PESTLE Analysis is a strategic medium for understanding different factors manifesting within a country. There is a strong inflow of FDIs in Spain to reap benefits of its international tourism market. The keen interest requires knowledgeable info making effective decision making to reap benefits. PESTLE explores political, economic, social, technological, legal, and environmental dimensions to analyse the forces that impact successful internationalisation. The article is very useful for analysts looking to make an informed decisions regarding their expansion into the uncharted waters.
The PESTLE will assist companies internationalising to make effective and informed decisions. The analysis guides regarding the factors which they have to consider before making an investment decision. There are multiple factor to consider before investing in Tourism industry of Spain. This analysis makes it easier to proceed systematically. This essay evaluates Political, Economic, Social, Technological, Legal and Environmental forces that are shaping external ecosystem of Spain. Corona Virus shock the core pillars of sustainability (Finance, Social, and Environment). It also questioned business’s capability of providing a proactive response to any such crisis. Covid-19 is a flu like disease that spread through physical contact since tourism industry is a service based industry. Hence this virus becomes a critical concern for ensuring business continuity. The business have suffered at home let alone efforts they need to internationalise.
Most of the readers will wonder, why discuss the new scenario. Readers would like to believe outcome is known. Hence, PESTLE analysis is a waste or not much effective under current circumstances. Even if the decision is the obvious i.e. not to internationalise. Since, Covid-19 requires every individual to stay at home hence there is no point of thinking beyond. Fortunately, there is always a silver-lining under a dark cloud. Unless the organisations evaluate the available information they cannot unlock opportunities available in heap of current problems. A problem is an opportunity for creative minds to achieve excellence in what they do.
Yes, Corona epidemic is very challenging but it never means that we have to stop exploring new opportunities. We are aware that Corona Virus is responsible for critically transforming the world. The most significant changes noticed are due restriction in human to human contact. The essay explores the dramatic changes that are occurring within the society responsible for impacting tourism ecosystem. Furthermore, article evaluates how these changing forces are shaping up the tourism industry in Spain. More specifically the article explores political, economic, social, technology, legal and environmental issues. These issues are evaluated under current Covid-19 to map future for Tourism Industry in Spain.
Evaluation of Political Crisis in Spain “Catalonia Crisis”
PESTLE Analysis of Spain: Governance system in Spain is a “parliamentary monarchy”. Previously, in 2015 Spain was going through a political crisis and was without a proper government. The parliament failed to unanimously select a Prime Minister hence was dissolved (for details click here). The situation never improved rather aggravated in 2017. It happened when semi-autonomous “Catalonia” attempted to break free in a bid to operate as an independent country. The attempt failed but created a serious political crisis in Spain.
The region has 20.7% of the foreign investment hence, it is too valuable to lose. In the fallout scenario, in 2019 Spain’s Federal Courted sentenced 9 Catalan Politicians for 9 to 13 years in prison. The Federal government took measures to ensure culprits are adequately punished to set the right tone for foreign investors. The government has taken keen interest to reassure investors that separation is not a popular demand. These efforts have created a positive environment that scenario will improve. Punishment is an important tool to maintain control, their actions jeopardised the sustainability of the country. Still there is a strong residual risk even after proper punishments. There is no complete assurance that such events will not intensify in future. Hence, Government will have to involve community on grass root level to strengthen Spanish Nationalism.
Spain has managed Corona Virus in a systematic manner. Spain faced a challenging scenario, effective information management and data analytics resulted in timely decision making. Timely decision making allowed Spain to align its political powers to deliver results. The country has streamlined its information sharing in real time. Moreover, Spain is effectively moving towards obtaining Corona Virus Vaccine. Once vaccination is live tourism can return to normalisation. PESTLE analysis of Spain highlights, they maintain a high level of hygiene in public places. The country is effectively implementing SOP which increases the awareness and strengthens the core pillars leading towards normalisation.
Analyzing the political force via PESTLE analysis means to translate the impact on the tourism industry. There are a lot of foreign investment in the Catalonian region. This means that investors would be evaluating this scenario of Catalanian region which has an independence movement. The foreign investors would feel apprehensive to invest in the country. The reasons are simple as they feel such uncertain situations are not good for business. The situation can lead to military conflict or a social rebellion. Turmoil is the outcome and it is never in favour of business growth. Moreover, any such situation will bar tourists to visit the country. Since, majority of investments are in tourism industry, investors will lose the purpose of investment in pursuing opportunities in Spain.
