Pestle and Five Porters Model of Chemical Industry

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Summary

This section discusses the chemical industry and its products, such as soda ash, hydrochloric acid, and hydrogen peroxide, which have many applications in daily life and other industries. The PESTEL framework is used to analyze the political, economic, social, technological, environmental, and legal effects on the industry. The technological segment is deemed the most important, and a strong technological team can lead to progress. The lack of market globalization is a key drive of change in the industry, and scenario building is important for problem rectification and alternate solutions. The threat of new entrants can be minimized through standardization of goods and items in the market. The section also highlights the adverse effects of low employee packages and bad environmental impacts.

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In this section we will take a chemical industry. Product of a chemical industry can be a soda ash, hydrochloric acid, or hydrogen peroxide etc. Chemical industry have many applications in our daily life and in other industry especially in textile industry, such as hydrogen peroxide is used as bleaching agent and soda ash used as washing powder.

PESTEL effects have influence on the performance, development and fortification on a industry. These effects can be explained as follows,

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  • Political Effect: Political effects have great influence on a chemical industry, such as political party may change their import/export rules and regulations, these effects can change the rules for a chemical industry.
  • Economical Effect: As raw material and basic necessities of a chemical industry are very expensive, so a rapidly going organization have less economical bad effects while a company with less profit have more economical bad effects.
  • Social Effect: Social effects are concerned with the internal effects of a chemical organization such as labor law, annual increments, and other employee’s policies. Unfortunately in Pakistan our chemical industry pays very low packages to their employees, that have a adverse effect on the development of an chemical industry.
  • Technological effect: Technological effect consider most important in all PESTEL framework. Technological team consists of expertise and trained manpower such as Engineers, Supervisors, Technicians, Fitters, and Operators etc. If technological team of a chemical industry is technically strong and have complete command on operation and maintenance then industry might be progress in very fast way.
  • Environmental effect: Some chemical industry has bad environmental effect, such as surrounding around hydrogen peroxide has a bad effect on crops and plants, while hydrochloric acid have pungent smell. An environmental team at Govt. level ensures the environmental effects on a chemical industry.
  • Legal effect: Industries have some legal effects, such as they can sale/purchase their product according to their own planning and requirements. Moreover chemical industries have their own legal advisor who helps and guide to management for legal issues. Since last few years’ Industrial police have been introduced for security and safety of industry in strike or protest days of people. CIIT / SP13-RPM-051 Key
  • Drives of Change: Market Globalization: As world is going to become global village, so, every industry try to be ONLINE their products, chemical industry have terms with local and international zone and need to be globalized but there is lack of market globalization in chemical industry.
  • Technological Segments: Information Technology is an integral part of technological segment, it include LAN (Local Area Network), Internet facility and other IT relevant facilities to employees of an industry. Scenario Buildings: Scenario building in an important and vital part of an organization, in which technical team decide some kind of SOP (Standard Operating Procedures) for problems rectification and alternate solutions.

Suppose a chemical industry product is hydrogen peroxide, if there is no new entrants of this product then there isn’t any effect on this organization, for understanding this concept we take an example, Hydrogen peroxide was first launched by Sitara Group and at that time there was not any competitor of SITARA GROUP and hasn’t any threat of new entrants, but later on after few years DESCON introduce same product with name of DESCON oxychem and it was first threat for Sitara Groups. Threats of new entrants can be minimized by standardization of goods and items in the market.

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