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This report looks at the market forces involved in the influence of the Bakhresa Group of Companies expansion in the East African region and beyond. The report considers the position of the company in relation to its environment at this current time and offers possible solutions to its growth possibilities. It has grown out of the need for a strategic look of the company at this time of global change and seeks to find out what the position of the company will be in the future.
Said Salim Bakhresa & Co.’s and Bakhresa Food Products are a collection of companies each of which is part of a whole that forms the Bakhresa group. It has steadily been expanding its borders from Tanzania to the neighbouring countries and has been gaining a lot of market forces over time. Countries operated in currently are:
This group of companies has specialised in undertaking certain projects in the neighbouring projects while at home, in Tanzania, it has diversified into the making and distribution of various products. Products made include the following:
- Maize flour
- White bran for livestock
- Bread (white, brown)
- Puratha (chapati)
- Ready to drink beverages
It has also invested in the operation of a marine service that has tours to and from the island of Zanzibar. The main offices are on the mainland coast of Dar-es-Salaam where one can process tickets and further information necessary for future trips.
1. To give an overview of the strategic position of the Bakhresa Group of Companies within the Tanzanian market.
2. To give possible suggestions for market growth within and outside Tanzania.
3. To find solutions to the challenges faced by the group within the general environment of Tanzania.
This report does not cover other areas that the group of companies operates in due to lack of knowledge on the necessary factors that are prevalent in the other countries.
2.0 General Environment
This environment is one that generates factors or influences that impact on the activities of an organisation but over which the organisation has no direct control and influence over.
The impact of the general environment on an organisation can be analysed by the use of PEST analysis and scenarios.
A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors of the external macro-environment. Such external factors usually are beyond the firm's control and sometimes present themselves as threats.
Scenario building is a process of designing a hypothetical situation in a way that helps you predict the consequences of decisions and actions. It is used hand in hand with forecasting tools which are tools that use a calculation based on historical data to make predictions about the future.
Instances of factors that may come into play areas listed below in the table.
POLITICAL FACTORS ECONOMIC FACTORS SOCIAL
FACTORS TECHNOLOGICAL FACTORS
- Taxation Policies
- Protection Laws
- Political Stability
- Political Instability
- Liberalization Policies
- Employment law
- Competition regulation
- Exchange Rates
- Money Circulation
- Disposable Income
- Energy Availability
- Water Availability
- Health Status
- Income Distribution
- Social Mobility
- Health Status
- Population Trends
- Life Style Changes
- Attitude Towards Work And Leisure
- Rate Of Obsolesce
- New Developments And Inventions
- Speed Of Technological Transfer
- Changes In Technology
- Lack Of Expertise
- Energy use Cost of Electricity
Table 1: Sample PEST table with various factors that impact an organisation
2.1 Factors Impacting the Organisation
The major activities in which the organisation partakes in are the following:
- Manufacturing PP/HDPE Woven sacks
- Research and Development
- Storage of various grains
- Transportation services
- Grain processing
- Dairy farming
Inset: P.E.S.T ANALYSIS TABLE. SEE ATTACHED SPREADSHEET
3.0 P.E.S.T Analysis Interpretations
3.1.0 Political Analysis
3.1.1 Political Stability
This is an important factor to consider despite the business being undertaken. Political stability refers to the state of governance in a particular country. Tanzania’s political stability is fairly high as there is one major party which contends with smaller parties that only manage to attain a few seats in parliament from constituencies in small areas, villages, and towns.
This has ensured that the ruling part, CCM (Chama Cha Mapinduzi), has managed to maintain the seat of power for a long time and has somewhat maintained the same policies from one presidency to another. This has made doing there favourable and growth conditions steady from one year to another.
3.1.2 Risk of military Invasion
The country itself is fairly risk-free of military invasion as there is a unity amongst its people that affects the whole nation’s view of achievement in terms of making it possible to support others who dare to make it big. The surrounding countries have all settled down in terms of internal conflicts and although there are still a few skirmishes in Rwanda, Democratic Republic of Congo, and Angola, these seem to not affect the stability of the country. This makes it very promising for carrying out future business endeavours.