Managers who understand the current scenario are effectively utilising the networking options. The focus point is that not only businesses are under stress but also government. Hence smart managers will be connecting with governments to assist them and gain special incentives. The companies that rise above in the crisis situation have a strong competitive advantage over its competitors.
It is no hidden secret that political stability is critical to boost investor confidence. It is the responsibility of the government ensure investors’ investments are safe. If government fails in its primary duty they can never attract sizeable investments. To prosper investment in Spain the government has to continuously enable a better environment. It has to focus on improving ease of doing business and offering attractions for tourists via facilitating visa policies. Currently, the political scenario is not favourable and the investment decisions will remained deferred. The situation has further aggravated due to Covid-19 the existing uncertainties have multiplied and investors would refrain from investing. Hence Spain needs a stable collaborative government to actually prosper and achieve better results.
Economic Analysis of Spain
The economy of the Spain is 13th largest in the world by considering nominal GDP as a measuring unit. Spain is undergoing a stable economic recovery with 2.3% annual growth in the GDP. The revival started between 2012-2014 when healthy economic policies were introduced. Presently, maintaining and improving the process is critical for the country to gain better results and grab attention from the investors. Also, debt to GDP ratio is improving. Today it is three time more than that of 2008 crisis. However, steady GDP growth has reduced it to 96% and forecast predict it to further reduce to 94% by 2021. Spain is on the road to recovery but has a long journey ahead.
Inflation parameters are in control as it stands 0.7%. In addition to this unemployment rate has reduced but it is still very high 13.7%. The positive indication is that it is slowly but gradually reducing. If this trend continues, the country will experience more stability. Companies interested in internationalising to Spain might also note the purchase power of the populace. Currently the purchase power stands at 0.6 LCU which is not at its best but has improved. In 2008 Spain has also experienced 0.8 LCU hence, the country has a long way to go to achieve some attractive figures.
Nevertheless, Spain remains attractive tour spot for visitors. As of 2019, Spain was second most visit country in the world having 83.7 million tourists. Hence, economic conditions and tourist inflow makes the country very attractive. These parameters can somewhat overshadow the political turmoil in the country when deciding for an investment decision.
PESTLE analysis informs Spain has a two-track labor market. This means that there is a temporary employment market and a market focused on permanent employment. Increased number of temporary workers is also a positive parameter for tourism-based economy. The popularity of temporary workers has reduced firing costs and employers have more bargaining power as compared to workers. Tour operators gain more flexibility over the resource as they endeavor to achieve sustainability. Furthermore, it is clear from the PESTLE analysis that government encourages entrepreneurship. The government has collaborated and created a contractual framework that allows the entrepreneurial entity to hire a worker on one-year probation. This provides a new company a flexibility to ensure they have the right talent to progress their business.
During Covid-19 tourism industry can benefit from special considerations. The availability of temporary workers raises a difficulty to train employees according to the new normal of Covid-19. The training cost will increase, but since many activities will be automated it is very logical to invest on people development.
The drawback of this contract is lack of trained young professionals. Spain’s tax burden is moderate to high. The government provides good incentive to companies specially those involved in R&D and technological innovation. Even after suffering a massive setback to its economy due the burst of the housing bubble. Spain has made a remarkable comeback as 4th largest economy in the Eurozone. The growth in IT and related industry, Tourism operators find these parameters as supporting their cause to automate their processes to reduce waste and deliver value for money to the customers. Automation of the services in Tourism Industry requires R&D and Technological industry to develop as well to provide technical support for visitors to explore Spain in a more dynamic fashion.
Analysis of Social Factors in Spain
PESTLE Analysis of Spain: PESTLE Analysis of SpainAs per Hofstede’s insights calculates cultural score (Spain) as 57 in power distance dimension. This dimension explains that it is a hierarchical society where everyone’s place is predetermined, and it is not challenged. People accept these parameters as part of the process. Moreover, Spain’s individualism scores 51 which means Spain is highly individual. Spain is not a collectivist rather individualist country, this fact is not easy to prove. There are strong evidence for being classified as individualist but there are traces of collectivism everywhere. It is safe to say this is not a dominant state of the culture. Spain is a mix, the society is collectivist with a more tilt towards individualism.
