WARD Company wishes to expand its operation to Greece. Understanding the business environment is critical to the success of the company in new markets. As a result, this paper presents a PESTEL analysis of Greece as the county of entry and Porter’s five forces to determine the attractiveness of the industry.
PESTEL analysis of Greece
Political
Greece’s political system is intensely unstable. It is characterized by a series of Parliamentary Electoral Processes. Thus, it is not attractive for business. The country has been experiencing worsening ties with former allies including Turkey and Cyprus. Riots against the government and increased dependence on international trends are some of the political environment of the country (Asteriou and Siriopoulos, 2000). The political environment is also influenced by multivariate factors such as high levels of corruption and freedom of information Factors such as political interests, government’s policies and ideologies of the ruling political parties influence on the government of the day (Pappas, 2014).
Economic
The last decade has seen Greece enter a period of economic crisis with a significant amount of Domestic Product having been lost between 2008 and 2013. Henceforth, the country has experienced a recession with minimal slow growth in some quarters. The downward trend has also been attributed to a slowdown in exports and consumer spending as well as a decrease in manufacturing, production, and agriculture. In the 1990s, Greece’s economy was significantly stable. A number of policies introduced during that period had an impact on the constant improvement of the country’s economic environment (Laskos and Tsakalotos, 2013). However, the declining conditions have rendered business conditions challenging for entrepreneurs with the sector experiencing massive closure of operations in the last ten years. The Greek shipping industry rose to prominence in the 1960s and contributed significantly to the GDP. However, Greece's shipping industry’s income fell since the beginning of the economic crisis. Other weaknesses in the Greek’s economy include trade imbalances, inflexible monetary policies, years of cheap lending, unrestrained spending, dependence on a few industry and failure to implement financial reforms (Pappas, 2013).
Social-cultural
The population is largely literate with more than a third of the population being graduates of Secondary Education. The percentage of the inactive workforce has grown with time. It may be necessary for multinational businesses to employ local staff to facilitate communication and business dealings (Lucintel, 2018). The unique nature of Greece’s cultural environment requires international businesses to adapt to the existing social-cultural environment in order to effectively penetrate the market. With a large number of unemployed people, the large population is a source of cheap labor for businesses operating in the country.
Technological
In order to develop local industries, Greece has been increasing investments in Research and Development. In 2018, Research and development spending amounted to 1% of the GDP. The main focus is on the improvement of technology for industrial growth (Lucintel, 2018).
Environmental
Environmental laws guide business operations in the country. Businesses operating in different industries are required to adhere to environmental laws.
Legal
The government maintains a significant presence in many areas. There are legal factors that have been implemented in the country in the past that may influence how businesses conduct their activities including the financial system, privatisations of companies in the industry, organizational modernization, and programmatic agreements with the Greek state. Additionally, the tax and fiscal systems are rigid and face mounting pressure (Lucintel, 2018).
Porter’s Five Forces
The degree of rivalry within the industry
Competition in the industry is extremely strong with large firms occupying a large market share. Similar to the wider European industry, the Greek shipbuilding industry is in crisis due to competition from other countries. As a result, a series of structural changes have been made in the past in order to improve the competitiveness of firms operating in the country (EuroFound, 2016). In addition, companies aggressively compete based on quality, price, service, and other variables. Hence, Ward Company faces a strong force of competition.
Bargaining power of buyers
The bargaining power of buyers is strong as customers can easily switch to offers from other companies. In fact, companies in the industry experience a considerable shift by consumers to competitors in the neighboring countries. Another factor that increases buyer’s bargaining power is that customers are individuals who make small purchases rather than regular buyers. It is also easy to move to other competitors due to the low switching cost. Hence, Ward must effectively address consumer concerns because they can easily shift to competitors.
Bargaining power of suppliers
Suppliers have high bargaining power. The shipping industry market has a small number of suppliers including local, national and overseas suppliers. The availability of a few suppliers strengthens their bargaining power.
Threats of substitutes
The threat of substitutes is low. There are few substitutes that provide a cheaper option to shipping. Hence, the threat of shifting to substitutes is not very high. Additionally, the industry is saturated with few firms.
The threat of new entry
The Threat of new entry is moderate due to high cost, low-margin and other barriers. While the industry does not require huge capital investment or expertise, the competitive landscape is tilted towards large companies that can sell large volumes to operate efficiently. It is difficult for a new chain to emerge and compete effectively with the giants. On the other hand, even small businesses can compete with large firms. Therefore, the threat of new entry is not a formidable force on the business.
Conclusion
While WARD Company would face low competition from firms operating in Greece, the business environment is not attractive for the company to invest in the country. Therefore, Ward Company should consider a different country of entry.
References
Asteriou, D. and Siriopoulos, C., 2000. The role of political instability in stock market development and economic growth: The case of Greece. Economic Notes, 29(3), pp.355-374.
EuroFound, 2016. Greek shipbuilding industry in crisis. Retrieved from https://www.eurofound.europa.eu/el/publications/article/2000/greek-shipbuilding-industry-in-crisis
Laskos, C. and Tsakalotos, E., 2013. Crucible of Resistance: Greece, the Eurozone and the World Economic Crisis (p. 22). London: Pluto Press.
Lucintel, 2018. Market Research Report. Greece. Retrieved from https://www.lucintel.com/pestle-of-greece-2013.aspx
Pappas, T.S., 2013. Why Greece Failed. Journal of Democracy, 24(2), pp.31-45.
Pappas, T., 2014. Populism and crisis politics in Greece. Springer.
