Introduction

One of the basic necessity of life is food despite of being underdeveloped country
Fast Food Industry in Pakistan is the second largest industry in the Pakistan. This
industry accounts for 27% of its value added production and 16% of total employment in
manufacturing sector facts estimated that 180 million customers are there in this industry
Pakistan is world’s eighth largest Market in Fast Food Industry more than 1000 large
scale food processing enterprises in Pakistan and average consumer spends 42% of its
income on food and 21% growth annually in this industry have seen in last year.

Why conduct a PESTEL?

Businesses do not just depend on the quality of their products to achieve sales. In
their external environment there are many factors that influence growth and profitability.
A PESTEL analysis helps evaluate the importance and strength of these factors. It helps
businesses decide which of these factors are favourable and which are not. PESTEL
stands for Political, Economic, Socio-cultural, Technological, Ecological and legal. All
these factors acquire a special importance for businesses operating in a global
environment.
The complete PESTEL analysis of fast food industry of Pakistan is conducted
below

Political Forces
Political trends may have a significant impact on business. In Pakistan, there are
conditions that affect the fast food industry.
1) Enforcement
Different governments focus on separate laws and enforce them more than others. At present the
enforcement on
excessive use of plastic bags is affecting the fast food industry. Shops now have to spend more
on paper bags
and other recyclable materials.
2) Greater concern for ethics
Ethics are more focused on these days. As a result, fast food shops now have to comply with
certain norms. Like
shops have to maintain the standard. Inspections are carried out by government agencies to
ensure the quality of these products. Like Punjab food authority makes special checks on fast
food chains to check the quality of food, kitchen environment, worker’s cleanliness etc.
3) Legislation
There are many laws and regulations in force for the food industry. The fast food shops have to
maintain a
minimum level of hygiene, number of staff, customer service, payments to staffs, and storage of
unused items
and so on. These legislations are changed from time to time to better standardize their operations.
Economic Forces

“Markets require purchasing power as well as people. The available purchasing power in an
economy depends on current income, prices, savings, debt, and credit availability.” (Kotler,
2000) “Factor that affect consumer buying power and spending patterns.” (Kotler, 2001) .The
economic factor plays a great role in shaping the organisations as it deals with buying power of
the consumer.
The key economic concerns for marketers are as follows (Kotler, et al, 2004):
There are two key economic concerns for marketers; these are changes in income and changes in
consumer spending patterns. Changes in income may indicate trends and explain slumps in sales
for the fast-food industry. A drop in sales may be able to be explained by a depression in the
market place, etc. Consumer spending patterns refer to how household income is divided
between food, housing, transportation, etc.By monitoring changes in interest rates,
unemployment, business and consumer confidence and retailing expenditure using economic
forecasting fast-food outlets are less likely to be surprised by economic depressions or bursts of
growth. Economic forces can be used to predict future sales rates and suggest the required
number of service staff to have working at anytime.

Social Or Cultural Forces

The cultural environment is composed of institutions and other forces that affect a society’s basic
values, perceptions, preferences, and behaviours (Kotler, et al, 2004). The cultural forces that are
at play in our environment are as follows (Kotler, et al, 2004):
1) View of oneself
People are now more concerned for their health and thus are switching to
healthier and greener food like salads, vegetable burgers, etc. Diabetes and heart decides
is also a major concern for consumers nowadays as most fast food items are rich in sugar
and carbohydrates. So many fast food companies serve food which is healthy and has low
oil in it.
2) Views of organizations
People try to associate themselves with good organizations most, those that are
more concerned for theenvironment for example, or those that offer homely services. Fast
food shops are now trying to improve their brand image by portraying their concerns for
the environment.
3) Views of society
The society we live in is what affects out spending pattern to a great extent. The
Pakistani culture is now a day is becoming found of eating out as the part of refreshment
and sometimes also part of their daily life. As a result fast food shops try to make the
eating out a memorable experience for everyone. Like McDonald’s gives away toys to
kids for Happy Meals.
4) Views of nature
Concerns about the nature have changed the eating habits of people. Like people
now prefer health food, natural ice-cream, and other natural products.
5)Views of the Universe
People’s religious beliefs are a part of their universal values. Muslims all over the
world are seen to avoid haram. As a result Pakistan’s food joints now serve halal products
on every shops.
Technological Forces

