Task1:ExternalFactor,CambodiasPESTAnalysis

Introduction
Strategically,externalfactorplaysanimportantroleinorderforbusinessestoenter
intomarkets.Thus,questionmaybeasked,whatareexternalfactorsmightimpact
businessesstrategy?
Sowesetourbusiness thatwill enter to Cambodia specifically to Foodindustry
(Kopitiam),acoffeeservingshop.Wechooseacoffeeservingshopbecausecoffeeis
available for any ethnic and religion. There is no legal or belief that coffee is
dangerousfood.Anyonecandrinkcoffee.However,coffeeissuitableforadultsfood
beverages.AdultismajoritygroupageinCambodia,whichcontributearound89%of
thetotalsales.
Particularly, this study will use PEST analysis to access one of the developing
countriesinSouthEastAsia,Cambodia.AccordingtoFrynasandMellahi(2011),
PESTanalysisisnotaseverelyaccurateanalyticaltool,butabroadframeworkto
assist managers apprehending the macro environment. More importantly, PEST
analysiscanbeutilizedasachecklistformanagerstoseehowpolitical,economic,
socialandtechnologyadvancementscanimpacttheirindustryandbusiness.Since
countrychangesovertime,itissmarttousePESTanalysistokeeptrackandforecast
thefuture.Inthisregards,Cambodiawillbeevaluatedaccordingtofourimportant
factors, political matter, economic status, social concerns and technology
developments, which have significant impacts toward Food industry (Kopitiam)s
operationifitistoopeninthecountry.

Political
Tobeginwith,politicalenvironmentinitiallyplaysanimportantrole,andhavea
major impact on the business. In this case, there are several components of
Cambodias political factors that affect on Foodindustry (Kopitiam)foodindustry
business,likeregionalintegration,governmentregulationsandtheleveloftaxation
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(FrynasandMellahi,2011).However,theleveloftaxationinCambodiaisseemedto
havemoresignificantimpactstowardFoodindustry(Kopitiam)foodindustrybusiness
operationcomparedtootherminorfactors.
ThelevelofTaxation
Particularly, the level of taxation in Cambodia is an imperative factor since it is
contributedasonetypeofthecountryrevenuesources.Theleveloftaxationincludes
theindirecttax,personaltaxation,andcorporateincometax.Inthisregard,corporate
income tax of Cambodia plays a vital role and has immense effects towards a
particularbusiness.
InJanuary1997,theNationalAssemblyadoptedLawonTaxation(LoT),whichisthe
principaltaxationlawofCambodia.In2000,theMinistryofEconomyandFinance
issued a Prakas (regulation) on Tax on Profit to clarify certain tax provisions
stipulatedinthe1997Law.
According to KMPG, since 2010, Cambodias corporate tax has been fascinating and
attractive for investor. Since 2010, Cambodias corporate tax has remained the same at
20%, which is below the average corporate tax of the whole Asia. (See figure 1)
Figure1
(Source,KPMG2014)

SinceCambodiais tryingtoattractmoreinvestors toinvestinitseconomy,itis

predictedthatCambodiascorporatetaxwillexperienceadeclineoverthenextfour
years(Seefigure2).Withtheabovejustifications,itisverybeneficialandsuchan
opportunityifFoodindustry(Kopitiam)foodindustrytoinvestinCambodia.

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Figure2

(Source:www.tradingeconomics.com/WorldBankGroup)

