`Introduction
Before an organisation makes the decision to relocate to another location or put up a similar establishment elsewhere, it would be paramount for the management to conduct an extensive feasibility study into its chosen site. This will enable the stakeholders to predetermine sensitive factors that may affect the operations of the establishment and ultimately decide whether the venture will be a success.
Bensoussan & Fleisher (2013) suggest that this feasibility study accords the Organisation a chance to know and capitalise on their strengths, minimise their weaknesses and detect the various opportunities that present themselves. It also facilitates the evaluation of any potential threats which may hinder the success of the business and find suitable means of eradicating them.
An Organisation may decide to hire a professional to conduct an intensive investigation of the operation of their business premises in order to determine its performance with relation to various factors which may be either internal or external. There are several methods which can be employed by the professionals when carrying out this analysis, including SWOT analysis or a PESTEL analysis. According to Dyson (2004), this analysis enables the management of an organisation to determine the performance of each department is and whether they are goal congruent and pulling in the right direction in as far as Organisational goals are concerned. It illuminates the specific areas that the organisation is doing exemplary as well as those that have shortcomings and need to be improved upon.
This report will discuss a PESTEL analysis conducted by a company called the Lend Lease Group, with regards to putting up a branch in Africa, specifically in a country called Kenya. Its main focus will be concentrated on the external factors that are likely to affect the company, especially concerning the opportunities and threats that would present themselves in pursuing the venture. This is in the attempt of understanding the impact it has on the market, as well as seeking solutions that improve on the sections that weigh down the company, as well as determine the measures that need to be implemented to realise more profits.
The Lend Lease Group
Lend Lease is an influential company that deals with property management, investment and construction. It has been in the market for over fifty years thereby earning a credible reputation. It has branches in numerous countries across the world; in Europe, Australia, Asia and the Americas where its operations include the construction and management of large building projects. The company is also involved in key sectors such as community and healthcare development (“Australia Home Lendlease”, 2016). It is responsible for the erection of spectacular structures including the Trump International Hotel and Tower located in the city of Chicago, The National Museum of Australia, The Broadgate Tower in London and the currently the International Convention Centre in Sydney which is scheduled to be opened in December this year.
Investing In Kenya, East Africa
Lend Lease has the experience of operating in numerous countries already, and this gives them a significant advantage in anticipating the reception of their business in a new environment. The decision to select Kenya as a potential investment location stems from the rising need for institutional and infrastructural development in the country and within other developing nations in Africa.
The East African region; comprising of countries like Kenya, Rwanda, Uganda, Burundi and Tanzania, has emerged as a lucrative location for foreign investors to conduct business and invest their resources. However, according to Bright & Hruby (2015) Kenya stands out as the economic anchor of the region and the overall performance of the region relies considerably on how the country performs.
With a population of forty-three million people and a GDP of $41.117 billion, Kenya’s economy stands as the largest and most dynamic in the region when put in comparison with the other member states. Moreover, it has commandeered the advancement of information technology in the region and continues to play a vital part in linking the other economies through investment and trade. For this reason, the country is expected to remain strong as an economic leader within East Africa (Bright & Hruby, 2015)
Kenya’s economy is the sixth largest in Sub Saharan Africa. It has been ranked 90 out of 144 according to the World Competitiveness Index by the World Economic Forum. The country has employment laws which stipulate that the minimum age for employment is sixteen years, with that of hazardous work being eighteen years. This grants the company a chance to maximize on the available workforce that would be seeking employment (Bright & Hruby, 2015).
Opportunities
Kenya offers promising opportunities that should be put under serious consideration by any foreign investors. The country derives its economic dominance from a strong private sector, and continued efforts by the government to introduce market- friendly policies for most of the period after its independence. Moreover, the nation has enjoyed relative political stability over this period, thereby cementing its position as a hub for foreign investors.
The government of the country has also realized the significance of foreign investors in improving the living standards of its citizens and has dramatically reduced the cost associated with doing business (SWOT, 2016). This, therefore, makes Lend Lease to stand at an advantage owing to the fact that relatively large part of its operations directly relies upon human capital. This implies that aside from providing infrastructural development, it will also provide employment opportunities regarding human labour, hence satisfying one of the needs stipulated by the national government.
Also, Lend Lease has made several efforts in diversifying the scope of the services they offer. This ranges from property development and construction to investment, thereby earning the reputation of being among the world’s leading providers of property and infrastructure solutions. The company also boasts a strong brand presence and solid financial stability which serves to give it credibility as well as a competitive edge in the market (SWOT, 2016).
Kenya is also a strategic location because of its easy accessibility. It serves as the international air and sea gateway of the East African region (SWOT, 2016). It has several international airports as well as the Port of Mombasa which would lighten the burden of any materials that would require shipping from other locations. Moreover, it would be easier for the company to consider expanding to the other countries in the region once it had stabilized its base of operations in Kenya.
Threats
Any business venture is sure to have its risks and challenges. Before deciding to invest in Kenya, it would be critical for the company’s management to conduct a thorough evaluation of potential threats that would hinder the success of the venture. One of the major threats to consider is that of terrorism. Kenya has been a constant target of terrorist attacks from the militant group al- Shabaab, whose main base is the neighbouring Somalia. This has seen the bombing and attacks on innocent civilians in several establishments including shopping malls and learning institutions and has considerably weakened the confidence of foreign investors despite its minimal effect on the commercial sector.
