Expanding Business In Rwandan Economic Zone

PESTEL Analysis of Rwanda

Question:

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Discuss About The Environment Strategic Business Management?

Business Strategy is helpful in planning the business of an organization for the long-term basis. Strategic management is concerned with the various business activities i.e. raising fund for producing products and services and getting profit in the business. This report identifies the famous technology company Alpha Response Technology Solutions. This is Taiwanese Technology Company and seeking to expand the business in the Rwandan Special Economic Zone. Before entering in new market, it is important to understand the environment of the market. By the analysis, this report provides the recommendations to the company to expand the business in the new market (Cateora, 2008).

Company is going to expand the business in Rwandan and the market of the country can be analyzed by the PESTEL analysis. The PESTEL analysis of the country Rwandan is described below:

Political

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·         Strong and favorable policy and legal environment,

·         Politically stable country,

·         Legal system supports government,

·         Citizen contributes to the government decision making process by e-participation and e-parliamentary channels, and

·         Tax regulations are favorable for FDI

Economic

·         Low disposable income of Rwandan population,

·         Exchange rate is low and attractive for the foreign investors, and

·         Financial system of country is underdeveloped and access to credit is poor

Social

·         High level of literacy in country,

·         Population is drawn from the ethnic and linguistic group,

·         People use principal language,

·         Rwanda is in the African Great Lakes region and highly eminent, and

·         Climate of the country is pleasant with two rainy seasons and two dry seasons each year (Twagiramungu, 2006).

Technological

·         Developing country and have growing technology gradually,

·         People do not have much technological skills,

·         Power is only in the government of the country,

·         Low average of innovation and creativity in the country, and

·         Limited access of foreign and local technology by local organizations

Ecological

·         Country is covered with the diverse ecosystem i.e. natural ecosystem, Forested area and agro-ecosystem,

·         Rural settlement of Rwanda has been scattered by unplanned settlement,

·         Agriculture is the most crucial sector for the country’s economy, and

·         Variations in the temperature ranges and rainfall are creating some irregularities (United Nations Rwanda, 2017).

Legal

·         Open liberalized economy for the economic growth,

·         Effective participation in the international trade for the sustainable growth path,

·         No significant trade barriers,

·         The export/import licensing process is simple and fast, and

·         There can be temporary entry of products without any duties (Kigali, 2010)

The country Rwanda is Special Economic Zone that is geographically specified and physically secured area for the companies. The country is offering some incentives to the entering companies i.e. more liberal and simplified economic regulations for the business operations. The Special Economic Zones of Rwanda has fiscal, social, and infrastructure policies for the new entrants in the country. The most important goal of the country is to facilitate economic growth by reducing tariffs and effective customs controls. Special Economic Zones of Rwanda creates attractive business environment for the new companies. Goals of the country is to utilize the public resources i.e. increase domestic and foreign investment, export expansion and diversification, development of industrial and non-agricultures sectors and establishment of employment and income (Baines, Fill & Page, 2011).

According to the report of National Institute of Statistics of Rwanda, the big part of investment in the country comes from the European Union (32%) and East African Community (14%). This is increasing in inflows of the country and indicating that the country is attracting foreign investment from the global market for improving business environment and existing investments. In recent years, most of the investments are approved from Kenya, South Africa, Germany and United Kingdom. According to this report, there are some reasons the investors now have confidence in Rwanda and they are investing in the potential economic sectors in the country. Rwanda is attracting the investors for all the sectors (National Institute of Statistics Rwanda, 2017). In May 2015, the country launched a new investment code to attract FDI into tourism and new technologies. Coffee, tin, tea, telecommunication and energy are some sectors that have attracted most of the foreign investments in Rwanda (Santander, 2017). The growth of the foreign investments in Rwanda in recent years can be seen in the described table.

Special Economic Zones in Rwanda

Table 1: Growth in FDI

(Source: Santander, 2017)

ARTS’ is a Taiwan technology is seeking to expand the business in the Rwandan Economic Zone. There are some factors that motive the company to enter in Rwanda. Those motivational factors are as follows:

Rwanda has strong economic growth and has high ranking in the World Bank’s business index. The country has the reputation for the low corruption.

The country provides various opportunities for the foreign direct investment in various sectors. ARTS would get profit and opportunities in the technology sector in terms of infrastructure, information and communication (Chen & Mujtaba, 2007).

General labor is available in the country and that would be very beneficial for the company ARTS. There is higher institute of technology, vocational institutes and private universities that are providing better trained graduates every year. So, there is great opportunity for the company to hire skilled people for the business operations.

Rwanda is the stable country along with the low crime rates. ARTS would get security of the business there. There strong police and military providing security from the criminal activities and disturbance.

Company has established a trade free zone including current and future communication infrastructure which would be very beneficial for the technology company (The New Times, 2013).