Economic
Inadditiontopoliticalenvironment,economicfactorisanotherimperativeindicator
forFoodindustry(Kopitiam)foodindustrytoassessbeforeenteringintoCambodias
market.Ineconomicfactor,currencyexchangerate,GDPandGDPpercapitaofthe
country are significant measurements that can influence Food industry
(Kopitiam)foodindustry business.Specifically,since Foodindustry(Kopitiam)food
industrylikeStarbuckssenteredtoCambodiamarket,itisreallyimportanttoevaluate
thecountryeconomysituation,GDP,andstandardoflivingofpeopleinCambodia,
GDPpercapita.
GrossDomesticProduct(GDP)
CambodiasGDPplaysanimportantroletoattractinvestorintothecountry.GDP
(Grossdomesticproduct)indicatesthehowwellthecountryperforms,economically.
Particularly,between2001and2013,Cambodias economyhadincreasedsharply
from3.65billionUSdollarsin2001to15.65billionUSdollarsin2013(IMF,World
EconomicOutlookDatabase,2014).(Seefigure3)

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Moreover,since2012,theGDPannualgrowthrateofthecountryhadbeenestimated
around 7% annually. Therefore, with the pace of the countrys GDP growth, the
growth rate of county GDP is expected to reach up to 7.4% in 2019, which is
accountedfor26billionUSdollarsoftheCambodiaGD(IMF,WorldEconomic
OutlookDatabase,2014).(Seefigure3and4)
Figure3

Gross domestic product, current prices

30
25
20
US Dollar (Billion)

15
10
5
0
2012

2013

2014

2015

2016

2017

2018

2019

(Source:www.tradingeconomics.com/WorldBankGroup)

Page 4 of 14

(Source:InternationalMonetaryFund,WorldEconomicOutlookDatabase,April
2014)

Gross domestic product, constant prices

7.6
7.4
Gross domestic product,
constant prices

7.2
7
6.8
6.6
2012 2013 2014 2015 2016 2017 2018 2019

Figure4
GDPPerCapita
In addition, Cambodias GDP per capita is yet a remark for Food industry
(Kopitiam)Foodindustry toconsider. GDPPercapitaisdeemedasanindicatorof
standardofliving.HighGDPpercapitacanbeinterpretedthatacountryhasbetter
livingstandard.(Investpodia,2014)
CambodiasGDPpercapitahadincreasedgraduallysince2005whenthecurrency,
Riel,greatlydepreciatedagainthedollar(CouncilfortheDevelopmentofCambodia,
2014)(Seefigure5).In2012,accordingtotheMinistryofEconomicandFinancein
Cambodia,thecountryGDPpercapitawasestimatedaround984USD.
Moreimportantly,sinceCambodiaisadevelopingcountryandwithreinforcementof
ASEAN integrationin2015,Cambodias GDP percapitalis expectedtoincrease
significantlytoaround1600USDin2019(InternationalMonetaryFund,2014).With
theincreaseinGDPpercapita,itcanbeinterpretedthatCambodianpeoplesliving
standard willbe increasing, whichis beneficialfor Foodindustry(Kopitiam)food
industrysincetheindicationimpliesthatpeopleinthecountrycanaffordtobuyacup
ofcoffeeeveryday.
Asaresult,withgrowthofcountryGDPandincreaseofcountrylivingstandard,

Page 5 of 14

Cambodiais a countrythatfull ofopportunities,economically,for Foodindustry

(Kopitiam)Starbuckstooperatein.
Figure5

(Source:MinistryofEconomicandFinance,Cambodia)

Figure6

Page 6 of 14

Gross domestic product per capita, current prices

1800
1600
1400
1200
1000
US Dollar

Gross domestic product

per capita, current prices

800
600
400
200
0

(Source: International Monetary Fund, World Economic Outlook Database, April

2014)

Social
Social Factors are important to ponder with individual and community characteristics
because it directly associates to consumers behavior. The social factors, which have
impact on the business, are the number of population, culture, religion, career
attitudes and lifestyles (Shideler & Kraybill, 2009). In this particular, the increase of
population in relation to the age group is the most important factor that has influences
on Foodindustry(Kopitiam)foodindustry business.

