Table of Contents
1.1Background of the study
1.2Aims & Objectives of the Study
1.3 Significance of the Study
2. Literature Review
2.1 Developing countries and their basic traits
2.2 Technological Factors and their impact on developing countries
2.3 Political Factors and their impact on developing countries
2.4 State’s role in controlling these factors and in enhancing growth
3. Research Methodology
3.1 Research Approach
3.2 Sampling and Respondent Selection
3.3 Data Collection Instrument
3.4 Data Collection
3.5 Profile of Respondents
4. Data Findings and Result Analysis
4.1 Political and technological factors and their impacts
4.2 Comparison of impacts of political and technological factors on Developing countries
5.1 Limitations and Future Research
Political, technological, social and cultural factors of different countries are affecting the economic conditions of that region both in positive and negative ways. But it majorly depends on the changes taking place in all of the above mentioned factors. The current study look into the impacts of political issues compared with technological issues on economies of developing countries. The purpose to narrowly focus the developing countries here is to go deep into the details of the reasons based on political and technological factors which are not letting the developing countries to grow and progress in the modern world.
The literature has already identified many factors that are hindering the economic growth of countries but very little research has been done on this topic specific to the context of developing countries so this research study would be more focused toward this area. Developing countries as the name indicates are the countries which are struggling to get developed and thus they have to pay more attention toward problems occurring due to political, technological and several different issues.
Another important fact to mention here is that although previous studies have identified individual impacts of different factors like political, technological, social and cultural factors etc on the economy of individual countries but this paper would rather focus over the comparative effect of political and technological factors on economy of developing countries. Reviewing the old research would make us clearer about the specific political and technological issues causing lower growth in the economy of developing countries.
Comparative effect of both the political and technological factors would be studied here and it would be concluded at the end that which factor is putting greater impact on the economy of developing countries. Suggestions and recommendation would be based over this conclusion, thus whole study will be summed up properly along with supportive argument from the historical researches.
1.1Background of the study
An economy basically consists of the country’s economical system or other area, such as the labour, capital, land resources, plus the economic agents that socially participate in the production, exchange, distribution, consumption of products and services of that region (Heilbroner and Lester, 1994). All professions, occupations, economic agents or economic activities, are the contributing factors to the economy. The core variable components in the economy which determines the market equilibrium is the, consumptions, savings, and investments (Kaldor, 1939). Economic growth of a country depends on the amount of business or trade that is taking place in its countries. Economic outcomes strongly depend on policy choices by the government. The Business environment is basically a set of political, economic, social, technological forces abbreviated as PEST that can potentially have both positive, and negative impact on the Business as these factors influenced the business setups both directly or in some cases indirectly (Findlay, Ronald and Harry, 1959). A country which has its economy on a developing state needs to make the environment in its country to be extremely suitable for business to happen and by which foreign investors are willing to invest in the particular country.
Whenever a business is going to establish within a new market it usually performs a PEST analysis for itself. PEST analysis is a very useful tool being used by large firms while they enter into a new and unknown market. Basically PEST analysis describes 4 very important sections of the any country which include; political, economical, social and technological factors which are going to interact with the business in the new markets. Several factors are present in the environment of any newly started business and thus for surviving well in the new markets PEST analysis is very important. PEST analysis basically studies all the factors present in the surroundings of the business or serves as the environmental factors which influence the business happenings as shown in the figure below.
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Source: BECKMANN BIO, 2011
Developing countries have to struggle to meet the challenges of the modern world and keep in pace with the developed countries. And there economic growth depends on several different factors and usually these factors have greater impact on economies of developing countries in comparison to developed countries (Keynes, 1929). Financial growth of a country depends on the amount of trade or business that is taking place in that country. And monetary outcomes of these businesses strongly depend on strategy formulations by the government. Political factors include government legislation and legal issues such as tax policies, employment laws and political stability (Caiden, 1988). Whereas technological factors include the rate at which technology change is taking place, the amount at which research and development is taking place in the country.
The strong economy makes the country powerful. It’s the basic necessity for every that country whose economical condition is on initial state should keep the internal environment of the country tremendously favourable for the business to happen and should also be for the foreign investors so that they can invest in that particular country by their will without any fears (Kemp and Henry Wan, 1976). But in certain countries most commonly developing countries whose economy are on the developing stage faces failures and these failures are certainly related to their wrong decisions, policy choices of both the government in that particular country which are the internal decision makers and that the external decision makers such as the International Monetary Fund (IMF) collecting which sets the economic policies for the developing countries.
Presently the IMF is taking the economic decisions for the Pakistan for its economy benefits and asking the government to implement such laws, as recently Pakistan’s economy got badly hit by a disaster of floods which has led down the economy very much because of the loses that Pakistan has faces in floods disasters.
In any country prior to starting any kind of operations or a business first of all we carry out the analysis which is termed as the PEST analysis this analysis tells that whether this country is suitable to business in or to invest in or not. So this analysis gives us the overall idea of the economical environment of that particular country. It provides the ‘big picture’ of the environment in which an organisation will be operating. There are vast issues that effects the economy of any country but broadly there are four types of issues that directly or indirectly affects the country’s economy of which include political issues, economical issues, social issues and technological issues (Jones and Henryk 1986).
