For this PEST analysis I will be analyzing the ice cream and frozen dessert manufacturing industry (NAICS Code #311520) within the United States. POLITICAL

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PEST ANALYSIS

        

For this PEST analysis I will be analyzing the ice cream and frozen dessert manufacturing industry (NAICS Code #311520) within the United States.

POLITICAL

        Political factors can have a direct impact on the way business operates. Decisions made by the government  affect  our every day lives and can come in the form of policy or legislation. For the United States of America our government and nation is ran under a democracy. In this capitalistic, free market-oriented economy, corporations and other private firms make the vast majority of microeconomic decisions, and governments prefer to take a minimal role in the domestic economy. As a result, the U.S. has a small social safety net, and business firms in the U.S. face considerably less regulation than firms in many other nations (Wikipedia).

        Employee rights in the United States have a substantial effect on business. Although manufacturing ice cream and frozen desserts has changed over the years with new technology in automatic machinery, the industry is still labor intensive. Employee laws to consider are minimum wage, over time, benefits and health and safety regulations.

         “With the exception of Arizona, Louisiana, Mississippi, Alabama, Tennessee, and South Carolina all states have a minimum wage requirements. The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments (DOL). Covered nonexempt workers are entitled to a minimum wage of not less than $5.15 an hour. Overtime pay at a rate of not less than one and one-half times their regular rates of pay is required after 40 hours of work in a workweek” (DOL). As well as minimum wage and over-time pay, employees are given the right to benefit plans.

        The ERISA, which is the Employee Retirement Income Security Act, sets uniform minimum standards to ensure that employee benefit plans are established and maintained in a fair and financially sound manner. In addition, employers have an obligation to provide promised benefits and satisfy ERISA's requirements for managing and administering private pension and welfare plans (DOL).

        In addition to pay regulations there are also health and safety regulations. OSHA, which stands for Occupational Safety and Health Administration helps regulate employee safety standards in all industries of the United States. In the ice cream manufacturing industry workers are exposed to ammonia, which is considered a high health hazard because it is corrosive to the skin, eyes, and lungs. The ammonia is used solely as a refrigerant. OSHA requires plants to install vapor detecting systems that set off an alarm when a certain amount of ammonia is found in the air. Also this detector needs to be capable of activating the exhaust blowers when the ammonia vapor concentration in the air in the control room reaches a certain point of danger (OSHA).

        Government programs and policies have an astounding affect on the price of dairy products. Milk, which is one of the main ingredients in ice cream is subsidized by many different government programs. The major national programs affecting dairy were the Milk Price Support Program, the Dairy Export Incentive Program, the Federal Milk Marketing Order system, and the Milk Income Loss Contract.

        Under the MPSP, the Commodity Credit Corporation(CCC) stands ready to purchase all the cheese, butter, and nonfat dry milk that are offered for sale at specified prices. The program therefore indirectly provides a price floor on all milk that is marketed domestically by supporting the price of these manufactured dairy products (Price).

        The Dairy Export Incentive Program enhances the total demand for U.S. dairy products. The program subsidizes the export of selected dairy products (primarily cheese, butter, and nonfat dry milk) in targeted foreign markets (Price). Under this program, USDA pays cash bonuses to private U.S. exporters of dairy products purchased from domestic commercial sources. This allows the exporters to sell these products at prices that are potentially below their acquisition costs (Price). Both the total quantities exported and the total budgetary expenditures under this program are subject to limits imposed by commitments with the World Trade Organization (USDA, 2003a).

        The MILC Program provides dairy producers with a degree of income protection from price volatility (Price). The payment rate for the program is established on a monthly basis. It is 45 percent of the difference between $16.94 and the Boston Class I price per hundredweight established by the Federal Milk Marketing Order system (if this difference is positive). All producers receive the same payment rate for a given month, and payments must be made within 60 days of the last day of the month in which payments are triggered (USDA, 2002b). MILC participants may receive payments on at most 2.4 million pounds of the total milk marketed in a given fiscal year (Price).

        The Federal Milk Marketing Order system regulates milk markets by setting regional minimum prices of milk for four different classes of use, and pooling revenues so that producers are paid a minimum weighted average or uniform blend price (Price). However, in many markets, prices are generally driven above Federal order minimums by market forces.

        Trade agreements are also important in the ice cream industry. The United States-Central America-Dominican Republic free-trade agreement  (CAFTA-DR) calls for eventual duty-free, quota-free access on essentially all products, and addresses other trade measures among the parties as well. This new trade agreement levels the playing field and provides the U.S exporters with equal market access. The agreement on dairy products establishes a two-track approach with the objective of achieving free trade within 20 years (FAS). The inclusion of sugar in the DR-CAFTA agreement is a significant step forward in allowing U.S. dairy processors access to more competitively priced world sugar. If U.S. companies were able to purchase sugar at world prices, the dairy industry could save as much as $110 million annually. DR-CAFTA is a modest but positive step forward (IDFA).

ECONOMIC

        All businesses are affected by economical factors nationally and globally. A strong economy indicates positive results for businesses and consumers, and a weak economy indicates quite the opposite. Ice cream itself accounts for 61.4% of the market, with sales having increased 21% between 1998 and 2003. About 1.58 billion gallons of ice cream was produced in the united states, a decrease of about 1.8 percent over 2003 (IDFA). However, nonfat and low fat, as well as, sherbet and water ices increased about 4.5 percent. In 2002 total sales of ice cream reached 20 billion dollars (IDFA). Some other economic indicators to look at in order to see where the market is going includes GDP, unemployment, inflation, and consumer spending.

        Real GDP increased 3.5 percent in 2005, compared to an increase of 4.1 in 2004. The increase was contributed to an increase in personal consumption expenditures, equipment and software, exports, and residential fixed investment (BEA).        Nonfarm payroll employment increased by 193,000 in January of 2006, and the unemployment rate fell to 4.7 percent.   The unemployment rate had ranged from 4.9 to 5.1 percent during most of 2005. The average hourly earnings is up from 16.16 in August of 2005 to 16.41 in January of 2006 (DOL). However, the consumer price index is also up 0.7 percent, but this can be contributed to unstable and high energy prices. Pressure from inflation is also causing interest to rise, the Federal Reserve has raised its target funds rate 14 straight times by a quarter-percentage point each time to 4.5 percent, in order to gain control on inflation (Isidore).

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        Overall, consumer spending was up in the final quarter of 2005. Spending by households, which accounts for almost two-thirds of GDP, rose by 0.7 per cent in the three months to December. This is the largest quarter-on-quarter increase since autumn 2004 - matching a strong rise in retail sales at the end of last year - and is a sign that consumer spending grew after a slow start to 2005 (Isidore).

                

SOCIAL

        

        Demographics is essentially population characteristics.  It is the statistics on individuals in a region in terms of age, sex, marital status, income, ethnicity, and other personal ...

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