Environmental factors affecting the global operation of an organisation

Task 1: The Environmental Factors that may Influence the Global Operations of an Organization. (30 marks)

In his book, the business environment, Porter (2008), describes the environment as the external factors that organizations have no control over. He further reports that these factors could include social, political, and technological and government regulations and policies.

In business, the environment is categorized into

[1] direct and [2] Indirect. In his World Economic Forum report, (Dutta, 2009) catalogs direct interactive business environment forces to include owners, customers, suppliers, competitors, employees and employee unions. Conversely, the category of indirectly interactive environmental forces includes social-cultural, political and legal, technological, economic and global influences. (Ghemawat, 2013) reports that indirectly interactive forces may impact one organization more than another simply because of the nature of a particular business.

Task 2: Analysis of Primarks environmental factors (30 marks)

I choose to analyze the operations of Primark Stores Limited, an Irish clothing retailer, with operations across Ireland, The Netherlands, Belgium, France, Austria, Spain and the United Kingdom. The Company has not reported any operations across Africa and specifically Kenya, which is my Country of origin and residence.

In support of both the arguments as presented by the World Economic Forum and Ghemawat (2013), I will apply the concept of PESTEL. The term PESTEL stands for – Political, Economic, Sociological, Technological, Environmental & Legal. A number of corporate organizations within Kenya apply these concept of PESTEL in their marketing and business development, as

such using this concept will give a clear elaboration of the Kenyan Market, especially the opportunities and threats for Primark.

Analysis of Primarks in light of the environmental factors Political Factors:
Kenya’s governance system is composed of both the Central and the County Governments. However, the county government has in the recent past tasked more with in foreign investment promotion. According to (Waris, 2013) report, there is a flat investment allowance of 60 percent for any organization interested in investing in Kenya, operation licenses are valid for five years. The Kenyan Government no longer steers investment to specific geographic locations. Local content rules are applied but only for purposes of determining whether goods qualify for preferential duty rates under the Common Market for East and Southern Africa.
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In light of the above, Primark’s business operations are subject to government policies and regulations. The business firms need to conform to the set of policies and regulations stipulated and enforced by the government and policy making body.

Economic factors:

Kenya’s economy is market-based, and maintains a liberalized external trade system. The country is generally perceived as Eastern and central Africa’s hub for Financial, Communication and Transportation services. As of March 2014, economic prospects are positive with above 5% GDP growth expected. Kenya’s economy grew by more than 7% in 2007 and its foreign debt was greatly reduced in 2014 it is expected to reach 4% and more in 2015 due to growing flow of

foreign investment. The economy affects a business in terms of taxation, government spending, general demand, interest rates, exchange rates and European and global economic factors.

Sociological factors: Kenya has a history of ethnic rivalry.The stability of Kenya therefore, has a very big role to play in determining the business condition of Primark in Nairobi. Further, Nairobi is divided into regions which are significant in reaching out to various economic group of Primarks.

Technological factors: This includes the rapid pace of change in production processes and product innovation affect a business. In Kenya, new technologies such mobile telephony has created new processes and procedures such as online shopping, bar coding and computer aided design.

Environmental factors: Kenya’s environmental patterns have been reported to change. This has been largely attributed to global warming, organizations in keeping up with international trends have adopted environmental management strategies.

Legal Factors: Over the years changes in legislation have had impact on employment, access to materials, quotas, resources, imports/exports and taxation for instance the introduction of disability discrimination legislation, increase in the minimum wage and greater requirements for firms to manage plastic bags recycle are example of relatively recent law that can affect Primark work and actions.

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Product

Primarks should tweak the clothing elements for the Kenyan Market to meet the cultural expectations as well. It should incorporates local considerations such as colour, occasions and gender in packaging i.e. different local tribes prefer different colors. It should also include the country’s native language (Swahili) in the packaging.

Price

Price will always vary across different market segments in Kenya. Primarks should consider product’s position in relation to the competition influences the ultimate profit margin. Whether this product is considered the high-end, expensive choice, the economical, low-cost choice, or something in-between helps determine their price point.

Place

Primaks distribution strategy should be influenced by the existing players in the market. Since Primarks Clothe line is not a high-end product can be distributed via “supermarkets”, strategic alliances or franchising by working with less pricey local stores.

Promotion

Primark should send message in a relevant, engaging, and cost-effective by using advertising strategies that can effectively reach the low end market. For example working with the local value added service provider through mobile phone texting.

Even though, the Kenya Association of Manufacturers reports (2010) a downward trend in the textile sub-sector statistics by the Economic survey indicate that cardigans and toweling materials production increased by 7.4 and 7.0. As such these are opportunities that Primark could utilize to gain market advantage over its competitors. Therefore in conclusion the knowledge and understanding of the environment is imperative for a Primark to be successful in setting its business in Kenya. Kenyan population is approximately 40 million, majority of these population are low income earners who are potentially Primarks Market target. There is great potential for Primark if the proper analysis of Political, Economic, Social, Technological and Legal market research is put in place. Moreover, it is important for Primark to understand the gap in the clothing industry in Kenya.

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Dutta, S. (Ed.). (2009). Global Information Technology Report 2008-2009. World Economic Forum.

Ghemawat, P. R. (2013). Redefining Global strategy: Crossing borders in a world where differences still matter. Harvard Business Press .

http://www.weforum.org/ accessed on 26th August 2014

http://www.kam.co.ke/index.php/about-us/organization-structure/industrial-sectors/178-textile-a- apparel-sector-

Porter, M. (1998). The cluster and economics. Harvard Business Review , 50-58.

Waris, A. (2013). Taxation and State Legitimacy in Kenya.” Tax Justice and the Political Economy of Global Capitalism, 1945 to the Present.

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