ACCA Strategic Professional · Strategic Business Leader · Environmental issues
Marlow Pharma plans to enter a new country. Its analyst notes that the local currency has fallen 20% against the dollar over two years, inflation is high, and consumer disposable income is falling. Under PESTEL, what is the most direct implication of these findings for the entry decision?
These are economic factors. A falling currency, high inflation and shrinking disposable income point to weaker demand and exchange-rate risk on returns, so Marlow should weigh them against the market opportunity and consider pricing and hedging responses, rather than treating them as social, political or legal issues.
- AThey are economic factors suggesting weaker demand and exchange-rate risk on returns, which should be weighed against market opportunityCorrect
- BThey are social factors showing a change in cultural values, so product design must change
- CThey are political factors indicating likely regulation of drug prices
- DThey are legal factors that prevent entry
Explanation
Currency movement, inflation and disposable income are economic factors. They imply lower affordability and translation or transaction risk on returns, so they should be assessed against the opportunity and possible hedging or pricing responses. They do not by themselves show cultural change, price regulation or legal barriers.
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