Country Development Comparison: Sweden and Vietnam PESTEL

Country Development Comparison: Sweden and Vietnam PESTEL Table of Contents Vietnam background Political factor Economy Social Technology Legal Environment Sweden Background. Political factor Social factors Technological Factor Legal Factors Environmental factor Intra Analysis of Sweden and Vietnam Political Factors Economical Factor Conclusion References PESTEL ANALYSIS Initially known as PEST Analysis, this is a macro environmental structure used to recognise the impact of the external factors on the institution and is used as strategic analytical technique. PEST stands for Political, Economic, Social, and Technological† factors. Francis Aguilar is referred to as the originator of this tool. He talked about ETPS – Economic, Technological, Political, and Social– as the four important factors for Scanning the Business Environment. Later Legal and Environmental factors were also introduced by some analysts and thus evolved the term PESTLE Analysis. Vietnam background Vietnam is a country situated in the extreme east on the indo-China peninsula. It is the 13th most populated country in the world with 90.3 million people being estimated in 2012. It is one among the fastest emerging countries in Asia. It has a very fast growing economy as many first world countries are being attracted by its resources and Foreign Direct Investment showed an increasing trend for some years. Political factor 2011 Vietnam Communist Party held an eleventh congress in 2011 by which followed an election where the leading party was the Party Central Committee. Following the event, Prime Minister Mr Nyugen Tan Dung retains his former position. Mr Nguyen Phu Trong was elected as General Secretary and Mr Truong Tan Sang as Vietnam’s president. The new party brought about some amendments in the current 1992 Constitution. Companies which have a say to economic development were given certain facilities when the government took some extra tax actions. Also, concerning the conflict between Vietnam and China over the East Sea, some senior bureaucrat of the two countries had to visit each other in order to reduce the pressures. 2012 Following an issue of farmers and villager’s land being confiscated by governments’ officials, the police force used extreme force to combat the riot. Conferences session were held to deal with these problems but no actions was taken to improve human rights which was elaborated in 2011. Prime Minister Mr Nguyen proves his supremacy by restricting citizen from deriving their rights. Economy 2011 The year 2011 proved to be a dynamic year for the Vietnamese economy with the first year of establishment of the Socio-Economic Development Strategy. It aims to boost up the country’s labor force, creating high standards infrastructure and stabilizing the economy. However, the Vietnam Development Report of 2012 showed that in the recent years there was an agitating macroeconomic experience. Vietnam experiences a slow GDP growth of 5.8%, inflation being 11.75% in 2010 to 18% in 2011. Both imports and exports rose and FDI increased as investors were attracted by certain core business of the country. 2012 Following the slowing down of GDP in 2011, 2012 also depicted a slow pace with GDP growing by only 5%. However, inflation decreased as it change from a two-digit figure to one digit figure of 9.1%. FDI inflows witnessed a fall of 4.5% in 2012 and seeing a boost in exports of 18.3% and imports of 7.1%. Social 2011 In vietnam, education is considered to be the key of good moral values and that every person should have a desire for achieving it. Despite having a poor education system, the economy has a highly educated population. The National average population rose by 1.04% (87.84 million) with a working age of 46.48 million which is a rise of 0.12% and constituting an unemployment rate of 2.27%. 2012 Average population rose by 1.06% (88.78 million). Working age from 15 and above rose was 52.58 million in 2012 which Is a rise of 2.3%. Unemployment rate was 1.99% and people’s standard of living decrease by 27.6% to 2011. Technology 2011 Year 2011 illustrated a new implementation of a strategic plan for social and economic development. Vietnam’s government emphasize on the establishment of new infrastural building and thereby constructing new express ways to facilitate the task. This would help to ease the modenisation concept. Various training is being offered to have competent scientist and also the government promoted technological innovation. 2012 Being cost advantageous compared to other countries, Vietnam captured some big economies for investment including South Korea and US technology enterprises. This boosted up the export revenue. One of the major influences was the implementation of Samsung’s mobil-phone plant which totalized an investment of $700 million. Legal 2011 Vietnam was called upon in a conference on the Rule of law to restructure its legal system and bring it into line with the international Human Rights Laws. The Human Rights were only theoretically being used in Vietnam after the war. In 2011, Vuong family created havoc by wounding 6 civil servants. The Prime Minister had to step into the matter so as to solve the case and the Haiphony Government was proven wrong. 2012 The dominance of the ruling party persisted. Human Rights were only proposed in 2011 and it was not given legal force. It did not abide by the international standards even in 2012. Freedom of the population was deprived from them. The police force still do massacre to the general public. Foreign countries tried to step into the matter to reform the legal system but the supremacy of the government remains. Environment 2011 Recent report of the World Bank stipulated that due to rapid economic growth and technological advancement in Vietnam, the environment is being affected significantly. Many natural resources are being deployed. Moreover, 2011 was officially the year where Vietnam Rhino was declared extinct. Also, with the growing urbanization, environmental pollution has increased. Water pollution is the main one as lakes’ area is decreasing sharply while many are disappearing. 