Monitoring other key factors of the analysis shows Spain scores 41 in Masculinity. Describing that dominant nature of the cultural values are masculine. The values are driven via competition and employees do not have time to extensively care for each other. Their whole planning revolves around the personal ambitions. Tourism is usually a strong factor and currently suffering. Airlines are suspended, tour visas are not being allowed Spanish people have high score in uncertainty avoidance where they would like job security over anything else, they do not like to risk rather want to stay safe and secure to avoid tensions.
They are not long term in orientation as the score (44) suggests they live in the moment. Spanish people enjoy the life as of today. They want security in things they do in life but they never plan for the future, very far ahead. Spain is not an indulging country rather people believe too much indulgence in leisure is bad. The current social norms abstain people from indulgence. However, the social norms are changing due to rapid globalisation. Hence, organisations have to remain flexible to address needs of any unique individual that does not conform with above explanation.
PESTLE Analysis of Spain: Social factor of PESTLE informs that Spanish population is ageing with improved life span. On contrary, birth rates have been declining. Consequently it means a shrinking workforce and less demand for consumer products. This parameter is not very concerning for the Tour operators as the country gets a huge load of tourist inflow from outside. The shrinking workforce is a point of concern may be in future currently there is sufficient temporary workers available in cities. Currently, Corona virus has halted all the activity, but it is a temporary phase. The phase will not last forever and country will eventually bounce back on normal track of doing things. As fear reduce, people start to understand the virus better with SOPs it will revive the tourist activity.
Work conditions are stricter and tighter because of increased competition. Furthermore, people of Spain value personal interaction and relationships. Value of relationship is high and individuals make effort to nurture these relations. Businesses planning to internationalise in Spain are recommended to pay attention on developing long lasting relationships with clients. The Spanish population is highly educated and relationships with investors can be cultivated via sharing business ideas. Majority of the individuals are pursuing advance college degrees and planning to even go higher. Higher eduction in Spain has not reflected the same number of employment opportunties. The talented Spainish youth seek employment else where in Europe. Unemployment in youth segment is high, consequently younger skilled force looks for better opportunities outside the country.
Since, highly skilled workforce is available, companies can engage this segment on temporary basis when tourism hits it peak. Readily available workforce is a cushion for the organisations to readily respond to changing external dynamics. Societal divide in the Spanish society is increasingly along communal lines. Two regions namely Basque and Catalonia (which includes the industrial city of Barcelona) have called for full provincial autonomy. There is a risk that they may even break off in the near future. Lack of national cohesiveness shows that organisation have to legally enter in provincial and federal contracts separately to ensure sustainability.
Analysis of Technology in Spain to Impact Tourism Operators
PESTLE Analysis of Spain: A Tech study carried out explaining PESTLE forces informs, Spain spends about $19.2 billion on Research and Development. The county holds 16th spot amongst top spenders on research. Due to recession there has been cuts in research expenditure but Spain has pledged to increase in near future. The plan is to improve its budget for research purposes to at least 2% of the country’s GDP. The Spanish population is technologically savvy with internet usage rates of 65%. Furthermore, Spain has fully developed ports and railways therefore, making movement of heavy industrial machinery very easy across the country.
Technology is implemented in Spain to improve Legislative system. The companies can use online portals to easily get basic documentation ready before internationalising. Spain, emphasis is on environment friendly ways of generating energy. With the help of technology and R&D they have significantly reduced carbon footprint. Recent technological innovations in renewable energy have made Spain popular throughout the world. R&D is at its nascent stages as, number of patents in ownership of Spain are far below its European counterparts.
PESTLE Analysis of Spain: In Corona Virus scenario, importance of technology has improved. Now the technology is the front line measure to ensure business continuity in any industry but especially in tourism. Technology can improve user experiences when interacting with a service provider, using Augmented Reality and Artificial Intelligence contains the answer. Augmented reality with 5G can facilitate in holographic projections of real employees. Who can virtually assist the guests in guiding and taking orders. Technology has a great potential in transforming the business environment and assuring success for Tourism industry.
Conclusion
PESTLE Analysis of Spain: The Pestle analysis show that internationalisation in current Covid-19 scenario is possible but is requires effective use of technology to make it possible. Spain has strong political risks but economic and social forces considerably mitigate its effects. To further mitigate organisation can enter into independent contracts with Federal Government and Semi Autonomous regions to ensure they will not be severely impact during any political turmoil. Corona Virus requires diverse planning but in it there are many opportunities that can targeted to achieve better results.
