PLEST ANALYSIS

PLEST ANALYSIS

In any given country, the entrepreneurial environment does have a direct influence on the general business setting in the country. In essence, it implies that the capacity of people to create new business corporations or remodel existing ones can either be enhanced or discouraged by the business environment of that given state. From a general viewpoint, the term "business environment" is used to refer to the influences and pressures that external factors exert on businesses. As such, the success of any given business undertaking depends on the changes experienced in the environment in which it maintains its operations. For instance, if changes are experienced in government policy, the business needs to make necessary changes in order to align its operations with the new policy, or it could face future compromises. The business environment comprises all the external factors that either provide opportunities or pose threats to the success of businesses. As such, assessing the business environment before developing any new venture is important because it will help to ensure that the business strategy is designed in such a way that success can be easily achieved.

In a broader sense, environmental factors are political, legal, economic, social, and technological (PLEST) factors (Koon, 2011).The PLEST analysis is considered the basic foundation for establishing new businesses, and this will be adopted to discuss the Nigerian business environment.

Political environment

The political situation of any country is very critical when it comes to measuring the success or failure of any establishment. Countries with a relative level of political stability will experience huge influence from foreign capital, and this will encourage local accumulation of capital. Since civilian rule was introduced in 1999, Nigeria has experienced a relative level of political stability, which has resulted in a subsequent growth of foreign direct investments (FDI) in the country (Corporate Nigeria, 2009; Ignatius, 2011). The trade regulations and public procurement policies of Nigeria have been described as liberal, which allows for an increased level of competitiveness. The risk rating of Nigeria, as asserted by Fitch and S&P, is BB. In any case, the country does face a present threat to its political stability as a result of increased criminal activities in the forms of kidnapping, political killing, and property damage. Additionally, a perceived high level of corruption in government procurement is still the order of the day. The implication here is that available resources that can be used to meet social services and public utility needs adequately become reduced. This increases the cost of doing business in Nigeria because investors are forced to provide their own power, security, water, and other amenities required to effectively and efficiently operate a successful business.

In general, the political stability in the country does present a friendly environment for doing business in Nigeria. However, it is necessary to understand that the increasing level of insecurity and criminal activities does pose some level of threat to the overall sustainability of new business ventures such as that planned in this case (Kalu, 1999). Thus, it is advised that the management should keep an eye on the changing political situation in the country in order to ensure that it is not eventually coveted by extreme political changes that can threaten the overall sustainability of the business.

Nigeria is also a member of the UN, ECOWA, WTO, Commonwealth, and other international organizations that adopt the common trade mantra. This allows for easy internationalization of products made in Nigeria for these international markets. In the case of the new innovative product that is being designed, it also means that the political setting is favorable because if the products are successful in Nigeria, they can easily be internationalized into neighboring countries and increase the overall performance of the company in the process (Ahmed, 2005).

Legal environment

Nigeria's legal system is robust and somewhat favorable for doing business in the country.In present times, alternative dispute resolutions for commerce and businesses have been conducted in straightforward ways. For instance, Lagos State, Nigeria, has created a commercial division in the High Court for handling enterprise disputes. This helps to expedite the resolution of commercial cases and reduces the cost of doing so.The Lagos State Chamber of Commerce and Industry has also established the Lagos Chamber Arbitration Centre (LCAC) for the purpose of providing necessary arbitration, reconciliation, and mediation services on commercially related cases (Ignatius, 2011; Kalu, 1996). This implies that corporations are now using arbitration and mediation to settle disputes rather than taking all cases to court.Practicing these initiatives across the country could reduce the time and cost required to settle disputes.

Presently, it is very easy to obtain licenses and permits for new enterprises with the aid of a one-stop-shop window established under the Nigerian Investment Promotion Commission (NIPC). The Corporate Affairs Commission (CAC) also provides a fast-track window for the same purpose.

In general, the legal system is very favorable. This is because Nigeria has a well-established legal framework that can be used to protect the overall operations of corporations while also protecting them from unnecessary disputes. Additionally, the legal system is continuously being revolutionized, which makes settling disputes much easier and faster. The implication here is that the Nigerian legal system is fast becoming open and friendly, which is a good thing for new innovative businesses like those discussed in this setting. Finally, the legal system facilitates business operations by allowing companies to easily protect their corporate patents and copyrights through a well-established system that supports such protection.

Economic environment

The term "economic environment" is used to refer to all the economic policies (both monetary and fiscal) that the government uses to control and regulate activities in the country. All these policies have a critical impact on the success and functionality of business organizations. Nigeria does adopt the capitalist economic system, which is a system where market forces (demand and supply) govern the market. When it comes to allowing private enterprises to maintain a presence in some activities in mixed economic systems, government can be chosen because some activities are specifically reserved for government operation.In the Nigerian economic environment, there are few restrictions (mainly in defense-related sectors) and other businesses that do pose a threat to the national security of the country.

Under the UNCTAD Protocols, Nigeria also adopted economic liberalization. In any case, it is important to understand that smuggling, high importation, and dumping of cheap as well as substandard products are threatening the sustainability of local industries (IMF, 2007; Kalu, 1996; UNDP, 2009).

