NCE : ML00002-026

BLICATI DATE: Nov 2014

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UNIVERSITY OF MUMBAI
PROJECT ON
"PESTLE ANALYSIS ON SPAIN"
MASTER OF COMMERCE (BUSINESS
MANAGEMENT)

SEMESTER III 2015-16

SUBMITTED By
ROLL NO:
PROJECT GUIDE :
K.P.B. Hinduja Collage Of Commerce, 315 New
Charni Road,
Mumbai 400004.

CERTIFICATE
This is to certify that Mr Ajay gupta of M. Com. Business
Management Semester 3rd [2015-16] has successfully completed
the project on " PESTLE ANALYSIS ON SPAIN "

Project Guide

________________________________
________________________________

Course Coordinator
________________________________
Internal Examiner
________________________________
External Examiner
________________________________
Principal
Date: ____________
Place: Mumbai

DECLARATION
I Mr Ajay gupta the student of M.Com (Business Management) 3rd
Semester (2015-2016), hereby declare that I have complete the project
on " PESTLE ANALYSIS ON SPAIN "
The information submitted is true and original to the best of my
knowledge.

Ajay gupta
(Signature)

ACKNOWLEDGEMENT

table of content

INTRODUCTION

Spain officially the Kingdom of Spain (Spanish: Reino de Espaa), is a sovereign

state located on the Iberian Peninsula in southwestern Europe. Its mainland is
bordered to the south and east by the Mediterranean Sea except for a small land
boundary with Gibraltar; to the north and northeast by France, Andorra, and
the Bay of Biscay; and to the west and northwest by Portugal and the Atlantic
Ocean. Along with France and Morocco, it is one of only three countries to have
both Atlantic and Mediterranean coastlines. Spain's 1,214 km (754 mi) border with
Portugal is the longest uninterrupted border within the European Union.
Spanish territory also includes two archipelagos; the Balearic Islands, in the
Mediterranean Sea, and the Canary Islands, in the Atlantic Ocean off the African
coast; two major exclaves, Ceuta and Melilla, in continentalNorth Africa; and the
islands and peones (rocks) of Alborn, Alhucemas, Chafarinas and Vlez de la
Gomera. With an area of 505,990 km2 (195,360 sq mi), Spain is the second largest
country in Western Europe and the European Union, and the fourth largest country
in Europe. By population, Spain is the sixth largest in Europe and the fifth in the
European Union.

Modern humans first arrived in the Iberian Peninsula around 35,000 years
ago. Iberian cultures

along

with

ancient Phoenicia, Greek and Carthaginian settlements developed on the peninsula

until it came under Roman rule around 200 BCE, after which the region was
named Hispania. In the Middle Ages, the area was conquered by Germanic
tribes and later by the Moors. Spain emerged as a unified country in the 15th
century, following the marriage of the Catholic Monarchs and the completion of the
centuries-long reconquest, or Reconquista, of the peninsula from the Moors in
1492. In the early modern period, Spain became one of history's first global
colonial empires, leaving a vast cultural and linguistic legacy that includes over
500 million Spanish speakers, making Spanish the world's second most spoken first
language.
Spain is a democracy organised in the form of a parliamentary government under a
constitutional monarchy. It is a middle power and a developed country with the
world's fourteenth

largest

economy by nominal

GDPand sixteenth

largest by purchasing power parity. It is a member of the United Nations (UN),

the European Union (EU), the Council of Europe (CoE), the Organization of IberoAmerican

States (OEI),

the North Atlantic

Treaty

Organization

(NATO),

the Organisation for Economic Co-operation and Development (OECD), the World
Trade Organization (WTO) and many other international organisations.

(PESTLE) Analysis
This profile analyzes the political, economic, social, technological, legal and
environmental (PESTLE) structure in Spain. Each of the PESTLE factors is
explored on four parameters: current strengths, current challenges, future prospects
and future risks.INO.COM
Spain has an effective system of governance; however, a belligerent Catalonia
government is a cause for concern

