Business Environment of Rwanda

This assignment examines the business environment in Rwanda. It delves into key aspects such as the political landscape, trade deficits, tax rates, and post-genocide economic development. The analysis draws upon scholarly articles, World Bank data, and online resources to provide a comprehensive understanding of the challenges and opportunities facing businesses in Rwanda.

BUSINESS
ENVIRONMENT
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TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................3
1.0 INTRODUCTION.....................................................................................................................4
Overview of Organization............................................................................................................4
Organization structure and its types.............................................................................................4
Organizational structure applicable to Tuffstuff Ltd. .................................................................5
2.0 definition of pest & SWOT ANALYSIS...................................................................................5
Discussing the utility of PEST analysis as an analytical tool......................................................5
Limitations...................................................................................................................................6
Possible alternative tools..............................................................................................................6
3.0 analysis, data information that can affect tuffstuff in rawanda..................................................7
Factors which can effect Tuffstuff in Rawanda...........................................................................7
4.0 Conclusion...............................................................................................................................11
REFERENCES..............................................................................................................................13
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EXECUTIVE SUMMARY
In this report, different aspects of business environment are explained. The business
environment comprises of various external and internal factors that affect the functioning of
organization. Therefore, it involves the study of various factors like, customers, competitors,
employees, suppliers, political, social trends and technical factors. In the present context,
organizations are required to carry out their operations in the intense competitive and dynamic
environment. Thereafter, various external and internal factors prevent organization in attaining
its business targets. Therefore, with the aid of SWOT and PEST analysis, impact of these factors
can be studied. Further, various political, economic, social and legal factors can impact the
functioning of cited company in Rwanda market. Considering, the provided scenario, Tuffstuff a
cement company of UK is planning to enter the market of Rwanda. To ensure success of
company in target nation, company can adopt flat structure which is flexible and appropriate for
company.
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1.0 INTRODUCTION
Business environment comprises of various extrinsic and intrinsic factors that impact
different operations of the business enterprise. Therefore, it is significant for company to study
business environment and devise strategies accordingly. In the present report, various aspects of
business environment will be studied in the context of provided case study (Fernando, 2011).
Tuffstuff Ltd is a cement manufacturing company of UK which is intending to expand its
operations in Africa. In this report, PEST and SWOT analysis will be conducted to study the
impact of external and internal factors that can obstruct the growth of Tuffstuff Ltd in the target
country. In addition to this, organizational structure of selected company will also be explained.
Overview of Organization
According to the provided case scenario, Africa is an attractive country for the
investment prospects. In addition to this, it is rich in competent and young human resources.
Therefore, to expand its operations, Tuffstuff Ltd is intending to enter into the market of sub
Saharan Africa by setting up a manufacturing and distribution unit. Therefore, company can get
benefit of resources available in the target nation. Further, it is believed by the management of
company that there will be less competition in the target area named Rwanda. Therefore,
company can easily avail competitive advantage. With this aspect, company can enhance its
productivity, growth and profitability.
Organization structure and its types
Organizational structure represents the manner in which tasks, duties and various
operations are distributed and coordinated in Tuffstuff Ltd to attain the overall goals of
organization. Selection of appropriate organization structure will assist company in successfully
attaining its objective of growth and profit maximization. Therefore, various operations will be
executed smoothly without any hindrance. Broadly, there are two types of organization structure,
flat and hierarchical. In flat structure, there are few or negligible levels of administration in
between managerial and staff level employees. Therefore, in this type of organization structure,
more emphasis is given on employee participation in the decision making process than on the
employee control and supervision (Kennerley and Neely, 2003).
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Further, in hierarchical structure, employees are provided ranking at different managerial levels
within the company, and every level is one preceding to another (Jones, 2010). Therefore, there
are large number of layers between top administration level and lower level of company.
Organizational structure applicable to Tuffstuff Ltd.