AccordingWorldEconomicsOutlookDatabasefromIMF(2014),in2014,Cambodia
population is estimated around 15.56 million people. Moreover, it is predicted to
escalateupto16.35millionpeopleby2019.Moreimportantly,within15.56million
peoplein2014,20.5%ofthepopulationwhoseisagebetween1524years;likewise,
38.9%ofthepopulationwhoseageisbetween2554years(TheWorldFactBook,
2014).Withthisagegroupofthecountry,Cambodiapopulationandgroupofageare

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very well suited with food industry (Kopitiam) primary target, adult and young
adults, who contribute around 89% of the total sales (Rene, 2014). Therefore,
Cambodiaisfoundtobeattractiveintermoftargetcustomers,andthenumberof
peoplewillingtospend,particularly,oncoffee.(Seefigure7and8)
Figure7

Population
16.6
16.4
16.2
16
15.8
Million 15.6
15.4
15.2
15
14.8
14.6
2012

2013

2014

2015

2016

2017

2018

2019

(Source: International Monetary Fund, World Economic Outlook Database, April

2014)
Figure8

(Source:TheWorldFactBook,2014)

Page 8 of 14

Technology
Besidepolitical,economicandsocialfactors,technologyalsoperformsanimportant
roleinassessingcountry.InCambodia,therearemanytechnologicalfactorsthathave
powertowardthebusinessoperation, Foodindustry(Kopitiam)Starbucks business,
like the number of Internet user and the advanced capability of research and
development. In this regards, Since Food industry (Kopitiam) is a business that
heavilydepends onrelationship,thenumberofInternetuserinCambodiaisvery
importantforFoodindustry(Kopitiam)toassessbeforeenteringintothemarket.
Inparticular,accordingtotheWorldBankIndicators,CambodiasInternetservice
has improved significantly since 2009. In 2012, it was estimated by World
DevelopmentIndicatorsthattheInternetusersinCambodiawas4.92(per100people)
withaglobalrankof177.Eventhoughthenumberwasquitelow,thenumberof
InternetusersinCambodiaisexpecttoincreaseinthenearestfuturesinceCambodia
isadevelopingcountry.(Seefigure9and10)
Figure9

(Source:WorldDevelopment
Indicators)

Figure10

Page 9 of 14

(Source:

World

DevelopmentIndicators)

Conclusion
Inconclusion,Cambodiaisdeemedtoprovideplentyofopportunitiesforbusinesses,
especiallyFoodindustry(Kopitiam),afterbeingassessedwithPESTanalysis.Dueto
thestabilizedcorporatetax,thegrowthofGDPandGDPpercapitalofthecountry,
theincreaseofpopulationandtheescalationofInternetusersinthecountry,Food
industry(Kopitiam)shouldinvestintoCambodiaseitherintheformofjointventure
orlicensing.

Task3:Challengesofhavingtoolsimplemented

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This study paper discusses the challenges of using PEST analysis to assess
CambodiasmacrofactorsofFoodindustry(Kopitiam)
TherearechallengesofhavingPESTanalysisimplementedtoanalyzeCambodia.To
beginwith,Ifindithardtogathersomeimportantinformation.AsCambodiaisa
developing country, there are not much researches have been done to analyze
Cambodiasmacroenvironment.EventhoughIhavefoundusefulinformation,some
ofthemwerenotusableduetowrittenlanguages.Specifically,mostofCambodias
ministrydocumentsarewritteninlocallanguage,whichisahugeobstacleforthis
analysis.Inaddition,usingPESTanalysis,sometimes,itcannotensurethecertainty
oftheanalysisandforecastingsincecountrychangessofastovertime.

Particularly,usingvaluechaintoscrutinizeishardwhenthecompanyinformationis
notstructured.Inthisregard,Ifounditinflexibletocopewiththeleakofcompany
detailinformationthatisusefulforvaluechainanalysis.Forexample,theleakofthe
companymarketingandsaleinformationmakesitdifficultfortheevaluation.
Finally,theabovechallengesaredeterminedtoobstaclesforthestudy,buttheydid
notdiscouragemefromdoingtheanalysis;yet,theyurgedandmotivatedmemoreto
completethisstudy.

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