Spain has been successful in making the transition from dictatorship to democracy.
Since 1978, when the new constitution came into effect, democratic principles have
taken firm root. The first years of democracy were dominated by the PSOE
(Spanish Socialist Workers' Party). In the November 2011 elections, it lost power to
PP (People's Party); however, successive governments have successfully
maintained continuity with regards to economic policies. The targets set under the
Maastricht Treaty bind the Spanish government, and do not allow it much room to
diverge from EU norms. Therefore, a continuation of the economic policies aimed
at fiscal consolidation will continue. In the 2014 World Governance Indicators,
Spain had a strong percentile rank of 77.25 on voice and accountability, which
measures the extent to which a country's citizens are able to participate in selecting
their government, as well as freedom of expression, freedom of association, and
freedom of the media. This indicates the effectiveness of the republican
constitution.
However, the increased hostility toward the central government is a cause for
concern. The CDC, a major party in the Convergence and Union alliance that
governs the state of Catalonia, approved a motion for the political independence of
Catalonia from Spain in March 2012. Its leader Mr. Artur Mas is a strong
proponent of Catalan Independence. Since, then the call for Catalan independence
has grown stronger, although it has been simmering since the economic crisis
began in the early part of its decade. The Catalan region is the largest in Spain with
a heavy industrial base and its output per head is around 17% more than the EU
average, while the rest of Spain's output per head is 5% below that of EU average.
This means Catalans' contribute a higher share to the central treasury than other
regions of Spain and hence will be much better off economically by seceding from
Spain. In addition, apart from economic reasons, the pro-independence supporters
believe the regional government's control over many other government functions
(such as taxation, public service) will make Catalans better off, than administered
by the central government in Madrid.
Another radical left party, the Catalan Republican Left, has for long demanded a
referendum on independence in 2014, however, in October 2014, the national
constitutional court ruled that such a referendum is illegal, but separatists'
movement has not died down and Catalonia will go ahead with a non-binding
informal referendum in November 2014, to know the opinion of the Catalans.
Moreover, in October 2014, pro-independence protesters have asked the Catalan
Prime Minister Artur to call for early elections, which the separatists are expected
to do well and further the cause for secession. The increased call for independence
threatens Spain's federal structure.
The country has excellent infrastructure, but the economy is reeling under a
high fiscal deficit and debt burden

Spain provides conducive environment for doing business. Spain's infrastructure is

among the best in the world, with two of Europe's 10 largest airports being in
Madrid and Barcelona. The country has around 47 airports servicing around 250
airlines and is among the top most positions in Europe in terms of passenger traffic
as of 2013. Besides it has also one of the largest road networks in Europe. There
are around 46

Atlantic and Mediterranean ports, making Spain one of the leaders in goods
transport in the European region. The country has one of the largest railway
networks among the EU-15 and one of the biggest high-speed networks on the
continent. Spain has a highly qualified workforce in terms of people in postsecondary education. It also boasts of well-developed ICT infrastructure.
However, Spain had an overall budget deficit of 6.62% of GDP as of 2013, which is
on the higher side. Before the crisis, major portion of the government revenue used
to come from land development and real estate transactions; however, the
government suffered huge revenue losses as real estate prices crashed in 2008 and
continue to head southwards as of 2014. Government tax revenue fell from around
41.12% of GDP in 2007 to a low of 35.08% of GDP in 2009, although, it has risen
since then (37.76% of GDP as of 2013), but yet to reach its peak. Moreover, the
country had a debt of 93.9% of GDP in 2013 up from 70.5% in 2011. The sharp rise
in the debt burden from 2011 was mainly because the government had to bailout the
major Spanish banks and provide assistance to cash-strapped provincial
governments.
The country has a well-developed higher education system; however, its aging
population remains a challenge
Spain has performed well in terms of education among the OECD nations. As of
2012, Spain had one of the highest percentages of tertiary-educated adults in 2012
among its western European peers. Around 32.31% of the population was tertiary
educated compared to France (30.86%) and Germany (28.12%).
Enrolment rates of 20-29 year-olds in full-time and part-time students in public and
private institutions was also on the higher side in Spain. According to OECD,
Spain's enrolment rate stood at 27.92%, which was higher than France and Italy, but
lower than Germany. The above indicators itself speaks volumes about a strong
higher education sector. The well-developed higher education sector of Spain has
been one of the major strengths of the country's social landscape.
However, the Spanish society is challenged by an increase in the aging population
that has not been balanced by a proportionate increase in birth rates. The nation's
birth rate has been declining continuously and fewer people are entering the
workforce. At 1.32, the country had one lowest fertility rate in Europe as of 2012,
according to Eurostat data.
High international scientific co-publications, but gross expenditure on R&D
remains low
Spain has always been at the forefront in terms of international scientific copublications. According to the Innovation Union Scoreboard 2014, its total
international scientific co-publications was well above EU27 average. According to
the same study, international scientific co-publications of Spain grew by 8.8%,
which is comparatively higher than Germany and France.

