Pest Analysis On Finance Industry

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PEST Analysis on Finance Industry

Introduction

The finance investment industry is one of the largest and most pivotal throughout the globe. Given its importance, the sector is constantly changing and transforming in the face of numerous regulatory frameworks that directly and indirectly affects the whole industry or its parts. The industry comprises banks, consumer-finance companies, credit unions, stock brokerages, credit card companies, accountancy and insurance companies, among others. The huge size of the industry stems from the fact that these companies exist in all developed locations. However, they tend to concentrate in international financial hubs like Tokyo, London, Hong Kong, and New York.  As already noted, the industry is heavily regulated. The interconnectedness of the companies and sub-sectors in the finance investment industry, however, articulates the effects of any policy, and makes it easy manage. As the industry continues to change day after day, it is important to analyze the trends not only because the industry impacts every sphere of life but also because investment is continually becoming popular in the modern world, hence, the need to understand the tenets of this industry. To this end, PEST analysis of the industry proffers immense importance both in the quest to plan one’s investment appropriately and ensure the investments offer higher returns. PEST analysis is one of the instrumentals tools whose effectiveness has been proved in examination of the big-picture of a phenomenon. The following discussion, therefore, seeks to analyze the political, social, sociocultural, and technological factors influencing the finance investment industry, with consideration of factors that may present a threat or opportunity for the industry.

 

PEST Chart

 

Factor

Opportunity

Threat

Political

Political factors likely to impact on the finance investment sector include political instability, current corporate and taxation policies, war-like conditions, licenses, grants and patents.

Favorable taxation and corporate policies, patents, and political stability offer opportunity for the industry.

Political threats to finance investment industry include political instability, grants war-like conditions, unfavorable taxation and licensing policies.

Economic

The economic factors include, buts are not limited to, current and future fiscal and taxation policies, the economic situation, stock market, the exchange rates and ease of access to finance.

Economic opportunities for this industry may stem from such factors as favorable fiscal policies and economic stability, ease of access to finance.

On the other hand, unfavorable economic policies, restricted access to finance, and poverty are harmful to the finance investment industry.

Socio-cultural

Socio-cultural factors include general consumer awareness, education or literacy levels, demographics, prejudices, and ethnic and religious differences.

Widespread consumer awareness, higher literacy levels, and effective financial education are advantageous to the finance investment industry.

Religious and ethnic differences including the associated prejudices, however, threaten the growth of the global finance investment industry.

Technological

Finally, technological factors include intellectual property rights, technological trends across the industry, safety issues, and spread of obsolete technology.

Regarding technology, intellectual property rights, safety issues, and effective technological innovations support the growth and survival of this industry.

On the contrary, widespread use of obsolete technology threatens its survival. Intellectual property rights especially the associated ineffective policies may harm the industry.

 

Reflection of the chart

Before delving into a profound-or meaningful- reflection of the chart, it is worth noting that some factors have appeared both as opportunities and threats. While they may not concurrently be both opportunities and threats, their opposite sides act exclusively to produce a specific nature of impact on the industry. Contextually, political factors top the ranks of factors that affect the nature of international business and the specific industries. Notably, the current political landscape is somewhat unstable with war-like conditions dominating most parts of the world. In particular, parts of the MENA region are the most affected namely Egypt, Saudi Arabia, Somalia, and Syria. Finance investment industry thrives better when people are able to invest in a region of their choices. On that note, politically unstable regions limit the choices of such investors to peaceful locations which restricts the expansion and flexibility of the industry. It is important to note all the political factors and project their potential impacts before embarking on huge investments in the industry. Essentially, the above political factors can either be threats of opportunities depending on the standpoint from which they are considered. For instance, favorable taxation policies like relatively low tariffs in certain regions encourage financial investors- the opposite is true for the case of unfavorable corporate and taxation policies. Also it is important to note that while unfavorable political conditions in one region may open a window of financial investment opportunities to another region, mostly the peaceful regions. This explains the uneven growth and development of the industry from one region of the world to the other.

Economic conditions and factors directly depend on the government and political policies and conditions. For instance, at one point, goods, either imported or exported, may seem cheap or expensive with respect to the currency exchange or tax rates. Therefore, just like the political factors, some of these factors like the aforementioned ones can also threaten or support the finance investment industry. With the global growth rate significantly improving, both security and safety of doing business increases proportionally. Correspondingly, financial investment opportunities continue to unveil themselves. However, these conditions and factors greatly vary from one region to the other, thus, the overall impact varies as well. For instance, while the vast majority of regions in Africa are considered poor, their counterparts in the first world have economic conditions that facilitate the growth of the finance investment industry. In particular, these economic conditions accumulate to affect other aspects of the industry like shareholder expectations, and their willingness to buy or sell their shares. Arguably, the willingness of shareholders to provide equity funding reduces when the economic conditions of a particular region less supportive. In the face of the ongoing economic imbalance and unequal distribution of wealth, the finance investment industry is likely to continue thriving in other regions as opposed to others.

Socio-cultural factors likewise vary from one place to the other. In general, they include the literacy levels and education, ethnic and religious differences consumer awareness, and prejudices. The socio-cultural environment is an emblem of demand and tastes, which rely on general trends and disposable income. These could threaten some companies and favor the growth of some. It is important to pay close attention to demographic changes, for instance, including the population structure by ages, regions and numbers working with a view to calculating demand and forecasting the potentiality of prosperity. The current rise in unemployment rates in certain regions may threaten certain finance investment products but will create an opportunity for market segmentation with respect to the nature of demographics. In the same vein, globalization has been beneficial to the finance investment industry. It has created cross cultural values and habits which increases reception of finance investment products, for instance, from foreign countries or regions into another region. In this manner, it facilitates the survival of the industry. Even so, religious and ethnic differences which affect consumer preferences still threaten the prosperity of the industry.

Just like most aspects of contemporary business world, technology is rapidly changing for the better. Newer technologies are emerging daily given the increased innovation required for survival in the contemporary finance industry. This opens huge opportunities for the finance investment industry. In particular, the company can use the technology in exploring the changing consumer preferences and tailoring their products to meet the needs of the consumers. Investors, on the other hand, can analyze statistics about the industry and plan their course of investment appropriately. However, the widespread use of obsolete technology, for instance, old information systems still threaten the development and growth of the company. It is worth noting that technological sophistication depends on the economic situation of a country or region.

Conclusion

From the above analysis, the future of the finance investment industry is uncertain. While such factors as technological and economic transformation continue to open numerous opportunities for the sector, widespread political instability and unfavorable laws threaten its existence. Since these factors are interconnected but mostly stem from the unfavorable political policies, it is difficult to ascertain the future of the industry because, for the large part, the global political situation is unpredictable. Nonetheless, companies need to exploit the existing opportunities fully while shareholders and investors ought to profoundly scan the industry landscape for informed decision.

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Essays Stock (2024). PEST Analysis on Finance Industry. Essays Stock. https://essays-stock.com/example/pest-analysis-on-finance-industry

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