Factors of a Successful Business in South Africa - Essay Example

Task: Business Report Executive Summary The purpose of this essay is to study the various factors that are paramount in establishing a successful business in South Africa. Similarly, the paper discusses how an Australian company such as ABC Learning that deals with children’s education has a potential in succeeding in the economy of the South Africa. Among the factors delved into this paper are simply abbreviated as P.E.S.T.E.L and they include political, economic, social, technological and legal factors. Alternatively, it is crucial to note that these factors affect the potentiality of a company on both positive and negative way. On that note, there is S.W.O.T analysis and the superseding recommendations that are also critical in the success of a company in a foreign country. 1.0 Introduction ABC Learning is a center for childcare and a huge provider of early childhood education services in Australia. It was acquired by GoodStart Childcare in late 2009 (after ABC had opted for liquidation in 2008) and was deemed as the largest early childhood education provider globally. The market capitalization of this institution, according to Australian Securities Exchange, is A$2.5 billion as noted in March 2006, and it has branches around the country. Similarly, because GoodStart Childcare Limited is a not-for-profit entity, there have been plans to open branches in other countries. On that account, the best choice has been South Africa because of many reasons that we are going to discuss1. However, it is imperative to observe that South Africa has been a viable choice because of its economic prosperity and economic stability. The only second-world country in Africa also has a warm socio-cultural environment that does not discriminate but allows lasting integration. 2.0 P.E.S.T.E.L Analysis 2.1 Political Environment The political nature of South Africa is among the friendliest in Africa as compared to other nations. Since the end of apartheid in 1994, the country has witnessed successive calm transitions of the ANC government that encouraged more investors and tourists. Similarly, the parliament has passed numerous policies and acts which directly support foreign investment. This is because of the various advantages of such ventures in the form of the employment creation and improvement of living standards. On the same scope, the number of deals and tenders the government offers to foreign businesses has been increased by the friendliness towards foreign investment2. It is also fundamental to observe that about 40% of feasible tenders are offered to foreign investors, making South Africa the biggest provider of tenders in Africa. Therefore, ABC Learning would be able to make profit by the imparting of knowledge to children of all colors in South Africa. 2.2 Economic Environment In terms of economic properties of South Africa, there are many interesting issues to note. For example, the management skills of most South African businesspersons are highly trained and admirable. This starts from time management whereby managers and workers prefer to arrive at their work places early due to the love of their job. Additionally, during meetings, burning issues are debated satisfactorily in order to attain a workable solution3. In other words, the forging of relationships at the workplace is paramount in order to solidify the essence of economic prosperity between nations. For example, ABC Learning plans to establish a branch that will realize economic success within a given time. Furthermore, in the context of doing business with other nations, South Africa was ranked number 34 in 2011, which places it among the most promising countries in the Global Index4. In the same context, the income category of the country is classified as upper middle income. Additionally, the per capita of South Africa is (US$) 5,770.00 with a population of 49,320,150, making the country only closer to nations such as Brazil and India. Therefore, these factors should encourage ABC Learning to have a chance of success in terms of economic well-being. 2.3 Socio-cultural Environment The socio-cultural environment of South Africa is considered among the richest in both Africa and around the world. For example, this country has whites, blacks, Boers, Afrikaners and coloreds among other diverse groups. Therefore, this has made South Africa a nation full of rich diversity in terms of traditions, customs and culture. Similarly, after the abolishment of apartheid, numerous efforts have been implemented in order to encourage tolerance and reduce race discrimination. This has been bolstered by rich cultures such as that of the Zulu and Ubuntu that encourage humanity and love amongst people. Alternatively, South Africa does not have a national religion imposed by the government, hence making a tolerant state where anyone has the right to adhere to any religion5. With time, this has bred a culture of warm social practices of love, respect and honesty among most citizens of South Africa. 2.4 Technological Environment The technology of South Africa has been expanding steadily since they begun using fiber optic cables. Similarly, there has been government support through the Ministry of Information and Communication in encouraging small information technology prospects. This is through provision of loans and grants to start-ups and companies both local and foreign. Similarly, their modes of production and processing have been digitalized in order to enhance efficiency and save on costs. In return, this has made South Africa a technological nation that competes with other countries such as Kenya, Brazil, India and China. Apart from the manufacturing sectors where technology is playing a significant role, the education area is also not left behind. For example, most schools have now inculcated Information Technology and Communication (ICT) course into the curriculum as a mandatory subject. This is meant to incorporate technology skills in all the citizens to prepare them for all markets. 