The 1990s have been a period of technological change and true innovation.
Technologicalchanges simply change the way people do business. The technological
forces that affect the fast food industry are as follows:
1) Fast pace of change
The rapid development and exploitation of new technologies have now mandated
companies of all sorts to be informed at all times, or else they face the chances of
threats to their survival. The internet itself has changed the scenario itself. Other
innovative systems make the consumers more honoured at times. For example,
Domino’s Pizza has a special system to record the names and telephone number of
any customer, so that in future when the person rings again, the customer service
attendant can address the customer by name.

2) High R & D budgets

Although the fast food industry does not have so great Research and Developments, they
do conduct surveys to calculate their brand loyalty and their market share. McDonald’s,
KFC, Pizza Hut are all continuously evaluating their customer’s views and adapting
their menus and customer service accordingly.

3) Focus on minor improvements

Since the industry is very big with a lot of different shops serving the similar types of
food and giving similar services, fast food shops now have to concentrate on minor
improvements like changing the décor – the menu list that hangs on top of the counter,
the packaging, the customer service done over the phone. These are all done by the
advanced technologies that are available.

Legal Forces

Legal aspect of the fast food business has seen important changes happening
during the recent decades. The pressure due to changing legal requirements has risen.
Food quality and nutritive value are the major areas affected by law. Apart from it,
packaging and waste management are also critically impacted. Overall, law imposed new
demands on the fast food industry. The entire sector changed its approach towards
marketing and sales. For the fast food brands, it is important that they comply with the
legal changes. Particularly, they should market responsibly to children under 13. Despite
being conscious for their health, consumers love the flavour. They cannot help their
craving for taste. So, there are a few things about fast food that are never going to change.
Fast food will continue to tinkle our taste buds. Moreover, food is a basic need. This
understandable human weakness will continue to aid the growth of the industry.
However, competition is now higher than ever. So, brands have to focus more on
engaging the customers. Some other things too cannot be ignored any longer. Hygiene,
sustainability and compliance are on the top of the list. Technology will continue to
influence fast food chains deeply. Customers like being served with discounts. No doubt,
brands have to focus on how they market themselves.
 Enviornmental Forces
Sustainability was another important factor to impact the industry
globally. Changing government rules and regulations pressed the brands to adopt a
greener approach. Food related regulations grew stricter.Whether the quality standards
have become stiffer everywhere. The pakistan food authority also tightened its rules.
Targeting children and waste management were some areas where brands were forced to
change their approach. A green approach has helped brands enjoy improved customer
loyalty. McDonalds innovated its approach to recycling and waste management.
Sustainability too became an important requirement for the entire industry. Some of the
brands have even focused on having sustainable and compliant supply chains

List of Opportunities & Threats

Considering the PESTLE analysis which we have conducted about the fast
food industry of Pakistan we can now make a list of possible opportunities and threats which we
can face and how can we convert our opportunities to our strengths and gain the competitive
advantage.

----------------------------------- -----------------------------------
Opportunities Threats

 Government support  High Political Instability

 Growing consumers  Inflation Rates
 Customer lifestyles  Misuse of customer’s personal life
 Targeting basic needs of food  High Food Standards

Forecasting

We know all strategic decisions involve forecasting about future conditionsand

possible outcomes. This may help a manager to decide where to invest in a new capacity and can
expect more sales and earn better revenue. We have three approaches of forecasting:
(i) Single point forecasting
(ii) Range forecasting
(iii) Alternative future forecasting

(i) Single Point Forecasting

This approach means a single point or figure where organizations have a

confidence about the future. For example in our case in fast food industry
it is predicted that the population of fast food consumers will increase by
5% in next 2 years. It means there is an opportunity for fast food industry
to invest more to get increased volume of sales
(outcomes)

This graph shows low certainity

(Time)
(Single Point Forecasting)

(ii) Range Forecasting

In this approach organizations have less certainity. This approach suggests

arrange of possible outcomes that can be projected as degree of
probabilities. For example in case of fast food industry, inflation rate
which relates to consumers income will be forecasted. It is estimated that
inflation rate for next 12 months will be 6.50% and current rate of
inflation is 7.64% and previous rate was 3.93%. we can see that we have a
range of inflation rate that vary from 3.93 to 6.50%.

