External analysis: PESTEL

31 of 87 research, as the purpose of the solutions are to only generate traction towards the end-users, but the customers don’t acquire any insights and data on their own customers (end-users). This is strategically a very different way of working with loyalty.

32 of 87 Alternatives: There are alternative ways to analyse the Danish startup macro-environment, such as conducting one of the many variations of the PESTEL analysis such as the PEST, SLEPT, STEPE or others. It is also possible to apply an ETOM analysis (Shtal et al., 2018), which looks at the environmental threats and an opportunities matrix. The

advantage of using the ETOM framework is due to the often faster analysis process, since there are less factors that are applied. The limitation is though, that the ETOM analysis factors are determined initially by an environment expert, which means that the startups can be limited to consultancy work in order to apply it correctly.

6.1.1 Political factors

EU: As a startup operating within Denmark, it is important to state the influence of the EU.

Denmark has been a member of the European Union since 1973, and benefits from being a member country. The internal market has been boosting the economy for many years and continues to do so, while also playing a significant role in the country’s high political stability and general economic foundation.

Lockdown: The pandemic lockdowns during 2020 and 2021 has severely impacted the political environment. Particularly hard hit has been the experience industry, travel

industry, restaurant & nightlife industry, and physical retail industry, which has in most part been entirely shut down or severely restricted for the last year. These industries has been hit the harshest since they are based around physical locations where people are

gathering. The restrictions has besides from entire lockdown periods been on opening hours, and amount of people allowed to be grouped together, both in public and private spaces. But now, as of April 2021, the restrictions are slowly starting to get lessened, and Denmark prepares to slowly re-open society. This means that more people are slowly allowed to return to school, and the above mentioned industries are being allowed to open, though still restrictions on amount of people and opening hours (STM, 2021).

Tax, delayed VAT, and compensation packages: As a result of the pandemic, Denmark has been generally strong and quick to react with ways of helping the struggling economy and most influenced industries. This has been made through a wide arrange of political tools, which includes delayed VAT, and vast sums of money compensation packages to

33 of 87 the industries that has been forced to close down or has been restricted. Also new

regulations on vacation laws, and tax deadlines has been politically regulated in an attempt to help the economy stay afloat, increase consumer spending and reduce the amount of bankruptcies and the unemployment rate (PWC, 2021). Some more successful than others.

Corona Passport and government criticism: During times of crisis it will most likely never be possible for a government to satisfy everyone, but the pandemic has created a broader level of scrutiny and criticism towards the Danish government, some saying the restrictions has been too harsh and the opening of society too slow (TV2, 2021b, p. 2). But the general frustration and dissatisfaction that has arisen among the Danish citizens might be a result of many factors, such as the impact that the lockdown has had on mental health, but also other variables as the Mink Scandal (TV2, 2020, p. 2) which among others has created a sense of political uncertainty. This will be described more under Social Factors. Highly influential is also the debated Corona Passport, which is at its core a way to improve governmental control of the pandemic while also creating a manageable way of reopening society. By implementing the Corona Passport, it will also highly increase the incentive for the citizens to get vaccinated, as non-vaccinated citizens will be restricted from society by law. This is also where much of the criticism comes from, which is combined with a fear of governmental oversight and a move towards an Orwellian surveillance state (TV2, 2021a, p. 2)

6.1.2 Economical factors

Generally the Danish economy is strong and stable, but it has been impacted by the pandemic and is currently experiencing a recession. In 2020 the GDP fell by 3,8 pct. And the estimates for GDP in 2021 has been lowered to 2,8 pct. From previous estimates in August at 4,2 pct. Indicating a lowered optimism towards the growth in 2021, and also adjusting for the still high uncertainty (KL, 2020). It is roughly estimated, that the crisis will cost the Danish society 536 billion kr., but the calculations are still under high uncertainty as there still exists high uncertainty regarding the further development of the pandemic and the roll-out of the vaccinations to the population (Finans, 2021).

34 of 87 Inflation: The core inflation (inflation exclusive energy and non-processed food) has

fluctuated during 2020, but has increased to 1,2 pct. In January 2021 from 1,0 pct. In December 2020 (DST, 2021). The changes in the inflation level for Denmark and EU are majorly the outcome of price changes on clothing. The core inflation is an indicator of the inflation development in the long run. The calculated inflation level has a higher degree of uncertainty than normally, since more prices in the index has been estimated than

normally, since several industries has been locked down or severely restricted during the pandemic.

