PEST Analysis

The PESTLE Analysis is a tool that is used to identify and analyze the key drivers of change in the

strategic or business environment. The abbreviation stands for

Political,

Economic,

Social,

Technological,

Environmental,

Legal,

Political-Legal Factors

These are all about how and to what degree a government intervenes in the economy. This can include:-

government policy,

political stability

instability in overseas markets,

foreign trade policy,

tax policy,

labor law,

environmental law,

Trade restrictions and so on.

Affordable Care Act

Healthcare is a huge concern in 2013. As the Affordable Care Act goes into effect this year, employers

must provide staff working an average of at least 30 hours a week with health insurance or face fines

starting in 2014. Therefore, preparing for the implementation of this health care reform will

undoubtedly put additional cost pressure (i.e. labor and management costs) on most restaurant

operators this year, thus necessitating a review of all operational costs related to employee hiring,

training, retention and compensation.(Threat)

Pakistan Hotel Association

Pakistan Hotels Association was established in 1963 under Section 3 of the Trade Organizations

Ordinance, 1961 and the license was granted by the Ministry of Commerce.

All the compliance of the required law are being fulfilled till to date and according to the Ministry of

Tourism, this body is the only representative body of hotel industry in Pakistan.

On the other hand, it is the platform, where PHA communicates between the stake holders and the

government, if there is any situation relating to tax, infrastructure and policies etc. There are so many

cases to quote whereby in past, this Association played a vital role in advising the Ministry of Tourism as

well as the Government of Pakistan and the Governments of respective provinces to resolve the matters

pertaining to the hotel industry. (Opportunity)

The Pakistan Hotels and Restaurants Act, 1976

According to Pakistan and Restaurant

No hotel or restaurant shall be registered, unless,

(a) it conforms to the prescribed standard of health, hygiene and comfort, provided that the Controller

may allow provisional registration subject to such conditions as he may deem fit and, for good and

sufficient reasons, modify, alter or withdraw any such condition at any time;

(b) It furnishes at its expense certificates of medical fitness from a Medical Officer of the civil hospital of

the area in respect of its staff in such form as may be prescribed;

(c) Its building is structurally safe and adequately protected against fire or an accident arising out of

electricity or gas and safety of the tourists is ensured.

Government Law regarding registration

For registration of a restaurant, the owner of the restaurant is required to conform to the standard

of health, hygiene, comfort, medical certificates of staffs in good health, its building is

structurally safe and to fulfill other requirements in accordance with law. The license granted

shall remain in force for a period of one year and is renewable every year on payment of

prescribed government fee.(Opportunity)

Economic Factors

Economic factors have a significant impact on how an organization does business and also how

profitable they are. Factors include

Economic growth,

Interest rates,

Exchange rates,

Inflation,
 Disposable income of consumers and businesses and so on.

These factors can be further broken down into macro-economic and micro-economic factors.

Reduction of Tax on Hotel Industry

After a long wait the Central Board of Revenue has reportedly agreed to exempt the hotel industry from

15 per cent sales tax and replace it with a 2 per cent turn over tax.

Hotels and Restaurants having annual income and above Rs.1-5 million would pay 2 per cent turnover

tax, whereas those having annual turnover below one million rupees would be exempted. While

thanking for this "small gesture", Pakistan Hotel Association has demanded for more help and

concession from the government. (Opportunity)

GDP Trend

The GDP growth rate is the most important indicator of economic health. The GDP growth rate

measures how fast the economy is growing. It does this by comparing one quarter of the country's

economic output (Gross Domestic Product) to the last. When the economy is expanding, the GDP

growth rate is positive. If it's growing, so will business, jobs and personal income. The GDP rate is driven

by the four components:

Consumption

Business Investment

Government Spending

Import and Exports

GDP of Pakistan from last 5 years:-

Years 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

GDP Growth 3.62 3.84 3.65 4.03 4.25

Rate

Service Growth 3.9 4.4 5.1 4.46 5.71

Rate

Trend Line

Pakistans economy has maintained the recovery path, GDP growth accelerated to 4.24 percent in 2014-

15 against the growth of 4.03 percent recorded in the last year. Continuously achieving higher GDP

growth during 2013-14 and 2014- 15 is an indicator that government policies are working in better

direction and providing incentives and necessary support in the picking up of economic activities in the

country. These policy initiatives will boost business climate further in coming years and higher potential

growth will be achieved soon. The government has initiated a number of steps like

comprehensive power policy,

security policy,

privatization,

ease of doing business,

reforms in taxation system,

Youth training and employment program etc.