Five forces analysis is very helpful for the company to understand the new market in which it is going to enter. The analysis for the company Alpha Response Technology Solutions is described below:

Threats of new entrants (High)

·         There are barriers to entry for new entrants due to economy of scale, switching cost, and high trade and government policies etc.

·         There is cost disadvantage in the technology industry.

·         Various distribution channels are available that restrict new entrants.

Bargaining power of buyers (High)

·         There is low switching cost for the product so bargaining power is low,

·         Buyers purchase a large portion of the total revenue of the company, and

·         Products are undifferentiated so buyers do not switch to other products,

Bargaining power of suppliers (High)

·         The suppliers are large so bargaining power of suppliers is low,

·         Companies are not regular customer of the suppliers so they can’t bargain,

·         Available products creates high switching cost in terms of suppliers, and

·         Substitute products in the industry are not available so suppliers have low bargaining cost,

Threats of substitute products (High)

·         The threat of substitute products is low,

·         Buyers face low switching cost in the industry,

·         The qualities and performance of the other products are similar, and

·         Buyers value to the differentiated products and reduce the threats

Competitive Rivalry (Intence)

·         In the technology industry, high exit barriers, strategic operations, high fixed and storage costs create rivalry,

·         New entrants create rivalry for existing company, and

·         Rapid growth, effectiveness and competition also create rivalry.

Product line is the crucial part of the business of any organization as it is helpful in attracting the customers and improving the revenue. The comparison of product line of ARTS and Positivo BGH is done in the given table.

Alpha Response Technology Solutions

Positivo BGH

·         Cloud solution,

·         Enterprise solution,

·         Public cloud,

·         Hybrid solution,

·         IT support i.e. desktop support, server support, and network monitoring

·         Network design and development i.e. email solution, portal solution, collaboration tools, system integration, document management solution etc.

·         Voice over IP solution,

·         GT80S Titan SLI 18.4in Core i7 Notebook,

·         1TB hard drive (Alpha Technology, 2017)

·         Laptops i.e. All in one  1800, All in one 2300,

·         Notebooks i.e. Serie A, Serie, Z, Serie, E and Serie FX,

·         Tablets i.e. 10”, 8”, 7” and Y710 Kids,

·         All in one laptops including high performance and optimization of space, and

·         Desktops i.e. D600, D660, and D651 )

( POSITIVO BGH, 2017)

Sale to the Rwanda domestic market

Sale to a Western market

Sales

100000

120000

Cost of sales

60000

84000

Gross profit

40000

36000

Expenses

12000

10800

Net profit

28000

25200

% return on production

28%

21%

From the above analysis of the sales of Titan in the Rwanda domestic market and in the other western market, it is observed that company would get profit and returns in the Rwanda market. The study shows that ARTS Company would be successful in using foreign direct investment to enter in the Rwandan market. So it is recommended that the company should use same strategy in the Rwandan market which it is using in other countries. Company should continue innovations and come up with the new and unique products which would be helpful in competing with the other companies in terms of products. ARTS should have aggressive marketing to attract more customers in Rwandan market.

References

Alpha Technology, (2017), Cloud Solutions for Alpha Anywhere, accessed on 16th September 2017 from https://alphatechnologysolutions.com/cloud

Baines, P., Fill, C. & Page, K. (2011), Marketing, (2nd), New York: Oxford University Press

Cateora, P.R., (2008), International Marketing (13th), NY: Tata McGraw-Hill Education

Chen, L. Y. & Mujtaba, B., (2007), The Choice of Entry Mode Strategies and Decisions for International Market Expansion: Journal of American Academy of Business, Cambridge, 10(2), pp. 322-337

Kigali, (2010), MINISTRY OF TRADE AND INDUSTRY, accessed on 16th September 2017 from https://www.minicom.gov.rw/fileadmin/minicom_publications/policies/Trade_Policy_Rev_NPC_.pdf

National Institute of Statistics Rwanda, (2017), Rwandan Foreign investments increased over last two years, , accessed on 16th September 2017 from https://statistics.gov.rw/node/813

POSITIVO BGH, (2017), Products, accessed on 16th September 2017 from https://www.positivobgh.com/products/

Santander, (2017), RWANDA: FOREIGN INVESTMENT, accessed on 16th September 2017 from https://en.portal.santandertrade.com/establish-overseas/rwanda/investing-3

The New Times, (2013), Special Economic Zones Accelerating Rwanda’s economic growth and Development, accessed on 16th September 2017 from https://www.newtimes.co.rw/PDF_ads/Special%20Economic%20Zones.pdf

Twagiramungu, F., (2006), ENVIRONMENTAL PROFILE OF RWANDA, accessed on 16th September 2017 from https://www.vub.ac.be/klimostoolkit/sites/default/files/documents/rwanda-environmental-profile.pdf

United Nations Rwanda, (2017), Environment, accessed on 16th September 2017 from https://www.rw.one.un.org/mdg/mdg7

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