PESTEL Analysis of Kenya
Question:
Discuss About The Strategy Research Complex Adaptive Business?
Investment in an emerging country can be beneficial in long run as the features like huge market opportunities and emerging economy can lead to a speedy improvement of business growth. This report shows the investment potentials in Kenya which is a centre of growth of East Africa. “WeWork” in a search of business expansion in the country needs to have knowledge about the country’s overall conditions if support a business expansion move by foreign company like “WeWork”. The PESTEL analysis of the country is an ideal analytical structure to understand general external environment of the country which have been presented in this report.
Kenya’s competitive strength is somewhat slowed down due to long-standing time of electioneering. Both pre and post election period, investment was full of confusion among investors holding back investment although the nation rose five places to a position of ninety one as per global competitive report. Instability in business environment is increasing as competitiveness is halted across sub- Saharan Africa. But there is reason of hope as government projects that there is economic development of 5.5 percent. Kenya holds good position in international competitiveness in terms of labour market and the country is interested in bringing in innovations for the overall development of national and business strength. Talents are expected to be more vital and this causes a shift to talentism from capitalism (Chen et al, 2012). Even though the country causes worries to investors for its uncertain political situation but the nation is set to become at a winning position since its preparation for fourth industrial revolution. This political condition can ensure better social as well as economic conditions. Overall uncertain and volatile business environment is somewhat offset by development in health, infrastructure, technical sophistication and preparedness and business elegance. But in global average this is not satisfactory and Kenya ranks below than many nations (Chen,2011).
GDP growth of Kenya indicates a possibility of slow but consistent growth. As an example it can be said that as compared to 2011, the growth of the nation in terms of GDP was 4.6 percent, a slight increase from 4.4 percent in previous year (David, 2011). A country partnership strategy was started by World Bank and that programme was worth $4 billion to support development of the country. The thriving growth of the country is also attributable to agriculture sector of the nation. Economy of the country sees opportunity of a boost due to mining segment but a better legal policy needs to be applied for the same if productivity is a key aspect of the development. Even the country is allegedly believed to have a legal system which is politically influenced, the government has taken steps to by enacting laws to improve business atmosphere with help of legal framework. The business has been turned into streamlined portion (E. Dobbs, 2014). In this country entrepreneurial situation has been streamlined and requirement of capital to initiate a business in minimal. Even non salary expenditures of employment of workers is not high. Subsidies are available from government for price control initiatives. For development of geo thermal power, funding from the end of international donor is also important. To the economy of Kenya, it is said that business is moderately crucial. Growing financial sector is open to competition in the country. Although foreign ownership is constrained that does not deter overall expansion of business of an overseas corporate (Helms and Nixon, 2010). In March 2014, the expected economic growth was expected in consonance with five percent GDP growth.
Competitive Analysis of Kenya using Porter’s Five Forces
Kenya has unstable society that suffers from racism by gender, class and religion. Fishing and agriculture have been options of occupations of males and growth in some sectors like telecommunication, transportation have opportunities for many English speaking people. The country’ culture is bit westernised nowadays. The rate of literacy is 87 percent and maximum population live in rural areas. People are quite fond of agricultural jobs as occupation and this also has shifted its trend to other sectors like fishing and deemed to be sophisticated sector like telecommunication (Jarratt and Stiles, 2010). Government of the country offers aid to underprivileged people to avail free of cost education and health services.
Technological requirement has forced the country to keep pace with global technological advancement. The e-governance service of the country has found elevated after collaboration with India. This marks development in the commitment towards people of country. Among organisations which are state owned, KenGen is a company of that stature which is reputed as power generating organisation and improving technologically to strengthen its geo thermal power reserves (Machuki and Aosa, 2011). In Nairobi, there is a reputed scientific institution which is UNESCO Regional Office for Science and Technology for Africa.
In Kenya there is important issue like environmental sustainability and the farmers in the country face problem like soil erosion and deforestation. Climatic conditions in the country differ region wise. Cultural aspects of the country became varied due to climate variances and increasing migration to urban areas from rural regions.
Legal facilities are not free of cost and the country’s reputation is not good due to least maintenance of human rights. Legal framework of the country provides with inadequate protection to press in terms of freed of speech. The country still finds promising business opportunities due to legal framework arranged by government of the country to promote business environment in Kenya (McMillan, 2010).
“We Work” in the search of business expansion in Kenya may find initial stumbling but the amicable business atmosphere supported by government initiatives in form of subsidy and international donation are motivational aspects for the company. Availability of talented workforce is supporting factor and relatively low employment cost is another business boosting aspect for the company (O’Cass and Weerawardena, 2010). These push the company towards thinking of business expansion in Kenya but still dependence on GDP trend and superficial growth marks to be considered more by the company. Even the investment requirement is not large but business running feasibility is a matter of thought for the company.
Conclusion
This portion focuses on competitive analysis of the country when it comes to business expansion and investment in the country by a foreign venture. A competitive analysis on the country like Kenya can offer “WeWork” the required insight and estimation relating to possible business expansion in the country. Porter’ five forces analysis is of great help for the company.
