Lecture 10

Political and Macroeconomic

environment
 Contents

1. Introduction of Macro environment and PESTEL model

2. Political environment

3. Economic environment

4. Link to the Requirements of P4 (partially)

for Political and Economic Environment

1. Introduction of Macro
environment and PESTLE
model
 Macro environment

Introduction of Macro
environment
 Types of Environment

Macro
environment

<TITLE>
Economic (PESTLE) Non-economic

Internal
environment
The company
External
environment
Customers
Micro environment
Marketing
Competitors
(Competitive environment) intermediaries
Suppliers
Public
5
 Two levels of environment

Macro Micro
environment environment
 General environment

• In contrast, the general (or contextual) environment comprises those

macroenvironmental factors such as economic, political, socio-cultural,

technological, legal and ethical influences on business which affect a wide variety of

businesses and which can emanate not only from local and national sources, but

also from international and supranational developments.

• Macroenvironmental factors might be thought of as factors so large that the

business cannot change them

 Macro environment

PESTLE model?
 PESTLE model

• PESTLE analysis: analysis of the business environment

which focuses on the political, economic, social,
technological, legal and ethical influences on the firm.
 PESTLE model

• A PESTLE analysis (or PEST analysis) can be used to analyze a firm’s

current and future environment as part of the strategic management process

• PESTLE examines factors external to the firm; these might represent

opportunities or threats and later can be used in a SWOT analysis (whereas

strengths and weaknesses are internal factors)

 PESTLE Model

Source: https://www.shutterstock.com/search/pestle+analysis
PESTLE
Framework
2. Political environment of
PESTE model
 Political Environment

2.1 Understanding of Politics

 Politics

• Politics is concerned with those processes which help to determine

how conflicts are contained, modified, postponed or settled; it can be
seen as a universal social activity
• For most individuals, however, the term ‘politics’ tends to be
associated with activities at state level, where the resolution of
conflict often involves large numbers of people and may even
involve individuals in other states
 Political factor

• Politics plays an important role in business. This is because there is

a balance between systems of control and free markets.
• The firm needs to consider political factors when:
✓ Before expanding into new regions. It also applies to firms
✓ Identifying optimal areas for production or sales.
✓ Help determine the location of corporate headquarters.

Source: https://pestleanalysis.com/pestel-framework/
 Politics and Business

• Politics affects the business world in a variety of ways →

understanding them will help making better business
decision

• With globalization of markets, these two are closely

related and affect each other
 Politics and Business

Example:

• Trade war between the US and the world

• Economic sanction of certain countries

• Joining free trade organizations

 Political Environment

2.2 Politics and its affect

Business
 Factors of politics and
Some of the political factors you need to watch are:
legal environment
• Stability of government
• Political leaning
• Regulation and deregulation: economic zone
• Government influence
• Political system
• Political activism
• Lobbying
• Corruption
• Government subsides
• Preferred industries
• Political aims
• Trade regulations (e.g. the EU & NAFTA)

Source: https://getlucidity.com/strategy-resources/ultimate-guide-to-pestle/
 Political Environment

Specific factor of Politics:

Stability of Government
 Guidelines

✓ One political party or multi political parties (một đảng hay đa đảng)? Any

conflicts between parties if any

✓ Security when organizing political activities: visit of foreign country’s

head of state

✓ Stability of tenure of Head of state (ổn định của nhiệm kỳ của các nguyên thủ
quốc gia)
 Example: Coup in Myanmar

Source: https://dantri.com.vn/the-gioi/he-luy-kho-luong-sau-cuoc-dao-chinh-o-myanmar-20210203145734175.htm
 Example: Coup in Myanmar
• Consequences to Business:
✓ Employees strike: Medical staff in at least 20 public hospitals in Myanmar went on strike to protest the
coup.
✓ Imposing sanctions by many countries like the US (cut the support)

Affect on
business

Business has to cease because of no worker

Sale decreases rapidly
Facility are damaged
Foreign sanctions leads the foreign company have to stop business in Myanmar
Tourism is affected badly
Source: https://dantri.com.vn/the-gioi/he-luy-kho-luong-sau-cuoc-dao-chinh-o-myanmar-20210203145734175.htm
 Other example: Protests in Hong Kong

