PESTLE Analysis for New Zealand and Indonesia

PESTLE Analysis for

September 7
New Zealand and
2009
Indonesia

SUBMITTED TO:
MR. SUNDERASAN

SUBMITTED BY
Hitesh Goyal
Nirupan Chakravarthi
Sainath.V
MBA 12 and PGPRM-9

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 PESTLE Analysis for New Zealand and Indonesia

Introduction

PESTEL is a strategic management tool that provides useful framework to analyze the
environmental pressures on Business. It is an external analysis of the macro-environment in
which a business operates. These factors are beyond the control of an organization or a country
but are important to be aware of while undergoing business strategy. The main objective is to
understand the affect on business or trade policy because of external factors of a country which is
different to others. To complete this report we have chosen New Zealand and Indonesia.

PESTLE Analysis

Political and legal factor: One of the important factors for any country which affect trade policy
is their legal rule, regulation and their government. If the government is stable then there is less
chance of risk because legal rule and regulation would not be change in short time. In New
Zealand, the risk is high because after every three year, the new government applies new rule and
regulation which could be good for an organization. In the same way, the labor force is very
expensive in New Zealand but if we see in different prospective their productivity is more than
Indonesia or their one labor force is equal to five labor force in Indonesia (Table-3).

To start its new business or strategic business unit, every organization needs a vast amount of
money. In New Zealand, due to high lending rate (Table-3), company has to paid more interest
which could be good for the government but it reduce the profit of a company.

Business freedom in New Zealand is 99. 9 % and trade freedom is 84.6 % and in Indonesia
business 46.7% and in trade freedom is 76.4%. It tells that New Zealand has better environment
to do business and trading. (Index of economic freedom, 2009)

Economy Factor: New Zealand, per capita income is about eight times more than Indonesia
(Table-1) because they have only one sixth population of Indonesia. So, there is less scarcity of
products in New Zealand. In New Zealand, people spend more which help to carry on the
circulation of money all over the country in term of buy capital goods, luxuries products and
necessary products. In the same way their inflation rate and unemployment rate is less than
Indonesia which is a positive sign for GDP growth rate (Table-1). If inflation rate is low then
every commodity and service such as labor, steel, iron, rice, sugar and others products will
available at low price where an organization can make more profit but if we talk about Growth

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 PESTLE Analysis for New Zealand and Indonesia
rate Indonesia is growing faster than New Zealand. It invest almost one fourth of its GDP to
develop economy condition. They have huge reserve of foreign currency and their export is also
more than import which shows that Indonesia has natural sources in huge quantity, good
productivity.

So, consider these all points in mind we can say that New Zealand is more suitable for a
company which produces luxurious products such as car, diamond, fast food and Indonesia has
huge market of middle class income people.

Social and Culture factor: Both countries have different culture to each other for example
Indonesia and New Zealand has majority of Muslim and Christian’s religion. So, during festival
like Ramzan, in Indonesia, consumption and the import of meat products decrease rapidly
because people in Indonesia eat only one time in a day and restaurant and shops open 5 PM to 10
pm but New Zealand is entirely different from it such as consumption and imports of foods and
beverage and electronic gadgets increase during festival like Christmas.

If people are educated, it will help to boost the economy growth because they have knowledge
about latest technology which helps them to maximize their output at low cost with effective use
of input. 90.4% of Indonesia’s populations are literate in which male are 94% and female are
86.8% compare to 99% in New Zealand (Table-2). 3.6% of Indonesia GDP is spent on
education compare to 6.2% in New Zealand which is very low. So, there is more opportunity in
education sector for a domestic and international organization in New Zealand to make profit.

In the same way, life expectancy rate is more and mortality rate is low in New Zealand which is
good for country but not consider so good at organization prospective because in New Zealand,
after retirement, without doing any work people get pension, gratuity fund till long time which
affect company profit.

Technology factor:

Environmental factor: Indonesia is situated in South-Eastern Asia between the Indian Ocean
and the Pacific Ocean. It has total 1,904,569 sq km area in that land is 1,811,569 sq km and

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 PESTLE Analysis for New Zealand and Indonesia
water is 93,000 sq km (Table-2). It is hot and humid country but New Zealand has totally
different geography location. It is cold country with full of land.

Due to geographic location, several times Indonesia has faced many natural disasters such as in
December 26, 2004; magnitude 9.0 earthquake caused a tremendously powerful tsunami in the
Indian Ocean and about 155000 people died and after this in May 26, 2006, in Feb. 2007,
January 27, 2008. It has faced deforestation and massive forest fires. In 1983, about 3 million
hectares of prime tropical forest worth at least US$10 billion were destroyed.

Consider this thing in mind we can say that no country or organization wants to do business with
such a country where they more risk of loss due to natural disaster but New Zealand has some
disadvantage also like they have less resources of water, so the cost of fishery occupation is high
because they have to import at high cost.