The profitability for the company on the country can be measured by analysing the effects of the five forces on the competition and industry. Threat of new entrant is low if there are barriers to entry for a foreign company. In Kenya, threat of new entrants differ industry wise. Capital investment requirement is low in the country and for maximum industry the customer switching cost is moderate (Porter and Heppelmann, 2014). This works in support of a new company’s perspective and “WeWork can find a convenient entry in the Kenyan Market. The next force is bargaining power of suppliers. This is high in the country as suppliers generally quote higher prices for raw materials and the buyers like organisations are often forced to pay higher prices. But the quality is often compromised as the high bargaining power of the suppliers keep them in such a position to cut on the quality aspects as an instinct from their superior position (Tanriverdi, Rai and Venkatraman, 2010). This is deterrent for the “WeWork” as it is supposed to confront with the same situation there, in event of requirement of raw materials for the business. The another force is bargaining power of buyer and this is in Kenya is relatively strong because of they are price sensitive and the firms in almost every sector find switching cost to other firms are low from customers’ point of view. This possesses a scenario wherein customers or buyers have more dominance than firms and this is not business supporting conditions which is a matter of concern for “We Work”. The next force is threat of substitutes. Buyers usually find low switching costs to another brand for availing products. This becomes more complicated when the market is awash of substitute products with price variations. This creates options for customers to select their preferred brands (Vecchiato and Roveda, 2010). Therefore the company “WeWork” can focus on the quality and of products and services at an affordable cost to redirect customers’ attention from substitute services and products. Another force is rivalry among the competitors in the industry. This is high in the country as low exit barrier and presence of many substitute products and services, This generally reduces profits and as customers’ acquisition becomes priority with another attention on providing them with better quality products and that is too in low cost (Vecchiato and Roveda, 2010). This has to be kept in consideration by “WeWork” and the strategy formation needs to be accordingly and also knowledge development by assessing the mentioned five forces in the industry in the country like Kenya.
Conclusion
Business in foreign economy is always subject to risks and uncertainty. Therefore for business expansion in a country like Kenya needs better and flawless analysis which is possible with help of five forces analysis. The business expansion of “WeWork” can come to halt if the business environment in the country is not in favour of the business expansion and operation. In between political uncertainties there are some economic aspects which are industry friendly (O’Cass and Weerawardena, 2010). These are projection of GDP increase, availability of funding for business expansion, low investment requirement. Low cost of employing labour. Some forces are business supportive and some other not industry friendly. High level of cooperation, high level of bargaining power of suppliers and buyers put the company in search of strategy development which can be applied subject to better understanding of the country as worth investing for business expansion. Knowledge of external environment of Kenya an offer good understanding about general conditions for business in the country and knowledge about five forces can become more important to foresee the business opportunities in the country for long run.
Initially “WeWork” may not have the expected level of brand reputation in Kenya and this needs to be built up depending on quality of products and services. The first stage of business operation in the country will require the company to have patent, trademarks for keeping the business protected. Dependence on government regulation alone may not help the company and adequate steps are to be taken from the very first period of business in the country (O’Cass and Weerawardena, 2010). Higher bargaining power of suppliers is matter of concern and this can be negated by the company to create partnership with another suppliers even they are small in numbers. Without breaking collaboration with a single supplier, “WeWork” needs to look for sourcing the required raw materials for business from another source. This can lower the level of dependence and the bargaining power of suppliers can become limited. Low employment costs can be used by the company and with available talents in Kenya business can be continued without asking employees to be relocated there (Porter and Heppelmann, 2014). This can help the company to save additional costs. Moreover English speaking talented people can be employed in the business who can offer their better performances. Brand differentiation can become a possible means to prevent high bargaining power of buyers and threat of substitute products. The brand needs to be get familiar with the local people of the country and also gradually the perceptible impression of the brand goes higher among customers. The business environment although appears to be amicable to somewhat due to legal framework by initiates taken by government but the development of strategies for keeping business afloat in the new territory among uncertainty becomes imperative for “WeWork”. The overall investment is not concern free but again the firm needs to seize each single opportunity to strengthen its brand value and brand image in the country (Vecchiato and Roveda, 2010). If not possible in the first phase of business but with advancement of time corporate social responsibilities can enable “WeWork” towards better positioning and conquer over the impediments for the business out there.
References
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Porter, M.E. and Heppelmann, J.E., 2014. How smart, connected products are transforming competition. Harvard Business Review, 92(11), pp.64-88.
Tanriverdi, H., Rai, A. and Venkatraman, N., 2010. Research commentary—reframing the dominant quests of information systems strategy research for complex adaptive business systems. Information Systems Research, 21(4), pp.822-834.
Vecchiato, R. and Roveda, C., 2010. Strategic foresight in corporate organizations: Handling the effect and response uncertainty of technology and social drivers of change. Technological Forecasting and Social Change, 77(9), pp.1527-1539.
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