PESTEL Analysis and Porter’s Five Forces Framework of Lyft Vietnam

Lyft Vietnam Environmental Analysis
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Lyft Vietnam Environmental Analysis
Contemporary business firms must conduct effective market environment research to identify potential challenges to their expansion activities. Additionally, it helps identify potential opportunities the company may tap into. Lyft, a United States web-based cab application firm offering ridesharing services, motorized scooters, and food delivery systems in the United States, is aiming to expand its services to Southeast Asia in Vietnam. The company currently ranks second in the United States after Uber services, with a 30% market share. After the Covid-19 pandemic, the company has identified the need to diversify its markets and identified Vietnam as an ideal market for expansion. The report will conduct a PESTEL analysis to identify potential challenges. Additionally, it will outline Porter’s five forces to determine the market’s attractiveness and highlight the company’s integration –responsiveness in the country.
PESTEL Analysis
In the Lyft scenario, the company aims to penetrate South East Asia, particularly Vietnam. It is critical to conduct a PESTEL analysis to identify potential political, economic, social, technological, legal, and environmental factors that may affect its activities and growth rate in the country.
Source: (Overseas Business Risk, 2021).
Political Environment
Government Stability of the country - Vietnam is a single-party state. Thus its political and security environment is stable. Civil unrests, protests, labor, and political injustices are rare in the country hence ideal for Lyft expansion. However, human rights violation in the country remains a major problem, according to a Human Right Watch Organization report. The problem is censored and controlled by the government hence may pose a problem to the company’s foreign and domestic workers (Overseas Business Risk, 2021).
Bureaucracy and Corruption - both issues are rampant in the country despite the government introducing various accountability and restriction measures to mitigate the problem. According to the Transparency International corruption perception index of 2021, Vietnam ranks 87th among 180 nations on corruption levels (Vietnam, 2021). The country managed a score of 39/100, implying that its economy is one of the worst to invest in.
Economic Environment
The country has a relatively welcoming foreign direct investment for foreign companies implemented to attract more investors to the country (Rahman, 2020). The country has introduced new free trade agreements and economic reforms and offers cheap labor costs making it viable for Lyft to expand its activities in the country. The country remains low in the Global Competitiveness Index despite a high FDI of $143 billion over the last ten years (United States Department of State, 2022). The country’s weak currency poses a major problem for the company’s expansion; 1VND = $0.000043. Regarding business facilitation, the company lags behind other Southeast Asian countries, with companies taking about 384 hours to pay their taxes compared to 64 hours in other countries.
Social Environment
Despite the country’s large labor force, most people are under-skilled in driving, language, behavioral delivery, and customer care. It will be difficult for the company to identify the right individuals to hold its subsidiary director, manager, and leader positions (Rahman, 2020). Additionally, most of the country’s population live in rural areas rather than urban areas where ridesharing, motored scooters, and food delivery services are essential hence the company may find it difficult to create a new customer base since its services mainly depend on technology.
Technological Environment
The country is home to several giant IT providers worldwide, including; artificial intelligence, fintech, E-commerce, and software outsourcing. Additionally, the country has several tech parks, such as Saigon Hi-Tech Park and Da Nang Hi-Tech Park, which host multiple companies dealing in software engineering and IT. This will positively impact Lyft’s expansion and operations in the country due to its heavy reliance on technology (United States Department of State, 2022). Despite the country being ranked 8th in the world in IT services providers, a large portion of the population lack smartphones and tablets, which are key for sourcing Lyft services. This poses a significant challenge to the expansion of the company.
Environmental Factors
Hanoi, the capital city of Vietnam, is among the most populated cities in South East Asia due to excessive transportation activities and a high population density. Pollution is a key problem in the country related to gas emissions from cars and trucks. Lyft, a transportation company, may face difficulties laying its operations in the country due to protests by citizens and environmental organizations pushing for zero emission of gas in the air from vehicles (Wiengdee & Nimanussornkul, n.d). The company will have to invest in Eco-friendly vehicles and scooters, which will be expensive.
Legal Environment
The country lacks a clear, dependable, consistent, and transparent legal framework for foreign investors. Additionally, the accounting systems in Vietnam are inconsistent with international standards increasing costs for investors. The country has different business-licensing processes and restrictions for foreign investors, discouraging investors due to unfairness. These factors will affect Lyft’s expansion efforts in the country.
Porter’s five forces framework
The Vietnam transport industry is an attractive venture for transport industries and ideal for potential growth and expansion of their operations. Using the five Porters forces analysis, Lyft can determine the viability of investing in Vietnam. Lyft is the second largest transportation firm in the United States after Uber, boosting 30 % of the market share. The company has achieved customer loyalty within the continent and is seeking to expand its services to the Southeast Asia continent in Vietnam. Despite its success in the US, the company may face several challenges in its expansion plans, such as stiff competition from existing companies and new entrants with lower prices.
Source: (Adelakun, 2020).
A Threat to New Market Entrants
The Vietnam government does not protect existing companies from new entrants across various sectors. New ridesharing firms may enter the Vietnam market after Lyft and offer lesser charges for the same distance. In expanding its services to the country, the company will invest a sizeable amount of capital that will need to be recouped over time. Upcoming rivals usually utilize less capital to jumpstart their operations. Lyft is willing to offer its software application for free, but the need to offset its initial costs may lead to the start-up raising its rates, making it easier for new ridesharing firms to penetrate the Vietnam transport industry. Additionally, there is an increase in demand for ridesharing services in Vietnam, increasing the chances of new entrants investing in the market. The revenue from the industry is expected to rise from $2102 million in 2020 to $ 4577 million by 2025. This force will affect the chances of Lyft’s surv...