3.13 Legal framework for enforcement
The legal framework in Tanzania is still young and is still in the process of developing but it has firmly established itself. In recent years, we have seen several international bodies contribute to the legal base in Tanzania helping to resolve issues of international dispute. As the world becomes a global village, borders, especially of trade, are beginning to disappear and thus the legal system in each country involved in the various trade agreements across borders have had to change their laws pertaining to trade. These changes have now encompassed large areas of trade defining the systems there regardless of the powers that be. Inadvertently, this has promoted the growth of businesses and has proven favourable to Said Salim Bakhresa & Co.’s.
3.1.4 Intellectual property protection
This refers to the protection by law of an individual’s ideas to prevent them from being illegally used elsewhere without the consent of the individual. This is am important feature as it protects innovations made by the individual or individuals. The Bakhresa group have made many innovations concerning various sectors of Tanzania’s industry and thus it is a necessity to ensure that they are protected against the illegal theft of their progress over the years.
3.1.5 Trade regulations and tariffs
As the group of companies continues to expand by serving more and more towns and villages within the country, new trade regulations and tariffs are bound to affect it in a negative way. That is to say, the introduction of an increase in say trade licenses will affect the group’s total output which will inadvertently affect the sale price of their products and services which in turn affects their customers. This might prove to be a hindrance to the group in that they will lose a part of their customer base due to the price hikes.
3.1.6 Favoured trading partners
As with any organisation, this group also has partners that they are dependant upon. This is to bring the organisation up to speed in terms of the purchase and transportation of raw materials to and from its factories in various locations. Trading partners play a vital role in the growth of the company as their growth is assured with the growth of their partners. Discounts and also a promise of the better deal in terms of produce may be an incentive for forming new and maintaining old partners.
3.1.7 Pricing regulations
Governments worldwide are banging to clamp down on market prices set by the players by regulating prices of basic commodities. Despite the Tanzanian government not doing so yet, it is likely that with the constant changes in weather and the doubtfulness of crop yield from year to year, the government may play its hand and impose countrywide price standards. This being the case, the organisation should prepare for such a situation and plan accordingly.
3.1.8 Taxation - tax rates and incentives
Each government has had different policies in terms of tax rates – their increase, decrease and scrapping. Current tax standards are higher than they have been in several years and this is affecting several businesses in the way they function. As such, the Bakhresa group have to be wary of changes in tax set by the government.
3.1.9 Wage legislation - minimum wage and overtime
Many countries worldwide are advocating for a standard minimum wage for workers in every type of industry. Tanzania is still to pick up on these standards with workers in various industries still being paid meagre wages and salaries. As such, with the advent of globalisation, the future is uncertain as many individuals advocate for rights of workers and their campaigns are affecting countries worldwide. This is bound to affect the African continent as well and Tanzania will not be able to overlook the issue anymore.
3.1.10 Product labelling requirements
Standards are paramount to the success of an organisation and the Tanzania Bureau of Standards has stamped a seal of approval over all of the products. This boosts the company’s image and good grace with the public and thus increases its market share by attracting new customers while giving the old reasons to continue to believe in them.
3.2.0 Economic Analysis
3.2.1 Government intervention in the free market
Governments intervene in the free market by using several techniques such as taxation, setting a floor, and ceiling prices of goods, and the introduction of policies to favour the government in terms of returns. These will adversely affect the operation of the company and will influence future decisions.
3.2.2 Overseas economies and trends
Today’s world is more a global village than it was a few decades ago. This has had a tremendous impact on the way business is carried out and what type of business flourishes in today’s brittle economy. Tanzania is not a lone island which habitually interacts with the rest of the world. Free trade has dictated the constant dependence seen today from each global player in today’s economies. As small contributors to the global economy, countries such as Tanzania are affected by the economies of the Western world. Trends in their economies should be followed closely to project trends such as the impact of the rising cost of fuel and the falling value of the American dollar on local economies and sales.
3.2.3 Skill level of workforce
A valuable resource that any company strives for is skilled labour that can be increased over time. Any company to succeed must use some form of new technology that must require some sort of expertise. This expertise is really expensive to hire as it is usually sought from outside the local area of operations such as South Africa. This impacts the company in various ways. Training of local staff to reach the capabilities offered by the imported experts is a task worthy of funding and carrying out. This is critical to the survival of the company.
