The paper focuses on evaluating the macro business environment for Tuffstuff, a cement company based in United Kingdom that endeavours to conduct its business in the African region, Rwanda. It would also focus on conducting a SWOT analysis of the company to help in enhancing its existing potential and minimising its weakness to gain on external opportunities and also in countering potential threats in its endeavour to conduct operation in the Rwanda region.
Terms of Reference
The study focuses on conducting a feasibility analysis for the entry of a cement manufacturing and marketing firm, Tuffstuff in Rwanda. The study aims to analyse the macro environment of Tuffstuff based on PEST Analysis and thereby would endeavour to generate a SWOT Analysis of the company based on the Rwandese market.
Cement is observed to be a fine grey coloured powder that is when used with water tends to harden on being kept for a few days to form a stronger surface. It helps in carrying out of construction activities big or small in different sectors. Cement owing to the above feature is also known as a Hydraulic Binder that binds sand and other coarse particles when being mixed with water (The European Cement Association , 2015).
Rwanda is situated in the East of Africa and is essentially featured by an effective landscape composed by avid greenery and mountainous peaks. Rwanda owing to its picturesque landscape is observed to have earned a nickname of ‘Land of a Thousand Hills’. The Volcano National Park of Rwanda is also popularly known for the existence of gorillas and also golden monkeys. The capital city of Rwanda is Kigali. The major ethnic groups comprising Rwanda are Hutu and Tutsi that are also known for their ethnic clashes that amounted to the rise of genocides in the region. The Chief of State for Rwanda region is Paul Kagame elected as the President of Rwanda during April 2000 (CIA, 2015).
Two specific organisational structures are identified as the entrepreneurial structure and the functional structure. The entrepreneurial organisational structure is observed to be developed along the entrepreneur that focuses on taking decisions on a centralised fashion. Further, the communication lines are observed to be short in entrepreneurial organisational structure (Simms, 2005). The same is reflected as follows.
Another effective organisational structure that follows the entrepreneurial structure is the functional structure that is divided or allocated based on the different set of functions or operations carried out in the business organisation. The functional organisational structure focuses on coordinating between the different functional units like manufacturing, sales and distribution, marketing, finance and human resources to help in the meeting of business and organisational objectives in an effective fashion. The development of a functional organisation is economic in nature while also helps in increasing the level of specialisation of the functions conducted in a business institution (Simms, 2005). The functional organisational structure is reflected as follows.
SWOT Analysis is conducted to analyse the internal potential of the business organisations where SWOT stands for parameters like strength, weakness, opportunity and threat. The analysis of strength and weaknesses of different business organisations reflects on the capability of the business institutions to gain on the external opportunities and also in countering the potential threats emanating from the external business environment (Snelling, 2012).
STEEPLE Analysis stands as the acronym for social, technological, economic, environmental, political, legal and ethical parameters that are evaluated for any specific region to understand the impacts of such parameters on the operations of business companies operating in the different markets.
The analysis of the social parameters of the different regions intends to understand the needs and expectations of the consumers and other stakeholders involved in the greater society and thereby reflect on its impact on the markets for the products and services generated by different economies. The analysis of the social parameters also bears effective links with the economic situation of the region such that developed economic parameters also reflects developed social potential in the region and thus creates greater opportunities for the companies (Kachru, 2009).
The analysis of the technological environment in the different markets aims to understand the policies undertaken by the regional government and other regulatory bodies in enhancing the technological potential and infrastructures in the region to help in the conducting of the different types of operations and activities linked to the different types of businesses and industries (Sminia, 2014).
Analysis of the economic potential helps to understand the impact of the different economic policies generated by the regional and national government on the actions of the business enterprises operating in the region. The analysis of the economic situation also tends to evaluate the current economic potential in the region based on different parameters like GDP, GDP Per Capita, Inflation, Employment and Unemployment and Poverty percentages (Basu, 2011). Existence of strong economic potentials based on positive results along the different parameters reflect increased opportunity for growth and prosperity of the business enterprises endeavouring to conduct its business in the different markets while reduced economic potentials affect the operations of the business enterprises in the identified markets (Morrison, 2011).
The environmental parameters reflect of the impact of the natural and ecological environment on the policy making and activities of a business organisation and vice-versa (Stimpson & Smith, 2015).
The analysis of the political situation of the region intends to evaluate the stability of the political situation of the region while also aims to understand the impact of the regulatory and legislative environment on the operation of the business enterprises operating in the region. It thus focuses on reflecting the impacts of new policies introduced by the regional and national government authorities on the operational potential of the business institutions in the different sectors (Armstrong & Taylor, 2014).
The legal parameters reflect on the effect of regulations and legislations in a region on the business activities of companies (Stimpson & Smith, 2015).
Finally, ethical parameters reflect on the impact of ethical conduct of the people in a specific region on the operations of the business organisations (Stimpson & Smith, 2015).
