fast food industry to internationalise their business operations to not only the developed nations but also to the developing countries.

The low cost of labor is another significant aspect from the economic downturn that would enable our company to expand to the international market. The cheap labor is one of the cost saving features that would lead to increased profits and overall progress even in the most difficult economic situations. Since the economic flux and recession has increased the unemployment rate to a great extent, thus, it is an opportunity within the fast food industry to have more cheap labors, as the positions apart from the management one do not require high skills.

The shifted trend of spending behaviors of the general public of the countries in a broad spectrum is another positive aspect for our enterprise to have international exposure outside the European region. The cut down budgets on the food consumption is a great opportunity for our company to expand the business operations to other parts of the world.

The underdeveloped countries are also an opportunity for the fast food industry to penetrate. This is advantageous because the governments are largely flexible with their regulations and tariff barriers for the international exposure. In fact, the government is quite welcoming to the international fast food franchises. On the other hand, the general populace is usually below the poverty line. This is one of the hindrances that would not lead the company towards success and would reflect low sales in such areas (IMF, 2008).

Although economic and financial crisis has brought numerous changes in the global environment, most of the aspects create a constructive influence on the internationalisation scenarios for our fast food company.

Conclusion

From the above dissertation, it has been elucidated that UK is one of the countries that has witnessed fast food consumption to a very large extent. The primary reason for an increased consumption of fast food is typically because of the lifestyle trends that exhibit rising disposable income, longer working hours, more working parents, and so on. The overall fast food industry throughout the world has shown a positive impact on the consumption pattern, where consumers have preferred the intake of fast food as one of the best alternative choices of spending less money on quickly prepared food.

The PEST (Political, Economical, Social and Technological) analysis is an effective strategic tool that aids in evaluating the overall external environmental analysis that can lead to the strategies for international expansion. The PEST analyses of India and the Unites States along with the comparative study of both (presented arguments for and against) have proved that both the countries have the potential where our business can expand.

The economic flux and downturn in the last couple of years has given rise to numerous challenges to the countries as well as the corporate world, but fast food industry is one of the exceptions that have observed skyrocketed consumption trends and new eating habits. This is one of the reasons that promotes and persuades us to internationalise our operations to other parts of the world such as the United States and India, which has exhibited promising results in terms of growth.