3.2.4 Seasonality/weather issues
This company depends on a lot of agricultural products or by-products of it. As such, seasonality of certain commodities is something that should be planned for in advance. For instance, the production of its dairy range of products such as fizz pops and ice cream are dependant on how well the cows producing the milk are dieting on the grass and other grains available during that season. The global changes in weather patterns worldwide are affecting the need for these decisions to be made more often and with more accuracy.
3.2.5 Market routes and distribution trends
Africa has been plagued by poor infrastructure throughout its maiden history. This has not improved with the liberation from their Colonial powers. Tanzania is no exception. Today’s road structure, although much more spread than a decade ago, still fails to reach vital corners of the country and the roads are all but almost impossible in such areas. This affects the company’s distribution process as it incurs higher transport costs despite using its own transport services. This disadvantages the company by restricting the number of markets that it can operate within. Construction of roads and a more efficient railway system is to be investigated so as to benefit the company’s growth to both the outside world and the hidden gems within the country that are lying untouched.
3.2.6 Labour costs
These costs affect every company and are to be modelled in such a way that something productive may come out of increasing the wages of employees. Low wages create disgruntled employees leading to low output from factories and other projects. Currently, there is no minimum wage set by Tanzanian law allowing the company to pay its workers what they feel is a decent wage. This usually entails setting as low a price as possible without causing unrest within the employees to maximise benefits. Due to a large number of employees, this seems to be a fair deal to the workers as they have a job that pays and helps feed the family. The company should prepare for a change in laws that opt for paying employees higher wages as this will affect the delicate balance of costs that the company now maintains.
3.2.7 Interest and exchange rates
Fluctuations of the exchange rate of the US dollar to the local currency in Tanzania the shilling is going to the effect the price of the most basic of materials needed for the operation of the company. The globalisation effect is such that a fluctuation of the exchange rate affects almost every commodity on the market price as the demand for the dollar increases or decreases, so do the prices of the commodities on the market. The company, in attempting to weather the exchange rate fluctuations, will have to rely on being able to supply products and services at the old prices until the exchange rate changes to favour them in a bid to keep their customer base and gain new markets.
3.2.8 Inflation rate
Currently, Tanzania’s inflation rate is not that high but it definitely could improve. Since the coming into power of the new president, the inflation rate has seen an increase by a small percentage. This has affected the exchange rate of the US dollar to the local currency in Tanzania the shilling affecting the buying power of the company to purchase materials from outside the country. Essentially they have now to pay a higher price than they did a few years ago. This has had an impact that is still going to continue to change the way the company is conducting business now and in the future to come.
3.2.9 Impact of global warming
Changes in the weather patterns are becoming more frequent worldwide as more and more countries face historical floods, high levels of rainfall beyond the normal levels experienced in the past, hottest days recorded in years, coldest periods experienced in years, and so on. The unsettling weather patterns have affected industries worldwide. Africa has not been without its share problems in terms of longer drought periods and extreme rain conditions similar to tropical rain falls in Southern Africa. The company is definitely going to be affected in various ways and thus should have some disaster plan to cope with the situation in which a poor yield is gotten.
3.3.0 Social Analysis
Play a vital role in the determination of finding new markets and in the choosing of what products to serve to a particular location or even better yet, how your product will be received based on the age levels of that location. Statistics of death rates, birth rates, literacy levels, and so on give a company a good idea of what market they can target in an area such that they can prepare successful advertising campaigns. Successfully interpreting such statistical data may be the key to the company’s success where others have failed or haven’t bothered trying.
Literacy gives a consumer power over one whom cannot read the specifications on a product. The governing body of standards requires that all producers of products should clearly state on their products ingredients and other information necessary to the consumer to give them sufficient knowledge in order to make a choice as to whether to buy the product or not. A company that sells a product that aims to be successful should be able to live up to the hype surrounding it and thus should deliver what it promises to the educated. Plans should be made by the company to invest in the education of the nation such that they can boost their image with the learned as a company that values education and its promotion giving customers something to identify with when purchasing their products.