Another potential risk to the venture is that of the graft. Kenya has been ranked among the most corrupt countries in the world, with numerous scandals concerning individuals holding public office. This has had negative implications in convincing foreign investors to invest their capital and resources in the country, who are usually affected at the market entry and business start-up stages, as well as in the public procurement sector (User, 2015).
Moreover, despite having the reputation of being a politically stable country, ethnic tension and inter-tribal violence have been a constant threat. The worst of this was witnessed in the 2007/08 post-election violence which saw property worth millions destroyed and trade activities come to a halt. Peace has since returned to the country however there are still fears that the same events would re-occur in the future.
PESTEL Analysis
Kenya’s economy is the sixth largest in Sub Saharan Africa. It has been ranked 90 out of 144 according to the World Competitiveness Index by the World Economic Forum. The country has employment laws which stipulate that the minimum age for employment is sixteen years, with that of hazardous work being eighteen years. This grants the company a chance to maximize on the available workforce that would be seeking employment (Bensoussan & Fleisher 2013).
Politics
Kenya is a democratic state which has enjoyed political stability for most of its post-colonial era, save for the post-election violence that occurred in the year 2007. The government has since made numerous efforts to restore investor confidence and create a friendly and accommodating environment which will attract foreign investors. The country also enjoys the privilege of a free press and lively politics (User, 2015). With the next general elections scheduled for August or December 2017, it would be wise for the management of Lend Lease to observe the trends before making the final decision.
Economic
Performance indicators suggest that Kenya is coming out as one of the fastest growing economies and key growth centres in Africa, owing to lower costs of energy and investment in infrastructure. Also, according to the World Investment Report 2015 edition, the country’s inward foreign direct investment soared to an all-time high US$989 million in the year 2014 (User, 2015). This figure is attributed to pro-market policies, the country’s central role in the region as well as having a diverse economy. This will be encouraging news for the company looking to expand into the country. Also, the high rate of unemployment in the country suggests that there would be an availability of inexpensive manual workforce, which is highly essential to the huge projects that the company undertakes.
Social
Social environment entails the public perception with regards to the product or service offered by a company. With time, consumers have become more particular in knowing what they want thereby making it necessary for companies to become flexible and customize their services or products according to the wishes or preferences of the customer. This would call upon Lend Lease to adjust accordingly and be prepared to deliver quality and customized services.
Despite being rich in ethnic and cultural diversity, most Kenyans have fully embraced and adopted the western culture and capable of understanding the English language. The adult literacy rate in Kenya is at eighty seven percent, which surmounts to considerably competitive human capital (Bright & Hruby, 2015). This will therefore make it easier to communicate and relate to the locals who would provide manual labour. The company’s impressive portfolio and image would make it able to withstand and thrive in the competitive market.
Technology
Kenya has made a massive improvement with regards to technological advancements since the 90’s. The e-commerce sector has shown tremendous growth and the government has also introduced e-government services. Mobile communication is affordable enough to include the mass population and the government has also initiated rural electrification projects which will ensure that electricity is available across the country.
This will undoubtedly be of importance to the company which employs the use of highly mechanized equipment. Mechanization has enabled the Lend Lease to operate faster and more efficiently. Moreover, it has the capacity make sophisticated installations such as automatic touch doors or walls, depending on the client’s specifications and needs (Annual Report, 2015).
Environment
Kenya enjoys an equatorial climate, which has resulted in a rich flora and fauna, which has significantly boosted the tourism sector. For this reason, environmental sustainability has become a sensitive issue (Sherrin, McAllister & Nanda, 2015). With a workforce of seventy-five percent and only eight percent land, there has been a growing need to preserve the natural environment. This therefore means that the green building initiative by Lend Lease will be greatly advantageous in making them competitive in the market. The rising number of rural to urban migration also suggests that there will be an increase in the need for community and developmental infrastructure thereby creating more opportunities for the company.
Legal
Kenya’s legal framework has been wired towards attracting foreign investors and protecting their interests. The government has made honest efforts to ensure investors feel comfortable in injecting their capital into the Kenyan market. Some of these include the Foreign Investor Act which aims to protect foreign investors and accords them the chance to repatriate their earnings and the Capital Markets Authority whose chief mission is to protect investors’ interests (Bright & Hruby, 2015). The government has also placed very friendly tax laws for international investors in a bid to lure them into the country. This has led to an upward trend in international trade in Kenya (OECD, 2014). This should give the Lend Lease management some confidence in considering the country as a prospective location to put up shop.
Recommendation
Despite having some risks to contend with, the evidence gathered suggests that Kenya would prove to be a profitable venture for the Lend Lease Group. It has an obvious gap in the infrastructure and development sector, which is directly in line with the services offered by the company. Also, it provides an investor-friendly environment with regards to business and tax policies and enjoys relative political stability. Its strategic location on the map would also make it easier for the company to expand to other parts of the region, which are equally in need of the company’s services. For this matter, it is highly recommended that the management considers expanding into this location, preferably after viewing the country’s position in the general election to be held next year.
Conclusion
The analysis provides an insight into the feasibility of the Lend Lease Group introducing their services in the Kenyan market. The findings suggest that the company would thrive, given the study of the external environment. Ultimately there may be other factors to consider which would directly affect the venture’s success and this includes the internal factors within the Organisation. However, from the external factors viewpoint, the venture should be given the green light.
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