2.5 Legal environment The legal prospects of South Africa are friendly in terms of foreign investment and would be better for ABC Learning. For example, the business laws in South Africa allow foreign investors to conduct business according to a signed contract and they are permitted to be renewed6. This renewal always comes with a special stipend from the government in order to encourage the investor to continue doing business in the country. Alternatively, the tax laws are not stringent as stated in the foreign investment policies because of the direct benefits brought by foreign investors. Furthermore, the labor laws are flexible for both employers and employees in order to avoid labor conflicts. 3 SWOT Analysis This is analysis that evaluates the Strengths, Weaknesses, Opportunities and Threats. 3.1 Strengths South Africa has the potential of becoming an economic hub because of its skilled workforce, friendly government and technological advancements among others. On the same note, the resolution to team up with nations such as India, Brazil and China is a gainful step to attract foreign investors. This will increase the GDP and foreign exchange deducted from investors coming from different areas of the globe and facilitate networking. 3.2 Weaknesses However, despite the strengths aforementioned, there have been socio-economic challenges affecting South Africa7. These have been caused by the huge disparity between the rich and the poor, breeding a sense of distrust and hatred. In other words, many natives feel a lot of wealth is in the hands of the foreigners and the upper class, and this excludes them from personal development. Because of such unresolved inequalities, South Africa has witnessed unprecedented xenophobic attacks, especially against foreigners. This has scared most investors against coming to the country and encouraged them to settle in less violent nations such as Brazil. 3.3 Opportunities In terms of opportunities, South Africa has numerous chances to grow and attract more investors. For example, South Africa being a second-world country is at an advantage of competing with emerging economic giants such as Brazil and India8. This is because of its advanced technological ventures such as the fiber optics and studying of ICT in schools. Additionally, the flexibility of its business laws and tax policies will still attract foreign investors from across the world. Another growing trend in South African politics is the increase of the democratic space that is attempting to address several inequalities for a conducive business environment. 3.4 Threats South Africa also has threats in its business sphere9. For example, corruption is widespread in the government and private sector, making it hard for investors. Acts and motions being debated in the parliament that are likely to reduce corruption have accentuated these threats, scaring away most investors. Alternatively, the increasing gap between the rich and the poor, especially in black neighborhoods, is worrying most investors, both natives and foreigners. This is because this situation will eventually cause mayhem and disrupt business in the country, leading to uncountable losses. 4 Conclusion In summary, it is paramount for ABC Learning to conduct its own expansion assessments and evaluation on the basis of the information provided above. Similarly, it should attempt to determine the measures of maximizing on the benefits available in the country while employing caution to overcome the risks. This means it should invest in areas that are most politically and socially stable. However, they should also participate in the development process by pressurizing the government to address issues such as poverty and inequality. Alternatively, a foreign company such as ABC Learning that intends to invest in South Africa should learn to tolerate other cultures in order to avoid conflicts. 5.0 Recommendations Therefore, because of the aforementioned SWOT factors that characterize South Africa, ABC Learning can have alternatives. For example, the school can choose to make it expansion projects in Brazil to avoid the many risks that South Africa has. There are many reasons to recommend Brazil as it is an emerging economic giant with reduced unemployment rates, high GDP and a stable political environment. Similarly, the Latin American country is putting many efforts to increase foreign investments for the benefit of the citizens and future prosperity10 (Mary 156). Bibliography Melvin, Arthur. ABC Learning and its Education in Australia. New York, NY: John Wiley & Sons, 2007. Dunham, Michael. South Africa and Its Foreign Business Prospects: The Journal of Business Review, 7(2) pp. 34-45. 2006. Hart, Christopher et al. Evaluation and Business Expansion in foreign nations. Mason, OH: Routledge, 2011. “Ease of Doing Business in South Africa.” Doingbusiness.org. Accessed August 1, 2012. http://www.doingbusiness.org/data/exploreeconomies/south-africa/ Lehman, Gregory. The Making of Successful business in Other countries. Belmont, MA: Edgar Elgar Publishing Limited, 2009. Stephan, Mary. How to use SWOT Analysis in foreign business. New Jersey, NJ: Lightbulb Press, 2005. “Why Start a Business in South Africa.” Startupoverseas. Accessed 1 August, 2012. http://www.startupoverseas.co.uk/starting-a-business-in-south-africa/introduction.html Read More