80% of lakes are polluted and this called upon environmentalist to take necessary measures to tackle the problem. Vietnam is a country with drastic damages concerning climate change with 257 people missing and dead, 1200 houses being damaged or carried away. The natural calamities caused a loss of approximately over 10 trillion VND. 2012 With the support of US, in 2012 at the United Nations Conference on Sustainable Development, Vietnam developed a strategy for sustainable development following the increase in industrial work. Agriculture as a percentage of total national income is declining. Sweden Background Sweden was army powered in the 17th century, but it was no present in any war for almost 200 years. It remained armed neutral in both World Wars. It is a capitalist country. In 2000-02 and 2009 by the global economic downturns it had to face unemployment to a great extent, but fiscal policies were planned and implemented in a way that has permitted the country to survive in economic difficulties. Sweden joined the EU in 1995, but the public disagree to the introduction of the euro in a 2003 referendum. It is located between Finland and Norway. The Population of Sweden is 9,074,055 (July 2010 EST.) Religion is Lutheran 87%, other 13 %( includes Roman Catholic, Orthodox, Baptist, Muslim, Jewish, and Buddhist) Language of Sweden is Swedish (official), also Sami- and some Finnish talking minorities. About Literacy rate it is observed that age 15 and over can read and write Capital of Sweden is: Stockholm GDP growth rate is 4.5% inflation rate is said to be 1.4% Currency: Krona (SEK) Industries: iron and steel, precision equipment (bearings, radio and telephone parts, armaments), wood pulp and paper products, processed foods, motor vehicles Sweden is retaining its place as the tenth most attractive country in the world that is the result of the 2012 year’s Anholt-GfK Nation Brands Index (NBI), this index measures the global likeness (image) of 50 countries in attractiveness and perceived qualities. Political factor Official name of the country is Kingdom of Sweden Legal system Based on the constitution of 1974 Head of state Sweden has King Carl XVI Gustaf as head of state. The nations legislature is the Swedish Parliament (Riksdag), with 349 participants. Elections are heald on a four year basis but it should be pointed out that the king plays no role in government. In the 2006 election, the Riksdag set a new world record as 47 percent of its elected members were women.The Cabinet is headed by the prime minister. There has not been any major change in the political factor in Sweden between 2011 and 2012. Economic Factor It is going forward to maintain a sound fiscal support, improving greater labour force participation and efficiently increasing the public expenditure would help handling future undesirable events. The industrial as well as the agricultural sectors both play an important role in contributing to the GDP. The estimate of investments in research and development is about 4 percent of its gross domestic product. In 2011 in order to prevent long-term unemployment The efficiency of labour market policies could be elevated by increasing the training, specially those who need it most and getting strength in cooperation between institutions. Reforms in the social benefit and tax systems to provide the right incentives for increasing hours worked. In 2012, Efficient Capital Markets and Portfolio Investment Credit is made available to foreign investors in an unbiased way. The private sector have been given access to a variety of credit instruments. The central bank focuses on increasing the international co-operation. Combined with a well-educated labor force, excellent telecommunications network, and a stable political environment, Sweden has become more competitive as a choice for foreign companies forming a presence in the Nordic region. In the World Economic Forum’s 2011-2012 report, Sweden ranked third out of 140 countries in overall competiveness and productivity Sweden’s economy has strong potential to benefit from growing, technology-driven global competition. Sweden already hosts one of the most globally integrated economies in the world. Sweden’s effectiveness is manifested by large flows of trade, capital, and foreign investment. It is seen as a leader in adopting new technologies and setting new consumer trends. Products can be tested in a market with demanding customers and high levels of technical sophistication. Social factors Sweden’s people in general are very on time. They do not smoke in general public places. It is a custom to remove shoes if a person is invited by a friend or anyone to his/her house. Swedes students are informal but they are always willing to help. It is not a practice to exchange business cards in Sweden. Swedes don’t take generosity for granted they will surely give thanks. Fault to say thank you for something is perceived negatively in Sweden. Competition is not encouraged Maintaining eye contact along with a firm handshake, shake hands with all attendees on both arrival and departure. Call first names when you meet Swedes. These social factors have not change in one year i.e from 2011 to 2012 Technological Factor The image is adapted from The Global Information Technology report of 2010-2011 Hennigan (2011) states that Sweden stands 1st in rankings of The Global Information Technology report of 2010-2011, by the World Economic Forum. The report emphasizes the role of ICT (information and communication technologies) as a facilitator of a more economically, environmentally and socially sustainable world. According to new ranking report published by the UN ITU, Sweden holds the first rank in the ICT Development Index (IDI). Legal Factors Swedish laws provide a variety of types under which a business can be established. The Swedish Law, Act (1992:160) applies to overseas companies functioning some type of business The foreign branch’s president must be living within the European Economic Area (EEA). Each and every business enterprise in Sweden are required to register at the Swedish Companies Registration