However, according to the European Commission, Spain's R&D intensity measured

as total expenditure on R&D as a percentage of GDP stood at around 1.3% in 2012
far below the 2020 target of 3% and well below that of its peers such as France
(2.26% of GDP) and Germany (2.92% of GDP).
Spain has always been open to foreign investment; however, plethora of
regional and national regulations creates lot of uncertainty for businesses
As a member of the EU, Spain has a reasonably hospitable climate for foreign
investment. Portfolio investment has been a major source of FDI inflows into the
country. According to the UNCTAD World Investment Report 2014, the country had
FDI stock of $715.99 billion as of 2013, up from $156.34 billion in 2000, which
indicates that it has done relatively well in terms of attracting FDI. In 2013, FDI
inflow in Spain was $39.17 billion, up from $25.69 billion in 2012. Spanish law
permits foreign investment of up to 100% of equity, and capital movement is
completely liberalized.
However, varied regulations make working in the country cumbersome for
investors, thus acting as a major deterrent to players considering investing in or
entering the market. There are even instances of regional regulations running
parallel to national law, which results in patchy implementation. The passage of the
Market Unity law is a step in the right direct towards defragmentation of the locally
fragmented regulatory framework; however, implementation of the law is a big
challenge for the administration. All regulations enacted at central, regional and
local government level that may be considered incompatible with the Market Unity
law has to be amended, a task of gargantuan proportion. Around 2700 regulatory
barriers have been recognized as inconsistent with the law. Lawmakers should strive
to fasten the process to make these regulations compatible with the law, which
would facilitate investment into the country.

Spain has strong environmental commitment, but performed poorly on

environmental indicators
Spain has a large number of environmental agreements in place that have been
ratified by the EU. Both national and regional governments are responsible for the
implementation of environmental regulations. Spain's strong environmental policy
framework has delivered results in the past, as environmental authorities at both
levels are functioning as per EU directives. These authorities are focusing on
environmental infrastructure investment and financing. They have also successfully
managed to improve enforcement activities.
However, Spain has turned out to be a poor performer in terms of environmental
indicators. Despite making progress on its international commitments, Spain faces
important challenges concerning the marine environment, climate change and
regional air pollution. Under the Kyoto Protocol, Spain pledged to restrict its GHG
emissions for the 2008-12 commitment period to 15% above its 1990 levels,
however, failed in achieving it as it reached 20% above the 1990 levels.

PESTLE highlights
Political landscape
Spain's pro-euro stance is reflected in the incumbent government's implementation
of strict austerity measures to reduce the deficit in accordance with EU
recommendations. The EU has also sanctioned EUR100 billion as bailout fund for
its banks in return for adherence to the EU Fiscal Compact.
Tensions have been rising in different parts of Spain due to increased austerity
measures by the Rajoy government. Increased cuts in healthcare and education
budgets have been continuing as of late 2014.

Economic landscape
Product market liberalization is on track and limited competition has been
introduced in the energy, electricity and telecommunications markets.
Interest rates on corporate loans in Spain are among the highest in the Euro area,

which makes it difficult for firms to refinance their loans. The high rates are caused
by deleveraging at Spanish banks as efforts to shore up balance sheets are causing
lower credit approvals.

Social landscape
In accordance with the Royal Decree-Law, the government initiated major structural
reforms in the highly rigid labor market to make it more flexible and costcompetitive in order to revive Spain's competitiveness in the world market.
As of 2012, the gini coefficient (a measure of income inequality) of household
disposable income stood at 0.35, one of the highest among the OECD nations. The
Gini coefficient score of zero corresponds to complete equality while a score of one
corresponds to complete inequality.

Technological landscape
Spain also boasts one of the largest mobile markets in Europe, and the sector is
highly competitive with the presence of leading telephone service companies. The
country has well-established 4G networks and broadband penetration is on par with
the EU average.
The low level of innovation in Spain is reflected by the low number of patents
registered. The country managed only 711 patents in 2013, compared to France and
Germany, which registered 6,083 and 15,498 patents respectively.

Legal landscape
Spanish law permits foreign investment of up to 100% of equity, while capital
movements are completely liberalized.
According to the World Bank's Doing Business 2015, it takes 13 days to start a
business in Spain, compared to the OECD average of 9.2days. It takes six
procedures to start a business in Spain, while the OECD average is 4.8.

Environmental landscape
The country's environmental policies have been developed in line with EU
guidelines. Strategies on sustainable development and climate change have been
approved to reduce greenhouse gas emissions.
In order to reduce the country's energy dependence, the Spanish government wants
to increase the share of renewable energy in the nation's primary energy mix as well
as in its electricity.

