Diana Shipping Inc. PESTEL & Environment Analysis

Strategic Management Essays, Term Papers & Presentations

Diana Shipping Inc. PESTEL analysis is a strategic tool to analyze the macro environment of the organization. PESTEL stands for - Political, Economic, Social, Technological, Environmental & Legal factors that impact the macro environment of Diana Shipping Inc..

Changes in the macro-environment factors can have a direct impact on not only the Diana Shipping Inc. but also can impact other players in the Shipping. The macro-environment factors can impact the Porter Five Forces that shape strategy and competitive landscape. They can impact individual firm’s competitive advantage or overall profitability levels of the Services industry.

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PESTEL analysis provides great detail about operating challenges Diana Shipping Inc. will face in prevalent macro environment other than competitive forces. For example an Industry may be highly profitable with a strong growth trajectory but it won't be any good for Diana Shipping Inc. if it is situated in unstable political environment.

Spanish oil giant Repsol had to face a similar instance. It started an above average profitability operations in Argentina and made strong returns in 5-7 years. But the business was later expropriated by the Left Wing government. So the decade long profits didn’t materialize in the end.

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Political Factors that Impact Diana Shipping Inc.

Political factors play a significant role in determining the factors that can impact Diana Shipping Inc.'s long term profitability in a certain country or market. Diana Shipping Inc. is operating in Shipping in more than dozen countries and expose itself to different types of political environment and political system risks. The achieve success in such a dynamic Shipping industry across various countries is to diversify the systematic risks of political environment. Diana Shipping Inc. can closely analyze the following factors before entering or investing in a certain market-

Political stability and importance of Shipping sector in the country's economy.
Risk of military invasion
Level of corruption - especially levels of regulation in Services sector.
Bureaucracy and interference in Shipping industry by government.
Legal framework for contract enforcement
Intellectual property protection
Trade regulations & tariffs related to Services
Favored trading partners
Anti-trust laws related to Shipping
Pricing regulations – Are there any pricing regulatory mechanism for Services
Taxation - tax rates and incentives
Wage legislation - minimum wage and overtime
Work week regulations in Shipping
Mandatory employee benefits
Industrial safety regulations in the Services sector.
Product labeling and other requirements in Shipping

Economic Factors that Impact Diana Shipping Inc.

The Macro environment factors such as – inflation rate, savings rate, interest rate, foreign exchange rate and economic cycle determine the aggregate demand and aggregate investment in an economy. While micro environment factors such as competition norms impact the competitive advantage of the firm. Diana Shipping Inc. can use country’s economic factor such as growth rate, inflation & industry’s economic indicators such as Shipping industry growth rate, consumer spending etc to forecast the growth trajectory of not only --sectoryname-- sector but also that of the organization. Economic factors that Diana Shipping Inc. should consider while conducting PESTEL analysis are -

Type of economic system in countries of operation – what type of economic system there is and how stable it is.
Government intervention in the free market and related Services
Exchange rates & stability of host country currency.
Efficiency of financial markets – Does Diana Shipping Inc. needs to raise capital in local market?
Infrastructure quality in Shipping industry
Comparative advantages of host country and Services sector in the particular country.
Skill level of workforce in Shipping industry.
Education level in the economy
Labor costs and productivity in the economy
Business cycle stage (e.g. prosperity, recession, recovery)
Economic growth rate
Discretionary income
Unemployment rate
Inflation rate
Interest rates

Social Factors that Impact Diana Shipping Inc.

Society’s culture and way of doing things impact the culture of an organization in an environment. Shared beliefs and attitudes of the population play a great role in how marketers at Diana Shipping Inc. will understand the customers of a given market and how they design the marketing message for Shipping industry consumers. Social factors that leadership of Diana Shipping Inc. should analyze for PESTEL analysis are -

Demographics and skill level of the population
Class structure, hierarchy and power structure in the society.
Education level as well as education standard in the Diana Shipping Inc. ’s industry
Culture (gender roles, social conventions etc.)
Entrepreneurial spirit and broader nature of the society. Some societies encourage entrepreneurship while some don’t.
Attitudes (health, environmental consciousness, etc.)
Leisure interests

Technological Factors that Impact Diana Shipping Inc.

Technology is fast disrupting various industries across the board. Transportation industry is a good case to illustrate this point. Over the last 5 years the industry has been transforming really fast, not even giving chance to the established players to cope with the changes. Taxi industry is now dominated by players like Uber and Lyft. Car industry is fast moving toward automation led by technology firm such as Google & manufacturing is disrupted by Tesla, which has stated an electronic car revolution.

A firm should not only do technological analysis of the industry but also the speed at which technology disrupts that industry. Slow speed will give more time while fast speed of technological disruption may give a firm little time to cope and be profitable. Technology analysis involves understanding the following impacts -

Recent technological developments by Diana Shipping Inc. competitors
Technology's impact on product offering
Impact on cost structure in Shipping industry
Impact on value chain structure in Services sector
Rate of technological diffusion

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Environmental Factors that Impact Diana Shipping Inc.

Different markets have different norms or environmental standards which can impact the profitability of an organization in those markets. Even within a country often states can have different environmental laws and liability laws. For example in United States – Texas and Florida have different liability clauses in case of mishaps or environmental disaster. Similarly a lot of European countries give healthy tax breaks to companies that operate in the renewable sector.

Before entering new markets or starting a new business in existing market the firm should carefully evaluate the environmental standards that are required to operate in those markets. Some of the environmental factors that a firm should consider beforehand are -

Weather
Climate change
Laws regulating environment pollution
Air and water pollution regulations in Shipping industry
Recycling
Waste management in Services sector
Attitudes toward “green” or ecological products
Endangered species
Attitudes toward and support for renewable energy

Legal Factors that Impact Diana Shipping Inc.

In number of countries, the legal framework and institutions are not robust enough to protect the intellectual property rights of an organization. A firm should carefully evaluate before entering such markets as it can lead to theft of organization’s secret sauce thus the overall competitive edge. Some of the legal factors that Diana Shipping Inc. leadership should consider while entering a new market are -