Limitations of PEST Analysis
PEST Analysis stands as the acronym for political, economic, social and technological parameters that are evaluated for any specific region to understand the impacts of such parameters on the operations of business companies operating in the different markets.
The PEST Analysis though helping in the conducting of analysis of the macro environment of a business organisation suffers from essential limitations. The PEST Analysis conducts the analysis of the macro business environment in a broader fashion and thus fails to highlight any specific discrepancies along the different parameters (Henry, 2011). The macro environment of a business organisation is always subjected changes that are failed to be effectively highlighted and analysed through the use of PEST Analysis where it limits the analysis for a specific period (Daidj, 2014). The PEST Analysis also suffers from further limitations owing to not analysing the environmental, ethical and legal parameters of conducting business in a specific region. The PEST Analysis also fails to effectively analyse and understand the social and cultural paradigm of the different economies and their impacts on the operation of the business enterprises. The conducting of PEST Analysis also requires the management of the business organisations to generate increased investments and time which thus limits its use in a frequent fashion (Frynas & Mellahi, 2015).
Alternatives of PEST Analysis
The limitations of PEST Analysis reflects the need for identifying other strategic models like PESTLE and STEEPLE Analysis for the macro environment and Porter’s Five Forces Analysis for analysing the micro environment of a business organisation. The PESTLE Analysis in addition to PEST Analysis aims to evaluate the legal and ecological situation of any region and its impacts on the operations of the business organisations operating in the region. STEEPLE Analysis in addition to PEST Analysis aims to understand the impacts legal, ethical and ecological parameters on the operations of the business enterprises in the different markets. Porter’s Five Forces Analysis developed by Michael E. Porter of Harvard aims to analyse the micro business environment based on different parameters like buyer and supplier bargaining potential, threat generated from substitute products, competitive rivalry and also the existence of entry barriers in the different markets (IMA, 2014).
The analysis is conducted based on the use of PEST and SWOT Analysis of Tuffstuff Ltd. operating in Rwanda.
PEST Analysis of Tuffstuff Ltd
The political scenario of Rwanda is largely influenced by the clashes between ethnic groups residing in the region like Tutsi and Hutus. Paul Kagame acting as the current president of Rwanda focuses on generating needed development in the region through the development of potential infrastructures that in turn generates social and economic enhancement for the Rwanda people. The current government also focuses on tracking individuals or groups involved in promoting genocide in the region. The same helps in effectively reducing chances of emergence of further genocides in the region. The current government headed by the Kagamese government also focuses on the generation of social and humanitarian development through promotion of gender equity in the Rwanda region (King, 2013).
The analysis of the above political situation in Rwanda reflects the same as potentially conducive in fostering development and growth of operations of business institutions in Rwanda. The same also reflects that Tuffstuff can conduct its business in an effective fashion in the region.
The current Rwandese Government headed by Paul Kagame is observed to have generated the Vision 2020 Plan that encourages the growth and development of the economic and strategic position of the Rwanda region. The Vision 2020 Plan focuses on transforming the Rwandese economy from an agrarian economy to an economy driven by the development of knowledge and service companies. Further, the Vision 2020 Plan generated by the Kagamese government in Rwanda also focuses on reducing the level of poverty in the region through development of the existing rural potential of the region and also in the promotion of increased employment opportunities in the region. The skill and knowledge base of the Rwandese society is being continually improved to help in the generation of increased productivity in the region. Further, the government headed by President Kagame also focuses on generating economic development based on targeting the GDP Per Capita to increase to around $1000. The government also aims in reducing the amount of population below the level of poverty line in the region (The World Bank Group, 2015). The economic focus of the Rwandese Government aims to generate greater productivity and growth in Rwanda and thus promotes the entry and growth of both domestic and regional companies in the region.
The above analysis of the economic situation of Rwanda is taken to considerably help in increasing the demand for the cement products produced by Tuffstuff Limited. The enhancement of GDP Per Capita of the Rwandese population is taken to potentially promote the growth of urban middle class in the region. The same is taken to enhance the demand for real estate properties in the region and thereby generates increased opportunities for Tuffstuff to market its cement products.
The Vision 2020 Plan undertaken by the Rwandese Government is taken to considerably promote the growth and development of the Rwandese people. The promotion and development of the service sector and also the growth of various companies along the knowledge and industrial sectors in the region is taken to help in the large scale development of the Rwandese society. Similarly, the development of the rural sector and the agricultural activities in the region through the generation of considerable infrastructural support is observed to generate increased employment for the Rwandese population and thereby enhances the economic position of the Rwandese households. The development of the social framework in Rwanda can be effectively evaluated based on the reduction of the poverty situation in the region from 59 percent during 2001 to around 45 percent during 2011 (Mageza-Barthel, 2015).