Venture funding: The venture funding market in Denmark is important to look at for startups in Denmark, as it is for many a way to gather funding for the company, but it is also a signifier for the overall welfare of the startup industry, which is heavily where the venture funding market invests. In 2020 it showed that the Danish venture funding market has been more resilient than anticipated. There has been made 68 venture investments summarizing a total of 3,9 billion kr., primarily in tech ventures (Vækstfonden, 2021) which is very close to the same amount as of the record breaking year of 2019. The venture funding market has stagnated in 2020 compared to the previous years of rapid growth, but the pandemic has shown not to break the blossoming danish venture funding market.

6.1.3 Social factors

Demography: The Danish population is 5.837.213 as of January 2021 and it is expected to increase by 4,8% during the coming 10 years (DST, 2021b).The Danish society is highly educated, and there is a high degree of income equality (DST, 2021c)

Mobile and internet usage: Denmark is a highly digitally connected society, with 90 pct.

Of the population owning a Smartphone (DST, 2021a). The pandemic has resulted in an increase of media consumption, with the most recently available data being from March in 2020, in the start of the pandemic, where the Danes already used 23 pct. More time online than in the previous year, from 8,3 hours per day in 2019 to 10,2 hours per day on

average (Politikken, 2020) It is estimated to have become even higher during the long lockdown.

35 of 87 Remote work: Seen in the context of the lockdown people working regularly remote in 2020 reached an all-time high of 17%, which is more than doubled the amount from 2019 being 8% (DST, 2021d) If we look more specifically on the lockdown in the second quarter of 2020, and also include the people who worked remote more irregularly, then the Danish workforce reached a total of 40%. The drastic changes of the work environment for society is also impacting mental health.

Mental health & racism: As society has been isolated for more than a year, the toll on mental health is starting to surface through severe isolation fatigue. A sad increase in depression, anxiety, loneliness, and social panic is a result of the uncertain and isolated reality that we navigate as a society (Psykiatrien, n.d.). Another Sociocultural consequence of the pandemic is the increase in racism. As history shows, every pandemic has its scape goat. The Jews where accused of the Black Death in the middle ages, the Muslim

immigrants where suspected of spreading Cholera, and more recently several countries has had a broader fear of people with African descent during the Ebola outbreak in 2014 (Ringgaard, 2020).We’ve also experienced this xenophobia in Denmark during the COVID pandemic, where angry looks, exclamations on the streets and threats of violations has been the experience of Danish people of Asian descent (Skov, 2020).

6.1.4 Technological factors

E-commerce and cash-less payment: The pandemic has influenced e-commerce and digital purchasing behaviour drastically, with a record-breaking year of 2020, but also a year with enormous fluctuations in consumption. It has been a year of contrasts, where many stores has struggled to keep up with the demand, and others have fought to survive.

70 pct. Of the consumers that shop online, does so at least once a month, while half presses buy in a webshop at least once a week – an increase of 2 pct. point from 2019 (Dansk Erhverv, 2021). It is also revealed, that consumers are willing to pay significantly higher prices to acquire more convenience. Another transformative shift that has been evolving faster during the pandemic is the shift towards a cashless society. The shift from cash to payment-cards is taking another step from payment-cards towards digital wallet payment methods. It is still uncertain what this change will mean for policymakers, the economist, and consumers. It has been well known for twenty years, that people are

36 of 87 willing to pay significantly higher prices when buying something with a payment-card

instead of cold cash. A recent exploratory study from MIT indicates, that by making the payment a simple click, the technology might remove friction that consumers rely in order to not make hastened purchasing decisions (Walsh, 2021). This development and

research is worth following as it could change some of our assumptions regarding digital purchasing behaviour.

Big Data, Cloud, and AI: The tech buzzwords that are on the lips of many, and in the minds of almost as many. As the technological environment continues to evolve at rocket speed, and consumers adapt to the new reality, continuously more data is being

generated and stored. The industries are highly competitive with solutions from Amazon, Google, Microsoft, IBM, and the likes, making the capabilities of the behemoths available to startups. Today a startup can have seemingly endless Big Data stored for a mthly.

Subscription fee at IBM Cloud, while having the data flow directly from the IBM Cloud towards Google’s TensorFlow cloud AI solution, making use of Google’s online GPUs (.

This example of an ecosystem enables startups with limited resources to make use of multi-billion dollar technology, cloud servers, cloud computing for AI models and more, which. Should the companies have their own control and insight over the customers, or should they join the giants such as Amazon, with the risk of them copying the concept and while having limited data on the company’s own company. That is among the strategic thoughts that are necessary for many retailers.

