- Freedom of opinion, expression, and press and freedom to organize
- Elections in which voters decide who is to represent them
- Limited terms for elected officials
- An independent and fair court system with high regard for individual rights and property
- A relatively non-political bureaucracy and defence infrastructure
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A relative accessibility to the decision-making process1
The UK probably has the best example of a parliamentary democracy, here representatives from all regions are elected locally and then go on to represent the area the House of Commons. In Parliament Luton is represented by two MPs.
The economic environment is always changing and it is essential management are aware of the economics in order to predict trends. This issue is much more important in unstable economies where change may occur quickly and very often. Economic systems are defined as either; capitalist, socialist or mixed, they can also be categorised by using two more specific criteria. These are ownership (private or public) and the control of economic activity (market or command economy), the UK is like most economies, a mixture. In practice no economies are either entirely market or command economies though in the UK the government is involved in may corporations it is closer to a market economy than a centrally controlled one.
Another way of measuring the economic environment is by income, by analysing the GDP and GNP. The World Bank is an international lending institution that uses per capita GNP to categorise nations, the UK is firmly in the high-income bracket. Luton is also situated in the more affluent south of Britain. Other factors include; quality of life and purchasing power of which the UK is among the highest.
The next part of the analysis focuses on social factors and the cultural forces that identify the individuals and groups and the issues that engage them. The demographic that are most obvious are those concerning quantifiable factors such as population size and distribution, growth rate and age distribution. Luton has a highly concentrated population of around 200,000 and although the national population is ageing, Luton has a high number of immigrants to counter this factor. Ethnic mix and the level of education are also important and Luton has an increasingly successful university and strong institutes of secondary education. The other type of social factor are cultural forces, culture may be defined as; ‘an integrated system of learned behaviour patterns that are characteristic of the members of any given society’2. Culture can then be broken down into many elements including language, customs, religion, and aesthetics. In the UK the official langue is English and the Church of England is the state religion, however in Luton there are many cultures represented and therefore many languages and religions. Islam and Asian culture are particularly apparent in Luton.
Technology always has a large affect on the international business because new products and developments can increase demand and therefore business transactions. Technology can give an organisation a competitive edge with every new implementation of knowledge or equipment. Advances in this field can often prove to be the largest factor in the development of nations, cultures are forced to converge when communication barriers are broken down. It is therefore essential for management to be aware of new technology and how they will affect their organisation. The United Kingdom is one of the worlds leading researchers and users of new technology. Within Luton there is an extensive phone network also providing Internet and fax capabilities to its inhabitants and companies, also the University is typical of institutions responsible for the development of new technology.
The PEST analysis often incorporates an evaluation of other factors, the most important being legal and ecological. Legal systems are described as; common law, civil law and theocratic law. The common law system apparent in the UK exists in many developed countries because there is legal precedent on which to evaluate any relevant law, the structure and tradition allow for consistency in the application of law. Corporation’s actions are controlled by the laws of the nations and regions in which they operate, as are the rights of all major stakeholders such as consumers and employees. There is also increasing pressure for an organisation to consider its ecological environment and the views of consumers and pressure groups such as Greenpeace. This is apparent in Luton with all organisations having a social responsibility.
On the completion of analysis it is then possible to assess what opportunities exist for a company wishing to invest in Luton. When any business considers internationalisation it is for a number of reasons and a STEP analysis provides the information to identify possible opportunities. In Luton there are many environmental factors that an international business could benefit from, the most obvious being increased profits from operating in a larger market and economies of scale. The UK experiences low tax, this taxation will impact heavily on the following choices:
- Location of the initial investment
- Legal form of the new enterprise, such as branch or subsidiary
- Method of financing, such as internal versus external sourcing and debt versus equity
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Method of setting transfer prices.3
In the UK an integrated system of taxation is used whereby a dividend credit is given to stockholders to protect them from double taxation, a global approach is used to tax the profits of foreign branches and the dividends received from foreign subsidiaries.
There are many good reasons for a firm from overseas to operate in Luton, they would be operating in a stable political environment both nationally and locally. The United Kingdom, as a member of the European Union, is capable of trading freely across the borders of fellow member states and they may also take advantage of similar trade conditions across the British Commonwealth spanning the globe. Within the United Kingdom the political climate is very stable and Luton has direct representatives in the Houses of Parliament to unsure local interests are addressed. The UK is considered as a free nation and therefore an organisation would experience free trade within its borders and beyond. A foreign company would be able experience a stable economy in a high-income country, it is a mixed economy with mostly market characteristics but some government intervention. Potential customers in Luton would have one of the highest incomes per capita in the world as well as high purchasing power revealing a competitive yet open market.
In Luton a foreign would be able to take advantage of social responsibility with many consumers here willing to pay more for environmentally friendly products, a high level of disposable income within the UK makes this possible. Luton also has a highly concentrated population of around 200,000 and as in many developed countries experiences rural-urban migration so this it is likely to be increasing. Luton has an international airport so is easily assessable and is in close proximity to London. There is an extensive phone and power network and access to all modern forms of communication.
In conclusion Luton would be an ideal location for an international business to operate. On completion of a STEP analysis it is clear that the UK is at the forefront of society anywhere in the world. Luton in particular is suitable because it is in the most affluent region of the UK with international transport and communication links. There may also be an opportunity to open new niche markets because of the high levels of disposable income.
1 Robert Wesson, Modern Government-Democracy and Authoritarianism, 2nd ed. (Englewood Cliffs, N.J.: Prentice-Hall, 1985), pp. 41-42.
3 Albert J. Radler, “Taxation Policy in Multinational Companies,” in The Multinational Enterprise in transition, A. Kapoor and Philip D. Grub, eds. (Princeton: Darwin Press, 1972), p.30.
