External Analysis

The featured picture is a shot of downtown Swakopmund – the original department store Woermann Brock, established in 1894.

A while back I worked with a guy called Basil at Rössing Uranium near Swakopmund, Namibia.  And this is what he told me.  His wife opened a baby supplies shop in the town.  Commerce (and most other things) in the town, it was said, was run by a small cartel of businessmen, known as ‘The German Mafia’.  This group decided who traded in Swakopmund and who didn’t.  They had kept out all the large retailers from South Africa in favour of local business owners.  So we shopped at Woermann Brock, instead of Pick ‘n Pay.  This was constraining if you were not ‘in’ but Swakopmund retained a unique culture and visual appeal.  The baby supply business flourished until the owner of the premises wanted to rent the shop to someone else.  So the rent for the shop went up.  And up and up and up.  They were barely breaking even.  Apparently this was not having the desired effect so Public Works started work on the pavement outside her shop.  Mothers desperate for baby supplies still picked their way thought the mud to the shop.  One day they dug a deep, wide trench in front of the door.  When the shop put a plank across for customer access she was told this was unsafe and therefore against the law.  Game Over.

While this story is unsubstantiated, it does illustrate a strategic lesson.

Basil’s wife had fallen foul of Local Politics.  But how could she have pre-empted this?  How in fact can we in our strategy process consider risks facing us across the broad spectrum of the environment into which we intend to execute our strategy.  It is a good idea to carry out an External Analysis as part of our strategy process.  Here is a tool for part of this process.  There are two perspectives in the strategy literature which, when plotted against each other provide a broad and detailed spectrum for consideration.

The first perspective covers the scope of your intent.  Do you focus on Local, National or Global markets?  As operators in Southern Africa we could sub-divide ‘Global’ into Overseas, Africa or the Southern African Development Community (SADC).  These are self-explanatory.

The second perspective is your operating environment.  This part of your analysis assess the macroeconomic environment of economic growth, interest rates, currency movements, input factor prices, regulations and the general expectations of you organisation’s role in society.  This analysis is referred to as the reflecting the components involved.  This acronym has grown from early days as PEST to PESTLE.  Now, with the addition of Ethics, it is ‘STEEPLE.  The components are:

  • Social
  • Technological
  • Economic
  • Environment
  • Political
  • Legal
  • Ethics

The issues crashing the Baby supply store are shown in the matrix below.

This is a useful framework for external analysis.  The detail under each operating component goes beyond the scope of this newsletter.

Addendum

Many of the Germans from Namibia retired in my current home town, Somerset West.  A couple of years ago Woermann Brock established a large department store in our local mall.  For a term we were able to buy Stollen at Christmas time.  Then the Consumer Protection Act and the R146 Food Labelling Regulations were enacted.  The German labels were found unacceptable.  The fines for non-compliance are onerous.  Woermann Brock closed down.  Sad yet perhaps a little poetic.  Woermann Brock would have done well to consider this block of information.  Slide3

The picture comes from run gloria run.  I tried to penetrate the veil of secrecy around blogger google+ but alas I failed and could not get hold of Gloria – she had an interesting trip to this wonderful town.