Small Business Environment Factors in a Sub-Sahara African Country, Zimbabwe - Case Study Example

REPORT ON SMALL BUSINESS ENVIROMENT IN A SUB-SAHARA AFRICA, ZIMBABWE. STUDENT:XXXXXX EXECUTIVE SUMMARY. This report discuses small business environment factors in a Sub-Sahara African country, Zimbabwe. Major business environmental factors which affect business includes demographic, technological, economic, international, political &legal, natural environmental, social cultural. These factors have direct impact on the business operations. The business has no control over them. The other factors which affects business operations includes the internal factors which the business may have control over them to some extent and includes power of suppliers, customers, labor and competitors. The report has concluded by giving recommendations on business start up, awareness of the business operating environment and their effects and other strategies which may be put in place to stop small business start up failures. TABLE OF CONTENTS 1.0……………………………………….Major Factors 1.1………………………………………Demographic Environment 1.2……………………………………….Economic Environment 1.3……………………………………….Political And Legal Environment 1.4………………………………………Technological Environment. 1.5………………………………………Environmental and Natural Factors. 1.6………………………………………International Environment. 1.7………………………………………Social Cultural Environment. 2.0………………………………………Other Factors. 2.1………………………………………Suppliers. 2.2………………………………………Customers. 2.3………………………………………Labor. 2.4………………………………………Competitors. 3.0………………………………………conclusion& Recommendations. 4.0………………………………………references INTRODUCTION Small businesses are seen as the force behind better economic growth; create new jobs and poverty reduction in developing countries. They form the base, by which economic growth and industrialization have been achieved. Much as these businesses drive the economy they generally face a lot of difficulties which makes it hard for their long term survival in business. Starting a business has been viewed as a risky undertaking with majority not going far without failing. (Wynn.P and Okpara J. O, 2007) To avoid business failures strategic plans has to be put in place. Most of these strategies include carrying out the SWOT (Strength Weaknesses Opportunities Threats) analysis in order to be able to measure how the business can be able to cope with its environmental conditions which are external and internal. (Armstrong, M., 2003). Business involves activities that are carried out across national and local boundaries which include goods and services in exchange for money. These activities are affected by many other factors that are within and outside the operation of the business organization. The most notable factors are the external environmental factors and mostly are beyond the control of the organization. These factors may bring with them different effects to the organization which may be favorable or unfavorable to the organization at large. There are also other factors where businesses themselves encounter within their operations referred to as internal factors .All these factors forms business operation environment which are referred to as external and internal environment of the business operations. MAJOR FACTORS 1.1 DEMOGRAPHICS ENVIRONTMENT These includes social economic and cultural changes like age structure growing ethnic diversity ,level of education changing family status and geographical shifts. Education level also affects business operation due to the gap between the most learned and semi-learned becomes more of challenging to an organization when they try to satisfy both customers equally. Population is also major factor in determining the demands for the products in a house hold spending. Some families may be having only one person who is the bread winner compared to the fairly rich families where spending may not be a major issue. The effect on higher incomes per house hold has a counter effect on demand for more goods and services and vise-versa. Zimbabwe has a population of approximately 11 million and the country is rated as low income. (CIA World Fact Book, 2010) 1.2 ECONOMIC ENVIROMENT This shows economic effect of an organization in terms of inflation rates in the country, interest rates charged, rate of unemployment, exchange rate and also global economic factors affect directly the organization projects to be undertaken. Countries which meet International Monetary Funds, (IMF) conditions may be at advantage especially in terms of faster development by the aids given unlike other countries with donor restrictions. Better policies are addresses like trade and industry policies, monetary policies, interest rate regulations and many others in ensuring business are carried out effectively. According to P.Gift, 2005, report, many Zimbabwean found themselves in the worst economic crisis with inflation rate of about 150% and interest of more than 100% with unemployment rate above 70%. Majority of donor funds also pulled out of Zimbabwe due to non commitment on economic recovery by the government. Currently some improvements on business and economic recovery in Zimbabwe has slowly taken place though the economic turn around not yet near due to political statement between the two principals. The government was totally blamed for the economic troubles and Zimbabwe problems were seen as majority being the external factors which the government had no control of like sanctions, inflation and low mineral prices among others. (Karombo.T, 2009). 1.3 POLITICAL AND LEGAL ENVIROMENT. Generally when the country has bad governance and political crisis, this reduces investor’s confidence and business is negatively affected. In Zimbabwe political crisis made much small business almost impossible to operate with majority closing down and others unable to repay business loan. The type of government in power whether dictatorship or democratic economic policies brought about by the government regulatory boards, trade policies like the import and export duty charged to traders all of them collectively forms part of political environment surrounding the business. Legal environment includes how the country has placed its law and governance especially rules which governs the business operations like permit payment of taxes and other legal documents required by the law for the business to be allowed to start operating. These laws affect business in terms of flexibility and effectiveness. Also the legal policies ensure that the business in operation should work and operate within the limit of welfare of the environment where pollution and other gases emitted by the industries could be harmful to the community living around. The law ensures such businesses with hazards are not allowed to operate. (P.Gift, 2005) 1.4 TECHNOLOGICAL ENVIRONMENT Technological factors provide new devices and innovations that offer increased efficiency and make older technologies redundant. These changes affect the production technologies applied on the business operations and influences technological developments to great