Mabe Pest Analysis

PESTEL Analysis

Political Factor: There is a high rate of bribery and corruption in relation to the influence of politics in Russia which is something investors take into consideration before deciding to invest or do business in any demographic. A communist state like Russia has a big influence on business matters and decision making. Therefore, it is important that MABE understand these political challenges before entering the market as it could negatively affect how they intend to operate as a business.

Economical Factor: The financial crisis which happened in 2008 had a huge effect on Russia’s economy which took the country longer time to recover due to economic recession and low human capital. Profit margins also took a huge dip after the 2008 financial crisis. Among the BRIC countries Russia has the highest per capita income which means the economy is recovering well. Which implies the GDP of the BRIC countries is expected to increase. Furthermore, MABE should also consider the balance of trade of the BRIC countries since economic recession is usually coupled with balance of trade deficit causing frequent fluctuation (depreciation) in their foreign exchange rates and high inflation rate. This could either affect their operations positively or negatively.

Social Factor: In order to thrive in a foreign country’s market, it is necessary to understand and be aware of the lifestyle of the country’s citizens and their reaction towards certain markets. Russians have a collective culture when dealing with informal social orientation and sees trust as a very rare attribute especially when doing business with foreigners. This means it may take MABE some extra time and effort to establish a product goodwill through earning the trust of the citizens. The taste and lifestyle dissimilarity between the younger generation and older generation in Russia should also be considered by MABE to help them with product segmentation and differentiation.

Technological Factor: The electrical gadget industry is one of the saturated market industries which usually requires consistent product innovation and improvement in order to gain competitive advantage since most electrical gadgets are subjected high level of product obsolesce. Therefore, it is necessary for MABE to invest more in its R&D relating to technological improvement and product innovation to keep up with the rapid technological change in the industry.

Environmental Factor: MABE’s products are known to be environmentally friendly based on how efficient their products utilize energy. Despite this competitive advantage, MABE plan on sourcing some of its products from warm demographic regions such as Brazil and Mexico. Russia has one of coldest winters in the world and could cause a bit of a problem when transporting the products to Russia. Most electric circuit board develop condensation when moved from warm to cold environment and then stored at a room temperature. Therefore measures will have be put in place to minimize the effects of the Russia’s environmental conditions on the products sourced from warm climate demographics.

Legal: Russia has a lot of laws and regulations which may pose as tough hurdle for MABE such as compulsory AIDS test before obtaining a work visa. Russia has a low human capital and if MABE plans on hiring expats to either work for the company or train the locals, they will all have to go through this scrutiny in order to obtain a working visa. Russia is also known to have a very complex tax system which MABE will also have to deal with.

VRIO analyses

Value: There are many opportunities that MABE could exploit going multinational especially as they plan on operating in Russia. Russia is a vast country which shares borders with 14 different countries. This could also be an opportunity to study the markets of the neighboring countries if MABE ever plans of entering those markets in the near future. MABE also plans on sourcing stoves from Mexico and Brazil and microwave ovens from China. This gives MABE a cost advantage since labor is cheaper in Latin America and China without reducing the quality of the products.