The development of the economic situation in Rwanda based on the promotion and growth of industries and also in the enhancement of the agrarian framework is observed to require the increase the need for skilled and productive workforce in the region. This is taken to act as an effective opportunity for the management of Tuffstuff Limited in that they can get an abundance of skilled and productive manpower in the region. Moreover, the development of the economic situation and also the growth of educated masses in the region also reflect the need and demand for better housing and infrastructural facilities to be built in the region. The above situation effectively reflects the growth of market for cement products by Tuffstuff Limited in Rwanda.
Rwandese Government under the leadership of President Kagame is observed to continually focus on the development of the technological potential of the region through the promotion and growth of Information and Communication Technology (ICT) and also the enhancement of research and development activities in the region. The growth of the ICT potentials in Rwanda is taken to help in the growth of networking and communication in the region while the promotion of research and development facilities is taken to considerably enhance the potential and productivity of the manufacturing and other firms operating in the region (The World Bank Group, 2015).
The analysis of the technological potential of Rwanda region reflects the emergence of greater opportunities for manufacturing companies like Tuffstuff Limited endeavouring to develop an effective presence in Rwanda. The development of the Information and Communication Technology potentials in Rwanda is taken to enhance the networking potentials for Tuffstuff Limited. The managers of Tuffstuff Limited based on the use of effective ICT environment gains needed potential of interacting with its supplier groups and other business partners operating in the region. Similarly, the development of the research and development facilities in the region is taken to considerably enhance the productivity of the cement company and the quality of the cement products generated by the company.
The inferences gained from the PEST Analysis of Tuffstuff Limited in Rwanda is undertaken to generate SWOT Analysis for the company.
SWOT Analysis for Tuffstuff Limited
Strength of Tuffstuff Limited
The endeavour of Tuffstuff Limited to open up foreign branches in the African market of Rwanda reflects on the foreign expansion potentials of Tuffstuff Limited. The cement company is understood to possess right quality of financial and marketing potentials for generating effective presence in the international market of Rwanda. Moreover, Tuffstuff Limited also reflects needed potential in identifying key market opportunities in an untapped market like Rwanda. It thus reflects the existence of effective market and business intelligence units that help the company management in gaining quality information about new markets that in turn support its expansion in the foreign marketplace.
Weakness of Tuffstuff Limited
Tuffstuff Limited is observed to limit its production and operational activities limited to the production of cement. The same effectively limits the market for Tuffstuff Limited to cement market in Rwanda. Tuffstuff Limited to enhance its business potential and marketability along both the domestic and international markets is required to augment its product mix from only the production of cement to entry into the real estate market. The above change duly incorporated would help in enhancing the market reach of Tuffstuff along both regional and international markets.
Opportunity of Tuffstuff Limited
The conducting of PEST analysis reflects large number of potential opportunities for Tuffstuff Limited in Rwanda. The target taken by the Rwandese government for enhancing the economic and social situation in Rwanda through the development of knowledge and employment potentials in the region and also the growth of agricultural sector and rural economy of Rwanda enhances the individual economic position for the regional people. Targets taken for increasing the level of GDP Per Capita and also in reducing the poverty situation in the region considerably helps in developing the potential of the middle consumer categories in the region. The development of the urban middle class is observed to considerably help in enhancing the demand for real estate properties in the region. Similarly, the growth of the educated and learned masses in the Rwandese region also demands the development of the needed infrastructures like roads and bridges and also other effective buildings. The above facts reflect a growth of demand for cement products manufactured and marketed by Tuffstuff Limited.
Threat of Tuffstuff Limited
Rwanda reflects the existence of an open market economy with reduced amount of tariffs and also existence of no potential tariff barriers. Moreover, the existence of flexible regulatory regime in the region potentially attracts foreign companies to enter into the Rwandese region (Rwanda Chamber , 2015). The same is observed to increase the level of competition for Tuffstuff Limited from growth and expansion of domestic and foreign enterprises in the cement sector in the region. The existence of large number of firms operating in the cement sector and market in Rwanda is taken significantly affect the market share for Tuffstuff Limited in the cement producing sector in the region.
The PEST Analysis of Tuffstuff Limited in Rwanda reflects that the cement company has ample opportunities to gain from its conducting of business operations in the region. The existence of a stable government, economic and social development and also the introduction and growth of use of new technologies all are taken to potentially help in encouraging the entry of the cement production and marketing company in the region. The SWOT Analysis reflects on the potential opportunities that can help in generating effective benefits and also in enhancing the business potential of Tuffstuff in Rwanda while also the different threats that need to be rightly countered to enhance the level of competitive advantage for the company.
Tuffstuff Limited to gain and develop an effective market share in Rwanda region need to diversify its business activities by foraying into the real estate sector. The entry into the real estate sector would effectively help the cement manufacturing and marketing company to attract the mindset of the Rwanda population aiming to own larger real estate properties and also in participating effectively in the infrastructural development process of the Rwandese government.
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