From the analysis of two main organizational structure, it is feasible for company to
adopt flat organization structure. Tuffstuff is expanding its operations in Rwanda therefore, it
requires more funds. Further, flat structure will assist company in reducing operational cost by
eliminating the salaries of middle level employees. In addition to this, company doesn't have
previous experience of foreign entry so it is feasible for investing too much capital in various
resources (Brown, Earle and Lup, 2005). Also, organization can appoint young talented human
resources that are available in Africa and induce them to bring forward their creative ideas and
opinions. Flat structure will provide a great support in reducing cultural gap by facilitating higher
degree of communication between management and selected employees from Africa. Hence, flat
structure is more appropriate for Tuffstuff Ltd.
2.0 DEFINITION OF PEST & SWOT ANALYSIS
Discussing the utility of PEST analysis as an analytical tool
Analytical tool helps organization in making best suited business decisions by
considering different business aspects. In addition to this, it assists in developing sound business
strategy in order to enhance the routine performance of company (Klapper and Love, 2010).
Since, it is investigated that Tuffstuff is expanding in market of Africa, so it is crucial for it to
use various analytical tools. It will further help company in making suitable business decisions
and enhance more knowledge about various factors like, competition, threat of new products etc.
in the cement industry. For this aspect, business enterprise can select PEST analysis and Porters
five force analysis.
PEST analysis regards to the acronym that represents, Political, Economic, Social and
Technical elements as well as changes regarding them, that can impact the functioning of
organization. It helps in understanding the business environment in which organization is
functioning. It helps in scanning and studying the external environment to get better knowledge
about progress or declination in the market, position of business etc (Fernando, 2011). Therefore,
business strategy and plans are framed by considering PEST analysis in order to ensure smooth
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functioning of business. Political factors are related to the impact of government policies,
regulations and laws on business. It involves policies that are related to tariff, trade, employment,
environment etc. Therefore, to avoid government intervention in business operations in Rwanda,
it is important for Tuffstuff Ltd to study political factors (Hill, 2008). Thereafter, economic
factors involve the impact of economic policies like, economic progress, exchange, interest,
inflation, disposable income, GDP and GNP rates that can impact the operations of company in
the target nation. Further, social factors involve different social and cultural aspect like,
population and age distribution, current trends, income, lifestyle etc of individuals of host
country that can impact the functioning of cited company. For instance, population of Africa
comprises more of young individual of working age. Therefore, Tuffstuff Ltd can avail benefit of
fresh talent and generate more employment in the target country. Thereafter, technological
factors refer to different technical aspect that are crucial for the survival and success of business
enterprise in the competitive market (Fey and Birkinshaw, 2005). It involves research and
development activities, automation, various tools and processes that facilitate innovation,
upgrade the quality of products and reduce the operating cost of company.
Limitations
However, there are various limitations of Pest analysis that also should be kept in mind
by management of Tuffstuff Ltd. In this respect, the PEST analysis is based totally on external
factors that keeps on changing at fast change. However, it is not practically possible to
implement every change within the organization. Further, it is time consuming approach as it
involve intense market research and accumulation of significant amount of data. Further, the
large information discovered through external analysis can also confound the management
regarding what information to consider and what not (Eifert, Gelb and Ramachandran, 2005).
Therefore, surplus information make it hard to analyze and arrive at suitable conclusion.
Thereafter, PEST analysis may involve assumptions that may not be supportive. Thereafter, it
may be inappropriate for strategic planning as it disregard the significance of internal factors.
Further, there are more chances of absence of significant data.
Possible alternative tools
Furthermore, company can also take assistance of SWOT analysis that help in identifying
strength and weakness of company that can impact its operations. Thereafter, it also determines
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various opportunities that can be grabbed my company in future to attain competitive benefit. In
addition to this, it involve potential threats that organization is likely to face in new market of
Rwanda (Klapper and Love, 2010). With the help of SWOT analysis, company can take effective
measures to overpower its weakness and perform beyond its potential
In addition to this, Tuffstuff Ltd can consider Porters five force analysis that will help in
understanding the degree of competition in cement manufacturing industry of UK. Thereafter,
strategy can be developed by company regarding the analysis. It further refers to impact of five
forces like, threat of new business firms in market, threat of substitute service or products in
cement industry, negotiation power in hands of customers and suppliers and degree of industry
rivalry. Therefore, porters five force analysis will help Tuffstuff Ltd in identifying the
potentiality of Africa market. Therefore, considering the porters five force analysis business
enterprise can take feasible business decisions that will ensure its success in target market (Hill,
2008).