Demographic of spain
As of January 1, 2014, Spain had a total population of 46,507,760, which represents
a 0.5% decrease since 2013. Spain's population peaked in 2012, at 46,818,216
people. Spain's official population fell by 206,000 to 47.1 million, mostly because of
immigrants returning home due to the effects of the European economic and fiscal

crisis. Its population density, at 91.4 inhabitants per square kilometre (237/sq mi), is
lower than that of most Western European countries. With the exception of the
capital Madrid, the most densely populated areas lie around the coast.
The population of Spain doubled during the twentieth century, but the pattern of
growth was extremely uneven due to large-scale internal migration from the rural
interior to the industrial cities, a phenomenon which happened later than in other
Western European countries. No fewer than eleven of Spain's fifty provinces saw an
absolute decline in population over the century.
The last quarter of the century saw a dramatic fall in birth rates. Spain's fertility rate
of 1.47 (the number of children the average woman will have during her lifetime) is
lower than the EU average, but has climbed every year since the late 1990s.
The birth rate has climbed in 10 years from 9.10 births per 1000 people per year in
1996 to 10.9 in 2006.
Spain has no official religion. The Spanish Constitution of 1978 abolished
the Roman Catholic Church as the official state religion, while recognizing the role
it plays in Spanish society. 76.7% of the population define themselves as Catholic,
20.0% as non-believers or atheists, and 1.6% other religions. Among believers,
55.3% assert they almost never go to any religious service, by contrast, 17.0%
attend one or more masses almost every week.
The population of Spain doubled during the twentieth century as a result of the
spectacular demographic boom in the 1960s and early 1970s. After that time, the
birth rate plunged through the 1980s and Spain's population became stalled, its

demographics showing one of the lowest sub replacement fertility rates in the world,
only below Greece, Portugal, Hungary, Ukraine, and Japan.
Many demographers have linked Spain's very low fertility rate to the country's lack
of any real family planning policy. Spain spends the least on family support out all
western European countries0.5% of GDP. A graphic illustration of the enormous
social gulf in this field is the fact [citation needed] that a Spanish family would need to have
57 children to enjoy the same financial support as a family with 3 children in
Luxembourg.
In emigration/immigration terms, after centuries of net emigration, Spain, has
recently experienced large-scale immigration for the first time in modern history.
According to the Spanish government there were 5,730,667 foreign residents in
Spain as of January 2011. Of these, more than 860,000 were Romanian, and half
760,000

were Moroccan while

the

number

of Ecuadorians was

around

390,000. Colombian population amounted to around 300,000. There are also a

significant number of British (359,076 as of 2011, but more than one million are
estimated to live permanently in Spain) and German (195,842) citizens, mainly
in Alicante, Mlaga provinces, Balearic Islands and Canary Islands. Chinese number
over 166,000. Immigrants from several sub-Saharan African countries have also
settled in Spain as contract workers, although they represent only 4.08% of all the
foreign residents in the country.[citation needed]
During the early 2000s, the mean year-on-year demographic growth set a new
record with its 2003 peak variation of 2.1%, doubling the previous record reached
back in the 1960s when a mean year-on-year growth of 1% was experienced. [4] This

trend is far from being reversed at the present moment and, in 2005 alone, the
immigrant population of Spain increased by 700,000 people.
The growing population of immigrants is the main reason for the slight increase in
Spain's fertility rate.[6] From 2002 through 2008 the Spanish population grew by 8%,
of which 7% were foreign.

Key fundamentals
Table 1: Spain - key fundamentals

2011
2012
2013
2014f
2015f
2016f
2017f
GDP,
1.18
1.16
1.15
1.16
1.17
1.18
1.19
constant

2005 prices

($ trillion)

GDP
0.05
-1.64
-1.22
0.86
0.93
1.02

1.10
growth rate

(%)

GDP,
25243.89
24889.97
24415.97
24435.95
24455.20
24491.33
24561.25
constant

2005

prices, per

capita ($)

Inflation (%)
3.05
2.44
1.53
0.16
0.79
0.91
1.00
Exports,
30.83
32.67
34.00
34.79
35.21
35.53
35.73
total as a

percentage

of GDP

Imports,
32.33
32.05
33.31
33.60
33.72
33.85
33.97
total as a

percentage

of GDP

Mid-year
46.82
46.70
47.03
47.39
47.80
48.21
48.61
population,

total

(millions)

Unemploy
21.70
25.10
26.31
25.49
24.42
24.83
24.28
ent rate (%)

CONCLUSION

SUGGESTIONS AND RECOMMENDATIONS