The number of visitors and the percentage of hotel

rooms with tenants fell by double digits in July,
while travel agencies saw average revenue in the
past two months fall by nearly 90% year-on-year.
last year
Source http://antg.cand.com.vn/Kinh-te-Van-hoa-The-Thao/Hong-Kong-chiu-he-luy-tu-cac-cuoc-bieu-tinh-559037/
 Political Environment

Specific factor of Politics:

Favor of foreign investment?
 Guidelines

▪ Any special economic zone (đặc khu kinh tế) and theirs tax incentives (ưu đãi thuế)
if any? : Vân Đồn, Nghi Sơn , Phu Quoc…
▪ A lot of favors: corporate tax, land using rights, income tax … to attach more
business for investment

Barriers/ Benefits to
the selected firm ???

The foreign firm tends to expand the business or investment in

Vietnam, so the domestics firms has more customers or partners
 Examples of Phu Quoc
economic zone

Source: https://www.hataland.com/6-uu-dai-dac-biet-doi-voi-dac-khu-kinh-te
 Guidelines
Participate in international trade:
✓ World economic forum (diễn đàn kinh tế): WTO
✓ Free trade Agreement (hiệp định thương mại tự do);

• EVFTA (Hiệp định thương mại tự do giữa Việt Nam và Liên Minh Châu Âu)
• CPTPP (Hiệp định tiến bộ toàn diện xuyên Thái Bình Dương)

Exported tax Barriers/ Benefits to Imported tax

to Vietnam the selected firm ??? to foreign

• The domestic firm will be competed more by • The firm in the getting-benefit-of-
foreign companies in the getting-benefit-of- imported-tax- industry will consider to
exported-tax industry invest/ export/ import to foreign market
 Example of EVEFTA

Industries: get benefits:

✓ Fishery: 50% imported tax…(except tuna)

✓ Textile: 42,5% imported tax

✓ Electronic

Source: https://www.vietdata.vn/ExtAppCommon/Home/ViewDetailPost?idPost=163645108&idLoaiTin=49
 Example of EVEFTA

Industries: unfavorable
✓ Diary: free tax atfer 7 years for frozen pork.

✓ Livestock:

✓ Pharmaceutical industry

Source: https://www.vietdata.vn/ExtAppCommon/Home/ViewDetailPost?idPost=163645108&idLoaiTin=49
 Political Environment

Specific factor of Politics:

Diplomatic relation with other countries
(Quan hệ ngoại giao với các quốc gia khác)
 Examples

• Political conflict

• Punishment (lệnh trừng phạt),

• War, Boundary dispute

• Embargo (cấm vận)?

 Example: Cuba and US

• Cuba's tourism industry lost billions of dollars due to new

US embargoes: 1,8 billion USD
 Diplomatic affects business

• The companies grows global International Business in other

countries

If BAD diplomatic relationship If good diplomatic relationship

The business goes worse even The business goes

the business must be stopped well
3. Economic Environment
of PESTLE model
 Economic environment

3.1 Inflation rate

(Lạm phát)
 Inflation in Venezuela

Source: https://www.theguardian.com/world/2018/jul/25/venezuela-inflation-crisis-nicolas-maduro
 Controlling inflation

• Inflation is usually defined as an upward and persistent

movement in the general level of prices over a given
period of time; it can also be characterized as a fall in the
value of money
 Controlling inflation

• Normally measured by Consumer Price Index (CPI)

• Why prices tend to rise over time: supply sides and demand-siders

• Rising price may results in firm losing sales, employment rate,

investing, etc.

• Wage/prices inflationary spiral

• Deflation (giảm phát)

 Inflation in Vietnam: 1996 to 2026

In 2019, Inflation rate is 2,8%

Vietnam is expected to level off

at around four percent in the
next few years.