3.0 ANALYSIS, DATA INFORMATION THAT CAN AFFECT TUFFSTUFF
IN RAWANDA
Factors which can effect Tuffstuff in Rawanda
It has been identified that to ensure success of its operations in new market of Rwanda it
is feasible for company to conduct PEST analysis (Ekins and Lees, 2008). It will help Tuffstuff
in gaining knowledge about the factors that can impact the success of company in African
market. Major benefit of using PEST analysis is that it will assist Tuffstuff in grabbing business
opportunities prior to its rivals and will give early warning against the potential threats. It will
also assist in adopting significant changes that organization is required to adopt in order to
ensure long term survival. Therefore, PEST analysis will facilitate change. Thereafter, company
can avoid projects that are probable to fail in future (Doving, 2010). Since, company lacks in
market entry experience and knowledge of African market, so Pest analysis will help in
developing a subjective outlook of new environment. Thereafter, Tuffstuff Ltd can reassess its
plan to enter the Rwanda market considering the political uncertainties if any,
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The major benefit of Pest analysis is that it help in predicting future considering the present
situations. In addition to this, it boost the evolution of strategic thinking in management. Also, it
is simple approach and involves very low cost (Fey and Birkinshaw, 2005)
Therefore, it is viable for Tuffstuff Ltd to conduct analysis, as it helps to examine that how
organization can built up examining the different factors at the time of proposal of venture.
Political factors: The cited company is required to consider government policies framed by
UK as well as African government. Also, while entering the market of Rwanda prior permission
from UK government must be obtained (Halinen and Törnroos, 2005). In this aspect, the
globalization policy is being favorable for Tuffstuff Ltd as it can easily expand in African and
other foreign market. The President of Rwanda holds prime powers to control the business and
other affair of country. Thereafter, it is authoritarian country as president is state head
responsible for major decisions of country. However, president is appointed on the basis of votes
given by citizens in every seven years. Thereafter, the German and Belgian laws prevails in the
country which should be compulsorily considered by organizations operating in country (Fey and
Birkinshaw, 2005). Since, it is capitalist economy Tuffstuff Ltd can easily invest in setting up of
new cement manufacturing and distribution plants. Further, company is required to pay tax and
duties on time to UK and Rwanda government to avoid legal actions from government. Further,
the political factors also involve the political instability in country due to anti social factors like,
increasing terrorism, crime etc that affect the operations of organization. In this respect, The
Rwanda have faced a severe civil war; civil genocide that threatened the resident and various
organizations operating in country. It further lead to massive killing of more than 800,000
individuals. The major reason for the war was discrimination among two tribes hutus and tutsis.
Further, the war had serious impact on the business of country as majority of company started
moving to other parts of world. Further, it lead to destruction of property, infrastructure and other
resources available in Rwanda. However, presently the government of Rwanda is planning to
attract foreign investors to invest in country (Post Genocide of Rwanda, 2014). This will further
help country in reviving the economy. Therefore, there are more opportunities of Tuffstuff Ltd in
Rwanda market at present.
Economic factors: It regards to impact of economic policies on the operations of company.
Considering, the interest rate policy, low interest rate prevails in Rwanda which means company
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can easily get loan at low cost. Further, company can use the surplus fund in promoting its
business in target nation. Regarding to the past figures, inflation rate in 2013 was also low;
3.45% from past years which means there are more fruitful opportunities for organization.
Thereafter, there are positive movement in GDP which means the country have positive
economic future. However, Tuffstuff Ltd may face fluctuations in exchange rate which is again a
loss for company. The Rwanda Franc is depreciating with 13% in past 3 years which is negative
sign for company (Trade deficit of Rwanda, 2014). However, the unemployment rates of Rwanda
is continuously increasing which means the cited company is required to give more employment
opportunities to local candidates. Thereafter, the corporate income tax rate of Rwanda is 30%
which is 10% higher than UK. This means Tuffstuff Ltd will have to pay more tax in Rwanda.
This will further reduce the profitability of company in target market (Tax rate of Rwanda.