Amongst these the political issues are the most important ones and business or the investors tend to focus on these issues more in comparison to the other issues, nevertheless rest of the other issues are also taken into consideration prior to start or setup a business or investment (Harberger, 1950). Because if the political issues of that particular country in which business is to be setup, is not in accordance or favourable with what sort of business an investor is trying to setup then the Investor will be discouraged by this and this will in return would affect the economy of that particular country as such foreign businesses provides benefits and helps the economy of that country in progression. If we come to the examples then Pakistan is a one of the good example in this state of affairs because currently the law and order situation is on a weaker state which gives the impression that Pakistan is not suitable for businesses, and for the investments and this was affecting the economy to a greater extent (Johnson, 1953). Along with the political issues the technological issues are also taken into consideration because for the setting up of Businesses technological issues of that country should be in coordination e.g., the countries where their costs are lower and where the investors can find the best possible technology then the investors are at an advantage over their competitors and also any changes or advancement in technologies also affects the products and services. So the "PEST" analysis is done to get the idea of the economical condition in country and specifically this analysis is a beneficial tool for perception and understanding risks linked with the market the company will be dealing with. Thus helps in building and planning of future strategies by any business organizations and also anticipate the future threats that the business can face in any phase and also the remedies to deal that.
The Political factors which influences the economy majorly include government legislation and legal issues like the tax policies, the employment laws and most important the political stability (Jones, 1965). The Technological factors which are also the important one along with political issues include the rate at which the country’s technology change occurs and the amount at which research and development occurs within that country.
1.2 Aims & Objectives of the Study
The main aim of the study is to find out the influence of the political issues and the technological issues on economy and whether these political issues concerning businesses and investors have a greater affect than technological issues on a developing economy. In this essay Basic aim of the study is to find out whether political issues concerning businesses and investors have a greater affect on a developing economy than technological issues. It will also helpful to me to find out the issues of the country in which business is to be setup and what types of issues are linked and considered before any investment in any other country because in any country in which you are going to invest, country’s economical condition counts a lot. Also helps in determining how a country can make their country’s business environment more appropriate for business to be satisfied with. And my this research studies will help me out to find out either the businesses are more concerned with the political issues or with the technological issues related to that country. This research will be conducted by interviewing the investors, businesses that are operating in a developing economy. Surveys and distribution of questionnaires related to it amongst people of that particular society of country and knowing about what are their perspectives related to these issues. Along with this the literature studies like the journals and also the updated data which determines what the academics have said up to that time. The important objectives of the study are:
1. Initially this paper would focus whether both the political and technological factors affect the economy of developing countries or not. And later on their comparison would be made and it would be concluded that which among political issues or technological issues put more impact on economy of developing countries.
2. What are the most important issues among the heads of political and technological factors which are influencing the economic performance of developing countries and it would be discussed from investor’s point of view as well.
3. What are the political and technological strategies by following which, a government can makes its country's environment more appropriate for business. How these strategies are designed and executed.
4. What will be the factors other than these political and technological issues, which can greatly affect the economy of developing countries? Both the directly and indirectly related factors will be considered.
At the lateral section of the paper, in the discussion and conclusion part, the whole research both from literature and surveys would be concluded to answer the research question. And suggestions would be included to open the doors for further researches.
1.3 Significance of the Study
Developing countries although being the hot topic in the field of research have not yet been explored fully. And there is still a gap in the historical researches which needs to be fulfilled. This study is going to contribute for the research of developing countries and to fulfil this gap. How countries are segregated as developing and developed countries? How developing countries can turn into developed countries? What controls their growth and development? What factors impact the developing countries? Lastly which factors contribute higher in comparison to several other factors? These questions have long been considered as the centre of attention of the economic researchers. And most of the researchers have been successful in answering the above mentioned questions but few aspects still need explanation. Factors specifically political, technological, cultural, social put direct impact on developing countries; they can either enhance or lower the rate of their economic growth.
Although several other factors also play very important role in the development process of developing countries but these factors are directly correlated with the growth of developing countries. And that is the basic reason that this study is going to focus these factors more precisely. This study would not only consider these factors but it would also give very useful outcomes which if applied to the policy structure of the developing countries will definitely bring in huge benefits for them. Another significance of this study is that the comparative analysis has been performed very less throughout economic researches so this study is focusing on the comparative analysis of impact of political and technological factors on developing countries which again if used effectively would result in much better allocation of resources in developing countries. This is because as developing countries have scarce resources for infinite means which is the basic problem they are currently facing, so if resources are going to be spent for solving bigger problems then economy is going to prosper. Hence the significance of this study can’t be denied.
2. Literature Review
The literature review gives the complete picture of the relationship between the political and technological issues and how they are affecting and which one is affecting the more one’s country economy. And how will government of that particular country make the economical condition better because economy of any country is based on businesses operating in country and before starting up any business operation investor looked upon all the linked issues and aspects. Weak economical status will have negative impact on country as investor will not be investing in such weak economical status country and it will be more alarming for developing country. Thus if the investment is not taking place then it will have a negative effect on the economy leading the economy into a slump or recession. To increase investment in that particular country government should try to provide the best possible environments for setting up the businesses and foreign investments.
2.1 Developing countries and their basic traits
The nations having a low level of material well being comes under the term developing countries and the term not be confused with the third world countries. The levels of development of any country may vary widely. Another term which should be confused is the newly industrialized countries which have advanced economies than other developing nations, but not yet fully demonstrated the signs of a developed country (Rob & Damein, 2010). The development of any country is measured with statistical indexes which include income per capita (per person) (GDP), life expectancy and literacy rate. Names of few developing countries are Afghanistan, Bangladesh, Malaysia, Panama and Pakistan.
The Developing countries are those countries which have not achieved a major extent of industrialization in relation to their population, and which have, a medium to low standard of living mostly So there exists a strong correlation between low income and high population growth (Tarun, 2009). If we talk about the developed countries then we see that The UN has developed the HDI, which is a compound indicator of the above statistics, to estimate the level of human, development for countries where data is available and this helps the government of the country to establish a better economy.