PEST Analysis of Global Home Appliance Industry

Political and Legal Factors 

US Department of Energy (DOE): requires energy conservation improvements for refrigerators and freezers & clothes washers.

Impact: All the industries will have to invest heavily in the Engineering (Process) R&D to keep up with this requirement. This will not only mean rise in cost of manufacturing these appliances but also keep on innovating new ways to save energy and be more competitive in the Appliance Market.

Common world standards: Standards set for safety/environmental, energy efficiency and testing procedures, such as BSI, JISC, AFNOR, DIN, CSA, UL, IEC, ISO, CANENA, ISO 9000, ISO 14001 and EMS. 2000 update to the ISO 9000.

Impact: These standards will serve as an entry barrier for not only new entrants to enter in the home appliance market because matching these requirements would mean investing heavily in process R&D and state of the art plants to manufacture such appliances, but also for the existing US firms who are on the hunt for new avenues like Asia and African markets because US and Canadian home appliance markets have matured.

Economical factors

Real GDP growth 1.6 %

Consumer price inflation 1.6 %

The U.S. unemployment rate leaped from 5.7 to 6 percent in April 2002, according to the Bureau of Labor Statistics (BLS). It's the highest unemployment rate since August 1994 when it was also at 6 percent, but trending downward.

Impact: On the Manufacturer side: Cost of capital is high as the interest rates are rising which will mean increase in the cost of production when the industry at its maturity stage (growth rate is 1.9%) which will shrink operating profits of the industry as whole

On the Buyer’s side: on the buyer’s side the cost of consumer finance is increasing due to increased interest rates, more over people will not be able to purchase high value products like refrigerators freezers, washing machines etc because of critical rise in unemployment level during 2002.

Socio-Cultural Factors

Change in the demographics: Age of the people is changing.

Impact: The aging of the baby boomers and the increase of two-income families has favored the high profitability, high end, high-profit segments of the business, making a solid base for Niche marketing for the appliance industry

Change in the Life style: increase in the income level of US citizens has resulted in increased demand for more stylish and costly features plus these appliances once used to be thrown in the basement but now US citizens are asking for smart, compact and stylish appliances which they can keep them in their kitchens.

Impact: Industry players will have to come up with the expanded product lines which emphasized quality and features. The best way to attract younger generation X is to offer new and unique products.

Technological Factors

Smart appliances integrated with internet: Internet marketing

Impact: This has resulted in the trend of e-commerce in the industry.

Research and Development: Companies have been investing heavily in R&D in order to get new technology & designs to increase the efficiency, effectiveness & also reduce the production cost and bring in innovated products in order to gain competitive advantage.

Impact: This has resulted companies to replace current technology with more efficient one in order to get edge over competitors, due to this companies have to spend millions of dollars annually  on R&D because No one producer could keep new innovation to itself for more than a year. This is the major reason for investing so heavily in R&D that has resulted in the reduction/decrease in companies’ profit.