Which are improving business environment and creating friendlier climate for business community and

other economic agents to take maximum benefits from potential of the economy. This is the

opportunity for the business.

Consumer Spending in Food industry

Food Industry in Pakistan is the 2nd largest in Pakistan. Accounts for 27% of its valueadded production &

16% of the total employment in manufacturing sector with an estimated 169 million consumers,

Pakistan holds the worlds eighth largest market when it comes to fast food and food related business.

According to the survey which was being made on the performance of the fast food business in Pakistan

it was being revealed that an average consumer spends 42% of ones income on food. It shows that

consumer spend a lot in food sector as our business also lies in food industry so their consumption result

opportunity for the business.

Money Supply: - (Inflation Rate)

Inflation occurs due to an imbalance between demand and supply of money, changes in production and

distribution cost or increase in taxes on products. When economy experiences inflation, i.e. when the

price level of goods and services rises, the value of currency reduces. This means now each unit of

currency buys fewer goods and services.

Inflation rate of 5 years:-

Year 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

Inflation Rate 13.66 11.01 7.36 8.69 4.81

Inflation in 16.5 12.8 9.9 12.04 7.54

Restaurant &

Hotels
Trend Line

20
Inflation in Restaurant & Hotel
15

Inflation in
10 Restauran

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

In Pakistan, majority of the population spend about half of their income on food. Hence food takes a

greater share in total expenditure for poor than the other income groups. Increase in food prices effect

the lifestyle of people. Because very large part of their income spent in food. As in the inflation in food is

decreasing from past year it shows that prices of food products decreasing which influence the people

lifestyle and they can easily consume food products which create opportunity for the business.

Energy Crisis

December 31, 2015 the news was updated on The Patriot by Ayman Ijaz that Pakistan is currently

facing gas deficit of about 2 bcfd (billion cubic feet per day) as the countrys overall gas production is

between 3.8 bcfd-4.2 bcfd but the demand stands at 6 bcfd which rises to 8 bcfd during peak cold.

In big cities the duration of Load shedding is 7 to 8 hours where as in small villages it is 10 to 12 hours.

As it is stated by Duniya News article, currently, electricity generation is 15,500 MW against the demand

of 21,000 MW.

According to sources, power generation could not be increased due to shortage of furnace oil. The

power demand is likely to reach 22,000 MW by the evening.

Energy crisis in Pakistan highly affect each sector to operate efficiently. The increase in energy crisis in a

country also affects the business badly which will become threat for the business because the business

will not able to operate efficiently and fulfill its expenditure and generate profit.

Social-Cultural Factors

This issue analyzes the demographic and cultural aspects of the company's market. These factors help

businesses examine consumer needs and determine what pushes them to make purchases.

Customer always wants best product as well as their people welcomed to foreign quality products. They

have very dominant society values. They provide equal opportunity both men and women. They give to

equal rights both men and women.

They have different concerns related to religion and ethics. They probably have 40 million people

involvement with Christianity. There is second largest religion that have more strength of people is Islam

mostly above than 1.5 million people live there that all are Muslims. That thing only not helps us to

predict their religion as well as help in to evaluate their ethics view.

Factors include:-

Lifestyle changes

Career expectation

Birth Rates

Regional Shift in Population

Growth rate of population

Changing societal concerns, attitudes, and lifestyle

Based on hotel value per room and the associated cost benefit ratio, the cities in Pakistan have been

ranked. The hotel industry showed a growth of 9.7 per cent in hotels and 9.5 per cent in rooms over the
year 2005-06. The average growth rate in hotel industry was five per cent in hotel establishments and

3.5 per cent in rooms during the last five years.