The major challenge that seems to be an outcome of poor leadership from past administrations is Nigeria’s enervating issues with electricity supply. The war against corruption does seem to be yielding expected results because corruption is increasingly being rated lower in Nigeria than in other Sub-Saharan African nations (Corporate Nigeria, 2009; Ignatius 2011, Ahmed, 2005; CIA, 2010; Imhonlele, 2010; Nigerian High Commission, 2010; The Business Trade and Investment Guide, 2009; Ikpeze et al., 2004; IMF, 2007; Kalu, 1996; UNDP, 2009; UNPF, 2009).

With its vast population in excess of 170 million, Nigeria does create a favorable business environment for any company that wishes to invest. Additionally, its GDP is continuously growing, with a subsequent rise in the volume of middle-income homes. As a capitalist society, it also means that government interference is reduced and new corporations can operate their businesses in ways that best suit their interests, thus allowing for intense competition between brands and the potential to continuously increase the performance of companies.

Social environment

Social environments have the power to exert pressure on business organizations, as these organizations are forced to adhere to some cultural and religious factors in order to ensure sustainability (Ignatius, 2011; Kalu, 1996). Cultural factors are used to describe the norms, values, ethics, goals, customers, and other behaviors that govern the way people behave in a given society. Another major impact on the social environment is the lifestyle and attitude of people in urban and rural areas. Normally, businesses do prefer urban areas to rural areas due to their advanced level of education, which does increase their overall purchasing power. Businesses are also expected to respect the religious values of their immediate communities in order to ensure sustainable business operations.

Another factor that is closely related to the social factor is the demographic factor, which is used to describe the size and behavior of the active population in a country. With over 170 million people, Nigeria is an actively large internal market, and businesses should strive to ensure that all their operations are aligned with acceptable cultural and demographic standards of the various communities they reside in.

Overall, Nigerian culture is open and friendly. It does accept corporations that accept them, but will eventually fight any corporation whose policies are not well acclimatized to the local cultures and expectations. For instance, the Niger Delta’s indigenous people have engaged in a decade of conflicts with Shell and other oil corporations for spilling oil in their region and endangering the livelihood of its populations (Ignatius, 2011; Kalu, 1996). Additionally, religious activities and days are very much observed within the Nigerian metropolis, which implies that shifts in working hours are experienced during such observation. Thus, the social setting does create the right platform for running a successful new business in the country, as Nigerians are generally welcoming to the ideas of new establishments that can boost their economic performance.

Technological environment

This is a crucial external factor because it can be used to determine the success of any given business. With the aid of computerized operations, present businesses have been successful in analyzing customers, reducing product defects, and ensuring services at the right time and place. Technologies have also made business communication instantaneous with the aid of numerous applications and social media to support such communication. Research and development have also been recognized by modern businesses as capable of enhancing their growth and stability.

The majority of Nigeria's technological aspects are heavily reliant on importation.For instance, communication gadgets are vastly imported from Asian countries. Due to their fight to remain competitive while offering a lower price advantage, most of these communication technologies are substandard, which threatens their overall sustainability and reliability while increasing the company’s incurred cost for acquiring such gadgets.

In the technology line, Nigeria is described as a developing economy (Ignatius, 2011; Kalu, 1996), which makes it reliant on new and innovative technologies. However, the citizens are still relatively poor (Corporate Nigeria, 2009; Ignatius 2011, Ahmed, 2005; CIA, 2010; Imhonlele, 2010; Nigerian High Commission, 2010; The Business Trade and Investment Guide, 2009; Ikpeze et al., 2004; IMF, 2007; Kalu, 1996; UNDP, 2009; UNPF, 2009), which implies that the majority of the citizens cannot afford the high price tags associated with new innovative technologies. Thus, Nigeria doesn’t boost advanced technologies in the corporate sector, and the majority of the technologies used in the country are either second- or third-grade technologies imported from China and other countries with low-priced products. In terms of production, this does have a negative effect because the lack of necessary technologies can hamper the overall production process. It does, however, present an opportunity for companies that can launch new innovative businesses that can service this sector, as they can easily become pioneers and gain large market shares in the process.Thus, this does create some favorable conditions for this new business establishment.

From the above discussion, it is evident that the creation of a favorable business environment does require that the right conditions be provided for the efficient, effective, and profitable development of enterprises. The government is responsible for ensuring that the environment is conducive to business activities.On that ground, it is important to make sure that political powers are exercised in ways that increase the confidence of investors when it comes to investing in the Nigerian economy.

From the above analysis, it is evident that the business outlook in Nigeria is both challenging and promising. This is because, while the political economy of the country seems promising and investor-friendly, development in general is still abysmal. Although Nigeria rates much better than the majority of the Sub-Saharan African nations in the area of constraints to business, there are still huge issues in the form of electricity supply, transportation, and accessibility of finance features (World Bank, 2010), as well as the ineffectiveness of its institutions and infrastructures.

Overall, Nigeria does represent a feasible business environment for the new innovative products that are being developed in this case. This is because the population will more or less guarantee sales as the increasing level of GDP and middle-income homes boost consumers’ purchasing power. Additionally, Nigerian culture is based on a unique and open setting, with consumers readily willing to try new innovative products. The government has also established a solid legal framework for regulating business processes in the country, and all these combined features boost the overall potential for successful establishment and operation of new businesses in the country.

References

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