Office. Trademark must be registered in Sweden so that legal protection can be obtained. The president if, not from EEA country, needs special permission from the Financial Supervision Authority to set up a branch in Sweden Taxes: Swedens taxation structure is straightforward and corporate tax levels are low. Sweden has a corporate tax of 28% in nominal terms. Individual’s income taxes are one of the highest in the world. Since it spends a lot in public finances to reduce deficits. One particular area has been tax reductions to encourage employers to hire long-term unemployed people. There are further deductions for personal income taxes by the government. Profits earned by a Swedish branch of any foreign enterprise may be sent abroad without implication of any tax other than the regular corporate income tax. Incentives: The government also offers specific incentives to set up a business. Loans are also given by the National Board for Industrial and Technical Development (NUTEK) and from regional development funds. The variety of regional support programs are in Sweden like location and employment grants, low rent industrial parks, and economic free zones. There are also several European funds that offer subsidies for starting enterprises and the Swedish Government provides collection of incentives for research and development Environmental factor Sweden was an early adopter of sustainable thinking. Back in the 1960s, it acknowledged that the rapid loss of natural resources had to be deal with, and took a lead in setting up the first UN conference on the environment, held in Stockholm in 1972. Since then it has continued to work actively with environmental issues, both nationally and internationally. In 2011, Sweden had the highest percentage of renewable energy in the EU (over 47 per cent). By 2020, at least half of the country’s energy should be renewable, a target the Government says is within reach. Sweden has implemented a water management program in 2012. Tap water is drinkable, and in the summer you can swim in central parts of the capital, Stockholm.Although Sweden is a frontrunner in environmental policy, the Government recognises that there is plenty of room for improvement. For 2013-2016, Sweden will allocate approximately SEK 22 billion to environmental measures. Intra Analysis of Sweden and Vietnam Political Factors Unlike Sweden with a sound and stable political state, that of Vietnam is quite unstable. Vietnam’s political party shows its supremacy upon its citizen by depriving them of their human rights. Sweden can be said a country where its political factor would be less risky that Vietnam. Following the comparison of year 2011 and 2012 of the two countries, Sweden proved to be consistent where as to correct the Vietnamese political stability various countries had to step forward. Economical Factor Economic stability is of great concern to countries. Vietnam encounters a very fluctuating macroeconomic state with drastic changes. Sweden has a stable economic state as its figures do not change by a quite large amount. Vietnam with such agitation could be vulnerable to crises. This makes the economy poor and may lose investors’ confidence. Sweden on the other hand has a good economy and can boost up investors’ confidence. Being among the top competitive and productive countries in the world, investors are easily attracted. Social Factor In comparison with Vietnam, Sweden can be said to be more socially stable. Swedes are well repute for their moral values. It has a highly educated population with high prospect of flourishing as the people are back up by their government. Vietnam on the other hand also has a highly educated population but do not have the means available to ameliorate their living standard as year 2012 showed a decline. Sweden with its determination and perseverance became the third out of 140 countries for being competitive and productive. Technological Factor Sweden being a country of high level of technology has a major advantage over Vietnam. The latter is now on the path of major technological advancement. Many efforts have been done to flourish its technological innovation. It is in 2011 and 2012 that the government is opening itself to new technologies and is constructing the required infrastructure whereas the case of Sweden is very different. Sweden is rank number one in information, communication and technology. Its telecommunication services is among the best due to high technology. Legal Factor Both Sweden and Vietnam encourages companies and individuals to prospect via tax cuts. Sweden is considered a country which is well known due to its high individual taxes and its large public sector. It encourages companies to hire persons by reducing corporate tax thereby reducing unemployment rate. Its government also helps to promote small and medium enterprises. Environmental Factor Sweden is the first country to adopt the sustainable development approach. It organises various conferences on environmental issues, the first one held in Stockholm. It has a clean environment where tap water is drinkable and it has the highest level of renewable energy in EU. Vietnam is on the other pole where pollution affects its water resources badly. Tap water is not consumable as its lakes are over 70% polluted due to industrial operations. Conclusion Sweden is a developed country and this can clearly be seen from the PESTLE analysis. Swedish society has developed an exclusive culture with a robust work code and strong ethical attitudes regarding the appealing of welfare benefits. There is also a great level of trust and social consistency. At present Sweden is now putting emphasis on its tertiary sector, more precisely on its financial sector. Vietnam on the other hand is a developing country still trying to struggle with its primary and secondary sector, its main goals are to establish a continuous trend in its macroeconomic factors such as GDP and inflation. The difference between these two countries is eye catching and there is technically no way that in the near future they will be on the same level even if Vietnam development is at a more than average pace.