Sweet are considered as convenient, nutritious and light portion of food that is eaten between after the

meals. Snack food industry is a recession free industry since every person has to eat. People are more

likely to try new private brands and they are not price conscious towards snacks purchasing. People are

more outgoing now days with families and friends like to sit, have chit chat in stress free environment.

So this changing lifestyle creates opportunity for the business.

Brand consciousness

There is a growing orientation towards branded goods among Pakistan consumers, especially in urban

areas. While in the past, consumers usually shopped according to price. Nowadays consumers pay more

attention to product quality and branding. The higher standard of living and the influx of Western

culture have combined to make Pakistani consumer tastes more sophisticated. (Threat)

Natural Disasters

In terms of annual probability, there is a 1% chance in any year that a major event of this size could

occur.

Pakistan faces a major financial challenge arising from natural catastrophes, with flooding causing an

estimated annual economic impact of 3 to 4% on the federal budget.

(The express tribune)

Consumer Spending

Consumer Spending in Pakistan increased to 8584834 PKR Million in 2015 from 8286472 PKR Million in

2014. Consumer Spending in Pakistan averaged 5899349.33 PKR Million from 2001 until 2015, reaching
an all-time high of 8584834 PKR Million in 2015 and a record low of 2884021 PKR Million in 2001.

Consumer Spending in Pakistan is reported by the State Bank of Pakistan.

Technological Factors

It include following factors:-

Total government spending For R&D

New Products

Total industry spending on R&D

Focus of technological efforts

Technology is changing the restaurant industry

Social networking sites have played a huge role in shaping the views of society on a myriad of

issues, and they are also playing a role in shaping peoples opinions of dining establishments.

Customers can leave their thoughts on a restaurant good or bad when they check-in. In fact, they

can simply be in the area of the restaurant and do that. If a patron has an experience they want to share

on Facebook or Twitter (again, good or bad), they can influence a lot of users with just one update.

According to an article at DailyDealMedia

43 percent of restaurant owners polled said that Yelp, the restaurant review site was a good because it

basically gives customers carte blanche to say whatever they want about a restaurant and a lot of the

reviews about restaurant.

Research & Development

The focus of the Government on the Research and Development is less as compare to the international

market. Pakistan is in 42th number in the international ranking level in Research and Development
expenditures as the percentage of the GDP in the real terms in 2013 that is 29% of the GDP. But the

government is improving its supervision on R&D less companies and forcing them to develop a Research

and develop department.

Those businesses have high investments in the research and development got the high market share in

the industry. So it would be threat for the Business because the activity of research and development

incur cost and it is a time consuming activity.

 PEST Impact Matrix

Nature Of Change Impact of Change Opportunities Threats Strategic

Response

Affordable Care Additional Labor Cost Implement

Act and management Pressure Double shift of

cost employees

Political and Pakistan Hotel Improve relation Provide a Build healthy

legal Factors Association between platform to relation with

stakeholder & resolve issues association

government

Pakistan Hotel & Maintaining the Increase in Fulfil all the

Restaurant Act required heath & expense condition

hygiene standard regarding Act

Increase in GDP of Boast business Ease of doing Better

country as well as activities, business utilization of

service Sector Higher Potential government

Economic growth offering

Factors incentive in our

favor

-Consumer - Boast in food Consumer are Increase our

Spending in Food industry willing to product line

 industry spend

-Decrease in Decrease in prices Increase in no Increase the

inflation of commodities of buyers Sales or update

the menu

Energy Crisis Load shedding of Unable to Will move

gas & electricity operate at towards

Unable to optimized substitute of

generate Product level electricity and

gas

Reduction of Tax Decrease in Low tax Increase sales

on Hotel Industry annual turnover

Social- Change in Societal People are trying People are Provide with

Cultural Concerns new private more outing stress free

factors brands, with family environment

Not price and friends

conscious

towards snack

purchasing

Brand Pay more Consumer Will try to

Consciousness attention to are focus on achieve quality

quality and high certificate,

branding standard of better

living and sophiscated

 follows taste

western

culture

Technology Technology is Restaurants Easy to Try to get

Factors changing the updating communicate customers

Restaurant themselves with the feedback from

industry according to the customers all the possible

customer ways

feedback