PESTLE analysis of Transport Service Industry in Nepal

Environmental Analysis of Public Transport Service Industry in Nepal

 

Tulsi Jung Basnet

Ace Institute of Management

 

Public Transport Service Industry in Nepal: An introduction

We all make use of the services provided by transportation companies. We probably have caught the bus in town or travelled on a school bus or made an intercity journey by Nepal Yatayat or Safa Tempo. Some of us have travelled on a super green energy-efficient Trolley bus. We know that, Nepal does not have a long history of transport service industry. Even though, with a population of 25 million, Nepal is a potential market for transport industry.

 

Public transport is popular as a cheap, easy and reliable access of transportation in the country. Sajha Yatayat was established as first public transport industry in Nepal. It was established on B.S.2018,Chaitra 3^rd as per the cooperative act B.S. 2016. On Shrawan 1, 2019, Sajha Yatayat started providing services with 6 buses and 14 employees. It was successful in its early days and created its brand image as good service provider. Besides the Sajha Yatayat, the trolley bus also provides the service as public transport in the Kathmandu valley. At present other private entrepreneur are attracted in public transport industry. Now popular public transport services in Nepal are Nepal Yatayat, Makalu Yatayat, Agni Yatayat etc.

 

External influences

Running a business would be simple if the chief executive only had to think about what went on inside the business. They could concentrate on internal decisions, such as determining routes, timetables and operating buses. However, a business planner has to understand what goes on outside the business. Businesses are able to identify external changes that may affect it by carrying out a PESTEL analysis. This is a business tool in which each of the letters in PESTEL describes a type of change that takes place in the external business environment.

 

Many of these external changes may be outside the control of the company, for example, new government legislation. Some changes may present a threat to the business, such as a Competitor using new or improved technology. Social changes may bring opportunities, for example, migrant workers bringing new skills to the service market. Environmental impacts, such as those caused by carbon dioxide (CO2) emissions or the management of waste, are of particular concern to businesses. A business must assess what external changes are likely and which it needs to react to or take advantage of. Business planners can then create strategies to help the business respond effectively.

 

An industry has to work within a changing environment and respond to many factors over which it may have no control. They are 'external' factors because they are problems arising from groups or forces outside of the industries' control. When assessing the main impact of external factors on any business or organization, it is helpful to group these together using the acronym PESTLE.

 

This stands for the four areas that represent the most common external influences. These are:

• Political and Legal factors – for example, new laws and regulations or decisions made by governments
• Economic factors – changes in the economy, people's spending power, patterns of wealth
• Socio-cultural factors – changes and trends in society, for example, the number of people aged over 60 in society
• Technological factors – changes in techniques or equipment that can lead to the development of new goods and services or new ways of doing things.

 

 

Economic Factors

 

The most significant of all external forces with which a business must contend is the economic environment of the country. The general economic conditions and trends are the most crucial to the economic viability and success of the business. The economic environment consists of factors that affect consumer purchasing power and spending patterns and it depends on income level, price, savings, and availability of credit. The purchasing power of Nepalese people is very low due to political instability, higher inflation rate and unemployment. The recent slowdown economy is principally led by contraction in manufacturing and tourism industry, and steep drop in exports.

 

Businesses need to make money to continue to exist. They do this by listening to customers to ensure they keep their customers and attract new ones with good services that customers want and need. It is extremely important for businesses to respond to changes in demand from customers. Market research showed that Nepalese passenger wanted cheaper and safer transportation services and public transportation fulfill the public demand.

 

Another economic factor affecting the transport service is increasing fuel price. High fuel price encourages passenger to switch from using private vehicle to more economical public transport.

Overcrowding in cities like Kathmandu also encourage people to switch to other forms of transport. For example, in major cities where parking is inconvenient, cheaper and wide available public transports are easy.

 

Political Factors

 

The country in the present day is in the transitional phase. The Constituent Assembly Polls being the major issue so various other matters are overlooked. The existing political instability as the constituent election has successfully completed is anticipated to be stabilize, which will certainly help the business environment to become favorable in the country. With so much of instability in Nepalese political sector, it is apparent that the rules and regulations are unstable as well. Hence, it is very important for any company to be extra cautious and adaptive to the changes in the policies regarding the laws and legislations.

