PESTEL analysis of Switzerland
This detailed PESTEL analysis of Switzerland aims to explore some of the political, economic, social, technological, legal, and environmental conditions of Switzerland and how they impact on it today. Switzerland is one of the most beautiful countries in the world. To many people, it is a wonderland! It is officially known as the Swiss Confederation.
Political factors affecting Switzerland
Switzerland is a federal republic consisting of 26 cantons (federated states) with the states being able to enjoy fair amount of decentralisation. Unlike any other country, it has a direct democracy where people can give their direct say in their own affairs several times a year through national/regional referendums and people’s initiatives. It has a ‘magic formula’ of power-sharing i.e. the Swiss government is a coalition of the four major political parties in the country. The President is the head of the country’s seven-member Federal Council and is elected for one year. However, the role of the President is mostly ceremonial as the Federal Council is the ‘highest executive authority’.
Switzerland has benefitted immensely from its stable political environment. It is one of the safest countries in the world. While some of its neighbouring countries have recently gone through political upheavals, Switzerland remans a politically stable country with the vast majority of voters being faithful to their parties. However, the most concerning issues to voters are migration, asylum, health insurance premium, social insurance, the environment and climate, and the employment market (SWI, 2017).
Switzerland is a full member of the United Nations. It is also a member of the World Bank and the International Monetary Fund (IMF). It is not a member of the European Union or European Economic Area; however, it takes part in European Single Market and Schengen Agreement, and therefore, Swiss nationals are free to live and work in the EU. It has also earned a good reputation for its long-standing neutrality and contributions to global peacekeeping activities. However, its relations with the EU is increasingly fragile.
Economic factors affecting Switzerland
The next element to address in the PESTEL analysis of Switzerland is the economic environment. Switzerland is one of the largest economies in the world. Its GDP in 2019 was $703.8 billion that represented 0.58% of the world economy (Trading Economics, 2020). However, the GDP is expected to slow down in both 2020 and 2021 and bounce back in 2022. Likewise, endless queues for food bags in many cities are signalling a tough economic crisis unfolding.
Switzerland’s economy is characterised by a highly skilled labour force of around 5 million, low tax rates, strong purchasing power, highly developed infrastructure, and a very stable macro-environment. Most of the Swiss firms are SMEs. Small and medium-sized enterprises (SMEs) are defined as companies with fewer than 250 employees. Likewise, with low public debts, low unemployment rate and a flourishing service sector, Switzerland has become one of the most competitive economies in the world.
Agriculture, manufacturing, service, banking, and tourism are the five biggest industries in Switzerland. Its top exports e.g. gold, packaged medicaments, vaccines, watches, and jewellery mostly go to Germany, the USA, China, France, and India, whereas its top imports e.g. gold, jewellery, cars, and packaged medicaments mostly come from Germany, the UK, Italy, the USA, and France (OEC, 2020). Switzerland is also very famous for its chocolates. Likewise, it is very common that many foreign nationals put a lot on money in Swiss banks, particularly because the country is considered one of the best in the world for banking.
Social factors affecting Switzerland
Switzerland is one of the wealthiest countries in the world where the life expectancy for men is 81 years, while 85 years for women. The total population is around 8.6 million and the major languages are German, French, Italian, and Romansch (BBC, 2020). The country has witnessed a rapid modernization of daily life over the years which is reflected in changes in the country’s habits and cuisine (Encyclopaedia Britannica, 2020). In terms of quality of life, Zürich, Geneva and Basel are among the top ten cities in the world.
However, Switzerland is not without some social challenges. For instance, some analysists argue that the Swiss social circles are incredibly hard to get into. According to a survey by HSBC (cited in Shahrestani, 2020) many expats find it difficult to integrate with locals and make friends. Likewise, discrimination, poverty, an ageing population, and hostility towards migrants and foreign workers are some other social challenges facing the country. It is worth noting that Switzerland is reliant on foreign workers as they represent a big part of the total work force. Most of the migrants are originally from Germany, Spain, Italy, France, Austria, Turkey, Sri Lanka, India, and China.
Technological factors affecting Switzerland
Switzerland is one of the most advanced countries in the world. In fact, it was named the world’s most innovative country in 2019 by the Global Innovation Index. Its top universities which have garnered global reputation, are playing a vital role in innovation. Scientists are working tirelessly to carry out medical, robotics, biomechanics and architectural research with a view to improving the lives of the elderly people.
Investments in ICT, biotech, and digital health have soared over the years. Switzerland is a global research centre and has the highest number of Nobel Prize winners per capita. Facebook, Pinterest, Twitter, YouTube, Instagram, and Tumblr are the top social media in use in Switzerland. The country is often positioned as ‘young, creative, and geeky’ and is chosen by many companies as a hosting location. However, it still needs more IT specialists today and in the near future.
Environmental factors affecting Switzerland
Switzerland is one of the most beautiful countries in the world. Alps, Lake Geneva, villages of Zermatt, pyramid-shaped Matterhorn, Jungfraujoch, Schweizerischer Nationalpark, Rhine Falls, Mount Rigi, Palace of the United Nations, Lucerne old town and many other attractions mesmerise tourists magnificently. However, Switzerland faces some environmental challenges as well. For instance, it can be badly affected by climate change in the future. Likewise, there is a huge pressure on its natural resources. Many people are also concerned about air and water pollution in the country.
Legal factors affecting Switzerland
The last element to address in the PESTEL analysis of Switzerland is the legal environment of the country. Switzerland has a great reputation for its independent judiciary. People whether nationals or foreigners are protected by law and can expect a free trial. The country’s legal system is characterised by substantial decentralisation given to cantons and half-cantons which decide their own economic and social policies, while the federal government deals with foreign affairs and some economic policies (Nordea, 2020). Switzerland promotes equal pay for both men and women as enshrined in the Federal Constitution and in the Gender Equality Act. Salaries can be negotiated between employers and employees either on an individual basis or collectively.
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Last update: 09 July 2020
BBC (2020) Switzerland country profile, available at: https://www.bbc.co.uk/news/world-europe-17980650 (accessed 05 July 2020)
Encyclopaedia Britannica (2020) Switzerland, available at: https://www.britannica.com/place/Switzerland/Daily-life-and-social-customs (accessed 01 July 2020)
Nordea (2020) Switzerland: Business Environment, available at: https://www.nordeatrade.com/no/explore-new-market/switzerland/legal-environment (accessed 01 July 2020)
OEC (2020) Switzerland, available at: https://oec.world/en/profile/country/che/#:~:text=In%202018%2C%20Switzerland’s%20exports%20per,and%20Jewellery%20(%2411.1B). (accessed 05 July 2020)
Shahrestani, V., (2020) Expats living in Switzerland have ‘worst social life’, available at: https://www.timeout.com/switzerland/blog/expats-living-in-switzerland-have-worst-social-life-111115 (accessed 20 June 2020)
SWI (2017) Switzerland remains an island of political stability, available at: https://www.swissinfo.ch/eng/electoral-barometer-2017_switzerland-remains-an-island-of-political-stability/43611918 (accessed 28 June 2020)
Trading Economics (2020) Switzerland GDP, available at: https://tradingeconomics.com/switzerland/gdp (accessed 03 July 2020)
Photo credit: Pixabay
Author: Joe David
Joe David has years of experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality and tourism management.