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China and the European Union remains to be amongst the world’s powerful economic blocks due to their advance infrastructure and strong economic policies. Setting up a venture in these territories could be profitable. However, one has to conduct immense market survey and understand both the external and internal environment influencing the success of a venture. Since the company is producing a world-class Shiraz, understanding the technological, economic, political, and social factors that affect business in the European Union and china is critical.
In this light, the paper profoundly elucidate the PEST analysis in these two countries and postulates that establish the business in China will be appropriate as compared to the European Union.
European Union is one of the largest conglomerate nations on earth, comprising of twenty-eight countries. However, this union has been experiencing political unpredictability in the recent past, something that could have immense impact in business activities. The exit of the United Kingdom from this union has a major economic implication on the block since it was one of the major players.
Even though the European Union has a joint policy regulating immigration called the Schengen agreement, such treaty only exist theoretically since each member country has a unique law governing foreigners setting up business (Poelzl, 2009). The individual country’s regulation makes it hard to start a new venture in some countries while in others it is easy. Moreover, the increasing number of immigrants from the middle east due to conflict has also increased political pressure in this union.
As such, it has made it hard to enter this market as a foreigner due to strict rules that each country is establishing.
The European Union has one of the largest gross domestic product in the world. According to Trading Economics (2019), the block posted a GDP of $18.8 trillion in 2018, marking it as the best in the world. Moreover, its single market approach attracts about 500 million consumers alongside numerous small business entrepreneurs (EU, 2019). The plan to break down the business barriers among member state has also contributed immensely to the strong economic position of this region. Nonetheless, the movement of people from one region to the other is still a challenge due to variation in political regulations. As such, it could negatively impact the new ventures in this region since people are the determinant of availability of labor as well as the purchasing power.
The social environment is conducive due to the rich cultural heritage and favorable learning milieu across member states. Similarly, the diverse sports activity like football, formula 1, rugby, and athletics amongst others create a positive social setting. However, increasing rate of female and youth unemployment in the region is the main social challenge (Schmidt, 2019). Similarly, the aging population and low-skilled immigrants has affected the availability of labor in the region. In this regard, it could present labor deficiency when establishing new venture in this region. Additionally, the IT and technology sector is still below the world’s economic giants like the U.S and China. The region lacks skilled workforce in the technology sector, a fact that might hinder business advancement. Therefore, it is not recommendable for the company to venture into the European Union.
The country has enjoying tremendous economic growth over the years due to numerous programs it has implemented alongside productive economic policies. Currently, China is a political and economic powerhouse in the world, coming second after the U.S.A in nominal GDP (The World Bank, 2020). Even though the country lacks political freedom, it enjoys immense political stability. Furthermore, it is a member of the UN’s Security Council on a permanent basis, a position that denote political steadiness. The favorable political atmosphere has continued to attract foreign investments, a move that earned China over US$ 139 billion in 2016 from foreign direct investment (The World Bank, 2020). Moreover, the good political environment has led to growth in infrastructure and available of labor. As such, it makes china a better option for new venture.
On the economic front, China remains the leading global economy in terms of purchasing power and the second largest on nominal GDP. The economic reforms that began in 1970s has catapulted the country to global commercial powerhouse. According to Chen (2019), the move by the country to change its economy from centrally-planned to market centered has yielded its GDP growth to ten percent annually. Additionally, the country has cheap labor which is vital in giving the company a competitive advantage. In this regards, setting up Shiraz producing firm in this nation will be lucrative.
Socially, China has the largest population in the world, hence providing the best customer base. According to World Meters (2020), the current population in this republic is about 1.4 billion, a colossal market for the firm’s products. Similarly, the literacy rate is approximately 96.4% hence making skilled labor available. The poverty level is relatively law, with the government lifting more than 68 million people above poverty level in the past five years (Brand, 2017). In this light, purchasing power is high, hence the new venture will fare well in this territory. China also ranks amongst the best in technology with the largest online populace globally. In 2015, its government launched entrepreneurship program that encourage technological innovation. The favorable technological environment is encouraging for new venture as it will open space for better markets for the Shiraz whine.
In spite of its large member states, commencing a new business venture in the EU is not advisable under the current economic conditions. The BREXIT fallout, political instability in some of its nations, and slow economic growth in the recent past all indicates unsuitable environment for a new venture. Conversely, china’s economy has been on the growth trajectory for the past several decades and still shows signs of rising. Its political sphere is stable and the population is high giving rise to cheap labor and large consumer base. Moreover, its grip on technology and good infrastructure are conducive for business set up and advancement. In this light, expanding this company to China is advisable.
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