 

To sum up, because of the unorganized political sectors it is pretty hard for business bodies to carry on the plans within the specified time frame. Thus, the unnecessary red tape and the bureaucratic systems of the government have been creating an intense problem for the service sector to grow. Nepal is facing increasing inflation day by day. The purchasing power of people hence, has become much less. People cannot afford to own private vehicle so there is a need of much cheaper mean of transportation to travel. Public transportation service therefore must identify and grab the market by establishing brand, service at a low cost, reliable and convenient method to travel and cater the needs of deprived Nepalese all over the country.

 

However beside private owned transport services, government protected public transport service is in loss due to excess political influence. These organizations have become a recruitment centre of political party. Due to over politicization the problem of over staffing, mismanagement and lack of leadership occurs which were the factors responsible for its loss. So these organizations instead of making a profit are running into irrecoverable losses.

 

Socio-cultural Factors

 

Socio-cultural environment is composed of various class, structure, beliefs, values, social institutions, accepted patterns of behavior, customs of people and their expectations. Hence, any industry must take into consideration the socio-cultural environment for developing its policy and strategy. Socio-cultural environment influences the demand and supply of goods and services.

 

Social trends are one of the key factors affecting a business. People's buying patterns and service utilizing pattern are determined by trends. Just as the demand for some popular clothes are determined by fashion, demand for mean of transport is determined by social trend and income level. Transportation means are always changing. The trend of leaving the country and staying abroad is arising for better lifestyle and to enhance their living condition. Lack of opportunity for youth, political instability, insurgency and educational purposes are major reasons for leaving the country. Due to this the income level of families has rise. Currently most medium class people are attracted towards car and motorbikes. But due to highly increased fuel price and shortage of fuel, people are shifting towards public transportation.

Society's habits and tastes are changing. People are being educated and are more aware of the importance of the environment and healths and are becoming 'green consumers'. Green consumers prefer goods and services that are environmentally-friendly' and which have less impact on the environment and is good for health. The green consumer, for example, prefers to travel by bus or cycle.

Technological Factors

 

Technological environment refers to all the technical surroundings that affect business. It includes skills, methods, systems and equipment. Technology consists of the forces that create new technologies creating innovative services and market opportunities. The most dramatic force shaping people's lives is technology.

 

Businesses are continually developing new technologies to provide the best solutions for the market place. Intelligent companies find out what the most appropriate technologies are for their businesses and use them. This is particularly true in transport.

A good example of change in technology is buses that lower the floor for easy entry. These provide better accessibility for disabled and elderly people. Technologically, Nepalese transportation industries are far behind the international transport industry.

Various types of sophisticated technologies are invented and implemented in international transportation Service. Services like path navigator, wireless communication in vehicle and other safety measures are already in use in international industry but in Nepal it is lagging behind. Crowded and the unsafe module of the procedure are till we considered. That makes the capacity below the actual level and makes difficult to compete with other. It ends up with a poor working condition for the employees.

Legal

 

Responsible businesses not only abide by the law, they seek to create standards above minimum requirements. Public transportation has to be aware of a number of legal factors. Legal changes that affect business are closely tied up with political ones. Many changes in the law stem from government policy. The Department of Transport Management (Dotm) government's transportation services governing body used to recommend the transportation fare. Many other laws are nation-wide, for example, the standards for bus transport emissions. Public transport must make sure that all its buses meet these requirements. It has to anticipate and prepare to meet future legal changes. From 2010 Nepal is entering in WTO, as part of an initiative called Carbon Reduction Commitment, public transport and other companies will need to buy carbon credits. These credits will permit companies to generate specific quantities of carbon emissions.

Conclusion

 

It is possible to see PESTEL factors as threats. However, public transport should see on them opportunities. Social trends are creating increasing numbers of passengers seeking comfortable easy-to access buses. Government pressure is encouraging more and more individuals to use public transport. Many people are seeking a 'greener' form of transport. A detailed PESTEL analysis helps public transport to make appropriate plans to rise to the challenges of a changing environment. So public transport should be able to move forward with confidence and grow its business.

Tulsi;

A very good report. Keep it up. 87/100