Source: https://www.statista.com/statistics/444749/inflation-rate-in-vietnam/
 Economic environment

Inflation rate affects business

 Inflation rate affects Business

• Inflation rises = Value of money

Price of input: Income of Customers Governement

Price of output Demands Society is Employment Public debt

unstable rate

Sale, scale of business

 Example: Price of Corn

Source: https://cafef.vn/gia-ngo-cao-nhat-hon-8-nam-sau-6-tuan-tang-lien-tiep-la-thu-pham-gay-bao-gia-thuc-an-chan-nuoi-20210507151808806.chn
 Example: Price of Corn

Price of exporting corn in the

US increases

Price of importing corn in Asian

Source: https://cafef.vn/gia-ngo-cao-nhat-hon-8-nam-sau-6-tuan-tang-lien-tiep-la-thu-pham-gay-bao-gia-thuc-an-chan-nuoi-20210507151808806.chn
 Consequences: Price of Pork

Source: https://anovafeed.vn/anova-feed-bieu-do-bien-dong-gia-thi-truong-chan-nuoi-2-tuan-gan-nhat-tu-0601-19012021
 Consequences: Price of Chicken

The price movement of CHICHKEN in the last 2 weeks

Source: https://anovafeed.vn/anova-feed-bieu-do-bien-dong-gia-thi-truong-chan-nuoi-2-tuan-gan-nhat-tu-0601-19012021
 Example: Price of Duck meat

The price movement of DUCK MEAT in the last 2 weeks

Source: https://anovafeed.vn/anova-feed-bieu-do-bien-dong-gia-thi-truong-chan-nuoi-2-tuan-gan-nhat-tu-0601-19012021
 Economic environment

3.2 GDP =Gross Domestic Product

(Tổng sản phẩm quốc dân)
 GDP and GNP

Source: https://www.investopedia.com/terms/g/gross-national-income-gni.asp
 What is GDP?

• Gross Domestic Product (GDP) is the final monetary

value of the goods and services produced within the

country during a specified period of time, normally a year.

Source: https://www.business-standard.com/about/what-is-gross-domestic-product-gdp
 What is GDP?

• In simple terms, GDP is the measure of the country's

economic output in a year.

• The GDP growth rate measures how fast the economy is

growing.

Source: https://www.business-standard.com/about/what-is-gross-domestic-product-gdp
 GDP growth rate in Vietnam

Source: https://www.gso.gov.vn/en/data-and-statistics/2021/01/viet-nam-economy-in-2020-the-growth-of-a-year-with-full-of-bravery/
 GDP growth forecast of
Vietnam in 2021 and 2022

Source: https://nhandan.vn/nhan-dinh/kinh-te-viet-nam-du-bao-tang-manh-tro-lai-trong-nam-2021-2022-643775/
 Economic environment

GDP affects business

 GDP growth rate affects Business

value of the goods and services

• GDP growth rate = produced

Sale of economy
Government
Demand
The number of
Scale of manufacturer/ companies Balance of
Foreign
business investment payment
Market oriented; strategies;
business field changes

Sale
 Economic environment

3.3 Employment rate

(Tỷ lệ thất nghiệp)
 Reducing unemployment

• Government focus more on job creation, maintenance and developing skills

appropriate to future demands

• High inflation often cause unemployment

• Unemployment creates negative effects for both society and the economy: waste of
resource, pressure on the public service, growing social and health problems

• 3 main types of unemployment: cyclical unemployment, structural unemployment

and technological unemployment
 Unemployment rate in the world

Source: https://viec.co/bai-viet/thong-ke-tinh-hinh-lao-dong-6-2020/2847
 Unemployment rate in Vietnam (June-
2020)

Source: https://viec.co/bai-viet/thong-ke-tinh-hinh-lao-dong-6-2020/2847
 Unemployment rate in Vietnam

Source: https://vietnambiz.vn/ti-le-that-nghiep-tai-viet-nam-cao-nhat-trong-10-nam-qua-2020071023171888.htm
 Labor force in Vietnam (2011-2020)

Source: https://viec.co/bai-viet/thong-ke-tinh-hinh-lao-dong-6-2020/2847
 Economic environment

Unemployment rate affects business?

