Answer to Question #316007 in Management for king

Question

The management of TFG has approached you to help identify and analyse the various factors in the remote environment. a) Use a suitable model to analyse the remote/external environment in which TFG operates. b) Identify two opportunities and two threats that are relevant to TFG. 

Answer 1

a) The PESTEL / PEST Analysis of Tfg will cover all macro environment factors that impact Retail political factors, economic factors, social factors, technological factors, environmental factors and legal factors. Tfg is listed on Johannesburg stock exchange. Tfg operates in a dynamic environment where it is influenced by – regulatory framework, government decisions, consumer spending behaviour, increasing environmental activism among consumers, increasing regulatory framework for environmental factors, technological changes, collective social trends, and ever evolving legal system.

Political Factors that Impact Tfg

Government resource allocation and time scale. The South Africa new government policies can improve the investment sentiment in the Services sector. Given the wider acceptance of the suggested policies among population, it is safe to assume that the time scale of these policies will be longer the mandated term of the present South Africa government.

Economic Factors that Impact Tfg

Inflation rate – The easy liquidity in the market post the great recession of 2018 will lead to increasing inflation in the South Africa economy.

Efficiency of financial markets in South Africa – Tfg can access vibrant financial markets and easy availability of liquidity in the equity market of South Africa to expand further globally.

Availability of core infrastructure in South Africa – Over the years South Africa government has increased the investment in developing core infrastructure to facilitate and improve business environment. Tfg can access the present infrastructure to drive growth in Services sector in South Africa.

Social Factors that Impact Tfg

Leisure interests – the customers in the South Africa are giving higher preferences to experiential products rather than traditional value proposition in Services sector. Tfg can leverage this trend to build products that provide enhanced customer experience.

Power structure – There is an increasing trend of income inequality in South Africa. This has altered the power structure that has been persistent in the society for over last 6-7 decades.

Attitude towards health and safety – With increasing liberalization the attitude towards health and safety are getting lax. Tfg needs to stay away from these attitudes as the cost of failure is too high in South Africa.

Education level – The education level is high in South Africa especially in the Tfg sector. Tfg can leverage it to expand its presence in South Africa.

Demographics – For the Services products, Tfg has demographics on its side. South Africa is a young country and growing. Tfg can use this trend to cater to various segments of the population.

Technological Factors that Impact Tfg

Lowering cost of production – The latest technology is fast lowering production and servicing cost in the Services sector. Tfg has to restructure its supply chain to bring in more flexibility to meet both customer needs and cost structures.

Research and development investment at both macro level and micro level in South Africa. If there is an environment of creative disruption and both government and private players are spending resources on developing new solutions.

Empowerment of supply chain partners – Technology has shortened the product life cycle and it has enabled suppliers to quickly develop new products. This has put pressure on Tfg marketing department to keep the suppliers happy by promoting diverse range of products. It has added to the cost of operations of the Tfg.

Environmental Factors that Impact Tfg

Customer activism – Greater awareness among customers have also put environmental factors at the center of Tfg strategy. Customers expects Tfg to adhere to not only legal standards but also to exceed them to become responsible stakeholder in the community.

Environmental norms are also altering the priorities of product innovation. In many cases products are designed based on environmental standards and expectations rather than catering to traditional value propositions.

Waste management especially for units close to the urban cities has taken increasing importance for players such as Tfg. South Africa government has come up with strict norms for waste management in the urban areas.

Legal Factors that Impact Tfg

Business Laws – The business laws procedure that South Africa follows. Are these norms consistent with international institutions such as World Trading Organization, European Union etc.

Data protection laws – Over the last decade data protection has emerged as critical part of not only privacy issues but also intellectual property rights. Tfg has to consider whether South Africa have a robust mechanism to protect against data breaches or not.

Opportunities

TFG brands are positioned as fashion-forward and premised on our market leading, in-house capabilities in clothing and store design.

• In South Africa, value continues to be created through our quick response supply chain while increasing local manufacturing capacity remains a strategic objective.

Threats

• Our ability to generate profits could be undermined by a failure to quickly and accurately interpret and respond to fashion trends.

• The ability of our brands to cater for a shift in consumer preferences