Conclusion: After analyzing PESTLE analysis of these two countries we came to know that both
country has some advantage and disadvantage in term of legal policy, economic factor, social,
geographic and technological factor. Where growth rate, labor force, foreign reserve, water
resources and natural resources such as gas, crude oil are more in Indonesia they have less per
capita income, huge population, high inflation and unemployment rate. New Zealand has better
business environment and their legal rule and regulations are liberal to start a new business. In
Indonesia FDI is restricted in most of the sectors and the business environment is not good when
compare with New Zealand and in Indonesia because of persistent corruption and natural
disaster.

References

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 PESTLE Analysis for New Zealand and Indonesia
Karim, S., Lee, M., & Gan, C. (2007, December). Real Effects of Monetary Policy in New
Zealand. Australian Economic Review, 40(4), 385-401. Retrieved September 4, 2009,
doi:10.1111/j.1467-8462.2007.00478.x

McAloon, J. (2006, March). ‘LONG SLOW BOOM’?: MANUFACTURING IN NEW

ZEALAND, 1945–70. Australian Economic History Review, 46(1), 45-69. Retrieved September
4, 2009, doi:10.1111/j.1467-8446.2006.00151.x

Bourgeois, R., & Kusumaningrum, D. (2008, August). WHAT CEREALS WILL INDONESIA
STILL IMPORT IN 2020?. Bulletin of Indonesian Economic Studies, 44(2), 289-312. Retrieved
September 6, 2009, doi:10.1080/0007491080216903

Commerce. (n.d.). Retrieved 08 29, 2009, from Indonesiacommerce:

http://www.indonesiacommerce.com/front/

Economy. (2008). Retrieved 9 3, 2009, from Indonesia-tourism: http://www.indonesia-

tourism.com/general/economy.html

Fry, E. (2009, 06 26). New Zealand GDP shrinks for fifth quarter. Retrieved 08 26, 2009, from
FT: http://www.ft.com/cms/s/0/dad55046-61f4-11de-9e03-00144feabdc0,dwp_uuid=b2e7f792-
b6a6-11db-8bc2-0000779e2340.html?nclick_check=1

Global etiquette. (n.d.). Retrieved 08 28, 2009, from Kwintessential:

http://www.kwintessential.co.uk/resources/global-etiquette/new-zealand.html

Index of economic freedown. (2008). Retrieved 08 05, 2009, from heritage:

http://www.heritage.org/Index/Country

Indonesia. (n.d.). Retrieved 08 30, 2009, from IISG: http://www.iisg.nl/w3vlindonesia/

The world fact book. (2008). Retrieved 08 29, 2009, from Cia.gov:
https://www.cia.gov/library/publications/the-world-factbook/geos/id.html#top

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 PESTLE Analysis for New Zealand and Indonesia

Table-1

Sources: https://www.cia.gov/library/publications/the-world-factbook/geos/nz.html

Particular Indonesia Rank New Rank

Zealand
th
GDP Growth 6.1% 56 3.1 201th
Per Capita Income $3900 157th $27900 50th
Foreign Exchange Reserve $51.2 billion 25th $11 billion 62th
Import $116 billion 33rd $32 billion 63rdx

Export $139 billion 32th $30 billion 62th

Inflation 9% 143rd 4% 64th
Investment 23% of GDP 61th 22% of GDP 78th
Unemployment rate 8.4 116th 4.2% 53rd

Table-2

Particular Indonesia New Zealand

Population 240271522 4213418
Literacy rate 94% 99%
Life expectancy rate 70 years 80 years
Mortality rate 29/1000 birth 4.9/1000 birth
Sources: https://www.cia.gov/library/publications/the-world-factbook/geos/nz.html

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 PESTLE Analysis for New Zealand and Indonesia
Table-3

Particular Indonesia New Zealand

Government type Republic Democratic
Election 5 year 3 year
Independence day 17th Aug. 1945 26 Sep. 1907
Capital Jakarta Wellington
Nation Holiday 17th August 6 Feb., 25 April
Labor force 112 million (5th rank) 2 million (114th)
Legal System Base on Roman-Dutch law Based on British law

Lending rate 6.41% 12.83%

Sources: https://www.cia.gov/library/publications/the-world-factbook/geos/nz.html

http://www.indonesia-tourism.com/general/economy.html

http://www.iisg.nl/w3vlindonesia/

http://memory.loc.gov/frd/cs/idtoc.html

http://www.indonesiacommerce.com/front/

http://www.infoplease.com/ipa/A0107634.html?pageno=8

https://www.cia.gov/library/publications/the-world-
factbook/geos/id.html#top

http://www.fcgi.or.id/en/aboutgc2.shtml

http://www.asiatradehub.com/indonesia/tax.asp

http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFIC
EXT/INDONESIAEXTN/0,,contentMDK:21517996~pagePK:141137~piPK:141
127~theSitePK:226309,00.html

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