3.3.3 Consumer and Worker attitudes
These form a major hindrance when they are negative towards a company. Attitudes of both the workers and consumers are something that should be a priority of the company sales department among others. Attitudes can make or break a company of any size. Workers attitudes towards their work determine the amount of effort put into creating a good product such that they can be proud of their work. Motivating workers determines their attitudes towards their work and ultimately this is reflected by the growth of the company.
3.3.4 Leisure interests
The mentality of consumers is also to be observed and noted as it could be instrumental in changing the sales pitch in use. Children have a tendency of liking sweet things such as ice cream and snacks such as sodas and biscuits. Targeting areas where it is known that families usually go out to spend time together will improve a company’s standings with consumers as they will be there to provide for their needs and give them the ideal getaway from their normal lives.
3.3.5 Brand, company, image
People have always seemed to be coerced into buying a product because of a brand name due to the brand name or what is associated with the brand name, the technology used to create the product, or the company itself. This is a powerful tool for the company to use and can be maximised by the promotion of its image to the public by catering for their needs in different ways such as in the development of infrastructure that does not in any way benefit them but their customers.
3.3.6 Consumer buying patterns
People form patterns after a while as they keep switching from one product to another for any variety of reasons. Identifying these patterns is essential if one is to beat the competition. Buying patterns can help various sections of the company understand what needs to be changed about the product or if a new product is required and how it will be received based on such patterns.
3.4.1 Competing technology development
Computers have advanced everything humanly possible and continue to do so. Industry technologies are changing at rapid paces and investing in technology that will save your company even a few minutes is worth more in the long run. As each company strives to beat the competitor, new technologies are invested in and incorporated into the company. Large sums of money are spent on this and thus a lot of investigation is required to weigh the necessity of the new technology to the cost.
3.4.2 Research funding
Funds for investigating new techniques to produce materials or process them such that less pollution occurs are costly. Any large corporation should invest in research that will benefit its output and image in the long run. As such, funds should be sought and ways of conducting the research found.
3.4.4 Information and communications
Information is needed on a timely basis and timely communications are now becoming an ever more important feature of success. With the many braches that the Bakhresa group have and are continuing to acquire, there is an even greater need for a better means of communication between the branches. A link should be investigated into the acquiring of a network set up specifically for it such that it has instant access from one office to anther. This would facilitate the quick decisions necessary of management today without the hassle of one man having to travel to all the different branches on a weekly basis to ensure that certain decisions are carried out to the letter.
3.4.5 Impact on cost structure
Technology is expensive and even more so for African companies as it has to be imported. Budgeting for technology is usually not implemented well as many try and match their current earnings or projected earnings with the costs to be incurred by acquiring that technology. Necessary as it is, matching costs to benefits is not an easy task, especially where the market is as volatile as it is in Africa. Therefore, the company should plan well in advance to start small and then grow from that experience of using that technology and decide whether it is worth investing in more of it or finding alternatives.
3.4.6 Innovation potential
Innovation amongst employees especially in Africa is not a common occurrence. Mostly this is because the rewards for useful innovations are indeed not beneficial and so very few employees take the chance to act and bring innovative changes to their environments. Encouraging innovativeness is bound to be beneficial to the company as it will boost its stability and impact its growth. Employees should be encouraged and rewarded fittingly when new ideas or products are brought about.
3.4.7 Technology access, licensing, patents
The use of technology created by others does not come without its own cost to be incurred. Gaining the use of these machines involves setting aside large sums of money so that the technology can be borrowed on the condition that it not be replicated in any way. Companies unable to produce their own technology must pay licensing fees to the manufacturers of the technology they require. This is costly but as Africa is still developing, the only way of acquiring technology for the present is through such means. The company will then have to invest huge sums of money to become operational while also hiring the expertise required incurring more costs. These costs should be well planned for.
A lot of challenges are going to be faced by the Bakhresa group for many a year to come. The changes in both political and economic factors worldwide are influencing even the remotest parts of Africa and other Third World countries. This impact of these factors will affect the direction in which the company chooses to follow.
To better meet these changes better, a new way of approaching problems is required by the management of the group.
The group will have to assess its current assets and attempt to match them to the needs of the group in the future. Doing so will allow them to get a picture to set them a path that can lead them through the turbulence that is to follow in terms of all forms of borders disappearing, global economies becoming one, and weathering the changes of the political system among others.
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