 Unemployment rate affects Business

People looses job

• Unemployment rate =
Sale of economy
Productivity
Wage
The number of
Scale of manufacturer/ companies
Affect on GDP
business
Demand
Market oriented; strategies;
business field changes

Sale
 Economic environment

3.4 Interest rate

(Lãi suất)
 Monetary policy

• Interest rate is the rate at which interest is paid by a

borrower for the use of money they borrow from a
lender.

Source: https://vietnambiz.vn/lai-suat-interest-rate-la-gi-cac-loai-lai-suat-trong-nghiep-vu-ngan-hang-20190828091305621.htm
 Monetary policy

• Monetary policy seeks to influence monetary variables such as the

money supply or rates of interest in order to regulate the economy

• Controlled by the State Bank with many tools, particular for :

✓ Deposit ceiling interest rate (lãi suất trần tiết huy động)
✓ Lending ceiling interest rate (Lãi suất trần cho vay)
•
 How the monetary policy affects business

Lending ceiling Deposit ceiling

Other tools… interest rate Other tools…
interest rate

Lending Deposit
interest rate interest rate

Business
 Current Lending ceiling interest
rate in Vietnam

• Decision of Governor of the State Bank of Viet Nam: No.

1729/QĐ-NHNN

Source: https://tinnhanhchungkhoan.vn/lai-suat-dieu-hanh-duoc-ngan-hang-nha-nuoc-dieu-chinh-ra-sao-8-nam-qua-post225463.html
 Lending interest rate in Vietnam

Ceiling Loan interest rates in 5 priority areas

Source: https://tinnhanhchungkhoan.vn/lai-suat-dieu-hanh-duoc-ngan-hang-nha-nuoc-dieu-chinh-ra-sao-8-nam-qua-post225463.html
 Current Deposit ceiling interest
rate in Vietnam

• Decision of Governor of the State Bank of Viet Nam: No.

1730/QĐ-NHNN

Source: https://tinnhanhchungkhoan.vn/lai-suat-dieu-hanh-duoc-ngan-hang-nha-nuoc-dieu-chinh-ra-sao-8-nam-qua-post225463.html
 Ceiling Deposit interest rate in
Vietnam
Ceiling

Source: https://tinnhanhchungkhoan.vn/lai-suat-dieu-hanh-duoc-ngan-hang-nha-nuoc-dieu-chinh-ra-sao-8-nam-qua-post225463.html
 Economic environment

Interest rate affects business?

 Interest rate affects Business

• Lending interest rate = People borrows

Business borrows
Government
Consumers borrow
The number of
Scale of manufacturer/ companies
services More job Affect on GDP

Demand
Market oriented; strategies;
business field changes
Sale
 Assignment 2

4. Link to the Requirements of

P4 partially
for Political and Economic Environment
 Remind of Requirements of P4

Opportunities or Threats
General
Point out Requirement of M4(1)

A REAL Company
Choose (** different
Impacts of macro
Requirement 1 from other members environment
in class)

Among top 500 biggest in Vietnam:

https://vnr500.com.vn/
At least 2 factors are taken
to satisfy Pass grade

Carries out business in

With factors of PESTEL model

Market: VIETNAM (compulsory)

Ethical and
Political Economic Social Technology Legal
Ecological
 Political environment

Explain the current issues of the Political environment in Vietnam company

(as guided during the Lecture) :

1.1. How stable is the government now and in the future?

1.2. Is the political regime favorable to foreign investment?
1.3. Is diplomatic relationship of the country good for business?

Requirement of P4 partially

Explain the impacts of Those issues to the Selected company (as guided during the
Lecture)

Requirement of M4(1) partially

Opportunities of Threats to the Selected company

 Economic environment

Explain the current issues of the Economic environment in

Vietnam company (as guided during the Lecture) :
2.1. Inflation
2.2 GDP
2.3 Employment rate
2.4 Interest rate

Requirement of P4 partially
Explain the impacts of Those issues to the Selected company (as guided during the
Lecture)

Requirement of M4(1) partially

Opportunities of Threats to the Selected company

THE END