deal. Computers can also control production plant thus reduces expenditure on labor, increased production and efficiency. Robots have taken control of most manufacturing industry where they can receive and reply messages incase of online operation. Business people can sell and buy online and can look for best prices in the world market. Electronic point of sale commonly known as EPOS and electronic funds transfer known as EFT makes business operations very easy especially to access cash. Easy communications modes through internet and mobile phones are available making operations much easier for the business. Technological changes have been proved to help organization reduce expenses greatly with better production method which leads to waste reduction and increased profit. (Appleby.R.C.1994) 1.5 ENVIRONMENTAL AND NATURAL FACTORS Physical forces like change in the weather and climatic patterns may require an organization to change its production programs. This may be due to shortage of essential agricultural based material or energy sources needed by the factories.Environmental pressure groups who advocates for the pollution and the healthy hazards posses’ big challenge to the business organization especially if the business engages in activities which cause pollution .might affect the air and pollute the water. Polluting the air and the environment has been a debate world wide especially the companies manufacturing such products like polythene bags and similar products. (World Bank 2003) Other natural hazards which might affect other business organization includes earth quake which really leaves behind devastating destruction like the most current Haiti earthquake. Strong winds which can rip off roofs and other destruction to the buildings and industries are major threat to business operations. The country may also be land locked where the facility of the port may be a hindrance on and this makes transport expensive 1.6 INTERNATIONAL ENVIRONMENT Liberation forces business to look at things in global perspective .Safe and protected market policies are developed to ensure business are carried out without a lot of restrictions .foreign language becomes necessary especially in exchange of goods and services .foreign currency regulations and exchange rate is vital. Global economic crisis also affects business generally. Foreign market currently has grown due to the technological advancement and the internet has enabled business people to operate effectively. 1.6 SOCIAL CULTURAL ENVIRONTMENT In social setups these includes changes in income and consumer spending pattern per household .business organization target different age groups and their likes for their products depending on their cultural background. These tastes and preferences affect business greatly. Business tends to follow and adjust in order to meet the needs and attributes of the people according to certain communities and religious groups. 2.0 .OTHER FACTORS 2.1 SUPPLIERS. Mostly companies must retain and maintain their supplies for the goods and services for effective and efficient operation. Ideally it is ideal for the company to have more than one supplier, Incase one fails. Supplies are important to the organization as lack of raw materials and other input for operation may affect the organization adversely. 2.2 CUSTOMERS Business normally operates in order to satisfy the customers. Without customers the business cannot operate and there are different types of customers generally. Either that who consume the services directly or wholesale customers. The customers also may be grouped according to age groups as such, many marketer target contain age group to market their products. They also move with tastes and preferences hence their organization must work towards customer satisfaction. 2.3 LABOUR In any country there are labor laws governing the operation and the way employers and employer relate towards each other .A part from the machines and raw materials, human resources forms an important component in the operation of the business. In Zimbabwe there has been much improvement in handling labor related issues. Many times employees demand high pay and better and better welfare for their work. Employees can cause a lot of problems when their issues are not attended to like going on strikes and engaging in labor law which really affects the business operation in a negative way. (Jongwe A., 2007) 2.4 COMPETITORS Industry competition is a normal thing when it comes to business operation. According to Porters 5 theory of market forces, he identifies the five forces which greatly affect the business completion. They are forces close to the company operation and includes the industry its self. The bargaining power of customers the external competitors who would wish to dominate the market, the supplies who may switch prices now and then or even collude with employees. Companies may compete for their products and bring almost similar brands to take over the market. (Morden A. R.2003) 3.0 CONCLUSION & RECOMMENDATIONS. Business starts up in sub-Saharan African countries face a lot of challenges, for example luck of financiers, poor management experience, unfavorable economic conditions and poor infrastructures. Business environmental factors are unavoidable especially the external factors. Based on the above findings any business start up must bare in mind the external and internal environmental conditions and much attention should be focused on the uncontrollable factors. It has been found out that developing countries face a high business failure than the developed countries. (Wynn.P and Okpara J. O, 2007).That means there is a higher risk in taking a business venture in a Sub-Saharan Africa due to the above factors. It is recommended first the World Bank to carry out a SWOT analysis to asses the environmental factors affecting small businesses in Zimbabwe before implementing the intended plan. At the same time it is also ideal to give the country some time in order for them to settle the political differences as this can greatly affect the business operations (P.Gift, 2005). However business environment is something which any business cannot avoid to do without but with effective and proper strategies the plan can and is possible to be realized. 4.0 References Joshi, Rakesh Mohan, (2005) International Marketing, Oxford University Press www.cia.gov/library/publications/the-world-factbook P.Gift, (2005), Zimbabwe Independent, Economic crisis batters small business Karombo.T, (2009),Zimbabwe business environment slowly improves. Paul McClure (2003). A Guide to the World Bank. World Bank Publications.   Kotabe, Masaki and Helsen, Kristiaan(2004), Global Marketing Management – 3rd Edition. Kotler & Keller,2005, Marketing Management - 12th Edition Jongwe A.,(2006),Labour briefing ,Zimbabwe. Morden. A.R, (1993), Elements of Marketing, 3rd edition. Appleby R.C. (1994), Modern Business Administration, 6th edition. Wynn.P, Okpara J.O, (2007), Advanced Management Journal Armstrong, M. (2003). Human resources management & practice 9th edition. Read More