6.1.5 Environmental factors

Every Danish emits on average 19 ton of CO2 per year through energy, food, products, traveling and service goods. Denmark is committed to lowering our CO2 emission by 39%

by 2030 compared to the level in 2005 (EU, 2020). The split of production of energy from The Danish Energy Agency shows that we produce 523 PJ energy a year, split between 216 PJ oil (41 pct.), 116 PJ gas (22 pct.), 15 PJ non-degradable trash (3 pct.), and 176 PJ sustainable energy such as wind (34 pct.). The impact of climate change is impacting the way the Danish consumers, and the green transition is becoming increasingly

spearheaded by the new generation.

37 of 87 Unemployment rate: The unemployment rate in Denmark has been significantly impacted during the pandemic. The unemployment rate is in February 2021 at 4,6 pct. with the second month in a row with an increasing unemployment rate (DST, 2021). The amount of unemployed people increased from 2019 to 2020 with 32.700, up to a total of 118.900 – equal to a 38 pct. increase. Following the unemployment rate and the impact on mental and physical health due to the isolation that the lockdowns has brought upon society as described in Social Factors, the health of the workforce in Denmark is uncertain, and the country is feeling the impact of the crisis.

6.1.6 Legal factors

GDPR: The dominating external legal factor in Denmark is the General Data Protection Regulation (GDPR). The GDPR is a new EU regulation that was implemented on the 25^th of May 2018, and is highly influential in Denmark and for the startup environment. The main goal of the GDPR is to create and enforce a harmonized data privacy law for EU (Intersoft, n.d.). The purpose of the GDPR is to protect individuals data privacy, and to give back the control over the citizens of EU’s personal data. The implementation of EU has required legacy companies to restructure many of their processes, and there has been given out fines across EU and in Denmark, for companies not upholding the new regulations and directives. Denmark has The Danish Data Protection Agency which enforces the regulations and directives, and the country is in generally one of the EU countries who most strictly uphold the GDPR (Datatilsynet, 2021). GDPR has made the consumers more aware of the data collection that are happening online. A questionnaire from the Danish Competition and Consumer Authority in November 2020 showed that three out of four asked Danish consumers, are either a little or very worried about how online platforms collect and user their personal data (Danish Competition and Consumer Authority, n.d.). At the same time almost half of the asked consumers has deselected a platform, simply because they were worried about the use of their personal data.

6.1.7 Conclusion of PESTEL analysis

Denmark is in a state of limbo, dancing in a pool of decisions made up of new virus variations, isolation fatigue, roll-out of vaccines, uncertain political and economic

environment and an urge towards coming back to a ‘normal’ world. The different external

38 of 87 factors mentioned above are not of equal impact to MyLoyal, hence there is given an assessment of the impact of each factors on the company.

Denmark is a strong and powerful country, especially compared to its size. Denmark has generally done well during COVID, and has been given global media attention for the way that the country has navigated the crisis.

The Lockdown has impacted the political environment, and many industries has been severely hit by the restrictions enforced. The different compensation packages, delayed VAT has up until now mitigated some of the economic and social damage that would otherwise had potentially occurred. The Corona Passport that has been implemented is both highly criticised and praised, and the introduction will enable the government re-open society faster and more controlled.

The Danish economy is experiencing a recession, but there are optimism towards 2021 based on the roll-out of the vaccinations of the society. The venture funding market is still very much alive, though it has stagnated in 2020 there was still invested 3,9 billion kr., primarily in tech ventures.

The Danish society is categorized by a highly educated workforce with high equality, but the lockdown has had severe impact on the mental and physical health of many, with depression, anxiety, racism and loneliness on the rise. People are also generally spending around two more hours online on average per day, and the move to remote work is of no surprise due to the pandemic.

E-commerce is booming, and cash-less payment methods has matured drastically. Big Data, Cloud computing, and AI giants such as Amazon, Google, IBM, and, Microsoft are pioneering the world of technology with multibillion dollar capabilities. Due to the

competitive and agile market of technology, many of the developments these companies create are becoming increasingly available to startups, which enables smaller companies to make use of the power of the giants.

39 of 87 Denmark is an environmentally conscious environment, which is committed to creating a greener future.

GDPR is still in full effect, and with the increase in the digitalization of society and the increase in the amount of data collected from online platforms, the EU legislation is a highly important external factor to consider. Consumers are worried about the collection and use of their personal data.