(outcomes)

(Time)

(iii) Alternative Future Forecasting

This approach typically invoves less certainity on a set of distinct features.
These alternatives are discontinuous and not linked to one another whether
they happen or not.
For example in our case if organization may invest in technology to
capture more customers in future. This will involve more uncertainity
because if company invests and inflation rate increase then company will
 face loss while in other case maybe inflation rate is down then company’s
sales may ncrease.

Porter’s Five Forces Model

Porter’s five forces model is a framework to analysis the industry. This
model is an analytical tool which helps the organization to understand the competitor behaviour,
its strengths and weakness and the strategic position of firm which helps the firm to make
strategies in order to take the competitive advantage in industry. These five forces are:

1. Rivalry among competing firms

Competition in the fast food industry is very high. Now trend has changed
people like to eat food outside from different restaurants, they have busy
life and want ready cooked meal. Therefore number of fast food
restaurants have increased in large number. With large number of
restaurants operating in market comes huge competitive rivalry. The major
competitors operating in fast food industry of Pakistan are:

 KFC
 McDonalds
 Hardees
 Burger King
 Pizza Hut

2. Potential Entry of new Competitors

If the barriers to enter the industry are high, than there are less chances of
entry of a new business and less threat for existing players. In fast food
industry the threat of new entrants are very high as there are no strict legal
restrictons to open a restaurant. Also opening a fast food restaurant does
not require much investment. But if the existing players maintain high
standards than it will be difficult for new enterants to come to the market.
 3. Bargaining Power of Suppliers

Suppliers are very important for the success of business because they
provide resources to produce the product. As they supply the raw material
they have power over industry. In fast food industry the bargaining power
of supplier is high as there are very lss suppliers present in this industry
and switching cost is also high.

4. Bargaining Power of Buyer/Customer

Bargaining power of buyer is a very essential aspect. Try to fulfil the

expectation of customer. Prices should be low as compared to the
competitors and provide good quality product. Bargaining power of
customer in fast food industry is high since this industry has matured and
customers have a lot of options available. If someone is not providing
competitive prices and offering good quality service then the customer
will switch to the other brand.

5. Threat of Substitutes

If you don’t maintain proper industry standards then there is a major threat
that your customers may shift to substitute prodcts of competitors. For
example some people may feel fast food is not healthy they may shift
towards continental or other cuisines.

Scenarios Analysis
Scenarios of a good enough alternative views of how the Macro
environment might be verb in the future, typically for long term. Scenarios
are not strategies in themselves, but alternative possible environment switch
strategies have to deal with.
This process involves five major steps
1) Define scope
This is an important step scope refers to subject and timespan of scenario
analysis. For example in our case for Fast Food Industry scope is our
national market and for five years from now to 2025.

2) Identify the key drivers for change

Here we identify with the help of pestle analysis, the factors which have
heavy impact on the future of the industry. for example for Fast Food
Industry there are two major factors which are, increasing number of
customers and buying power of customers is increasing.

3) Developing scenario stories

 In this process we have named two opposing stories, Oceans and
mountains. In oceans, it describes that number of customers and their
buying power will increase. In mountains it describes that number of
consumers will not increase and also inflation rate will increase.
4) Identifying impact
The impact on increase in number of consumers will led the industry to
incorporate more customers. They must develop plans to capture
customers to increase their sales. Same is the case with increasing buying
power. If both scenarios will not happen we must resize and develop new
plans like discounts, deals, new promotions etc.
5) Monitor progress
In this process organisation just monitor which scenario will be best and
how the current situation is going on. whether it is favourable or not. If it
is not , then companies must replan its strategies.