2014).
Social factors: The social factors states different social and cultural aspects of Rwanda.
Considering the income distribution in target country it has been identified that there is high
level of poverty in Rwanda as compared to UK. In addition to this aspect, more than 55% of
people live below the poverty line and upto 37% are living in utmost poverty (Data of Rwanda,
2016). This further means there is low buying capacity for large number of customers. Therefore,
company cannot sell its cement at high cost. However, analyzing the past trend it can be said that
there is improvement in poverty rate of country which means organization can have better
opportunities in future. Thereafter, there is improvement in the ratio of urbanization as more than
1000 million are living in cities. This further states that there will be more demand of cement in
future for building infrastructure, house etc. Thereafter, the economy of Rwanda is capitalist
therefore main focus is on profit maximization than on welfare and development of society. The
government pay less emphasis on building infrastructure for health establishments, education
institutions, roads etc. Overall, there is destructive impact as company will not get any
construction projects from government (Doving, 2010).
Technological: To ensure success and sustainability of company in Rwanda market, it is
important for Tuffstuff Ltd to make constant improvement in its technology by doing research
and development, up gradation in automation and other manufacturing and production-processes.
Further, new technology will help in reducing the overall cost of manufacturing (Galende, 2006).
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With the upgraded technology, company can also reduce the increasing pollution, carbon
emission in its manufacturing process. Therefore, organization can use technology for
minimizing and recycling waste. With this aspect, company can fulfill its duties toward
environment. Tuffstuff can invest significant amount for attaining new innovations in cement
industry in terms of production and packaging. With the help of technical aspects, Tuffstuff Ltd
can increase the enduringness of its cement which further reduce the repair and fixing costs of
construction works. This will further provide competitive advantage to firm in market. Further,
cited company can prepare multifunctional material which can further become its core
competence as it is not provided by any of the rival organization.
Furthermore, by considering the PEST analysis, it is important for company to conduct
SWOT analysis. This is because PEST analysis only consider external factors and avoids internal
factors. Therefore, to get better result and devise best suited business strategy, it is appropriate
for company to do SWOT analysis which is as follows:
Strength
 Strong reputation
 Established operations in UK
 Competent employees
 Reduction in poverty in Rwanda
 Improvement in urbanization
 Positive GDP
 Easy availability of young and energetic human resources in Rwanda.
 Up gradation of technology to develop multifunctional cement product.
Weakness
 Lack of support of government
 Heavy currency fluctuations
 Capitalist economy of Rwanda
 High carbon emission from production causing negative impact on nature
 Different government policies in between UK and Rwanda
Opportunities
 Globalization facilitating easy entry into foreign country
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 Lack of competition in Africa
 Positive market trends
 Increased demand of cement in future
Threats
 Entry of new competitors in market of Rwanda
 Increased interference of government or President Increase in poverty of target country leading to falling demand.
Hence, from the above SWOT analysis, company can make effective use of its strength to
overcome its weakness. Further, future opportunities can be availed by considering SWOT
analysis. Thereafter, proper steps can be taken to avoid the threat.
4.0 CONCLUSION
From the case it has been concluded that Tuffstuff should adopt flat structure as it
includes a creative thinking in workforce as their suggestions and ideas are considered by
management effectively for the benefit of company. It is also a cost effective approach as it
eliminates the extra management layers in organization and reduces the salary of middle level
employees. Further, it enhances the level of coordination and communication between
employees. Reason behind not using hierarchical structure is that it focuses on developing
employee to gain specialization in only particular area of work. However, hierarchical structure
reduces the level of communication between management and employees. Further, it increases
the operational cost of organization as company is required to pay salaries to increased level of
employees at various managerial level.
From the aforementioned PEST analysis, it can be concluded that it is feasible for
company to enter the market of Rwanda. The political factor states that company should keep the
president informed about business functions to avoid its intervention in functioning of company
(Political oppresion in Sub saharan Africa). Thereafter, the overall impact of economic policies
is positive as it pertains favorable growth opportunities for Tuffstuff Ltd. In addition to this
aspect, the GDP of country is improving which states organization is likely to have positive
future. Further, social factor states that improvement in poverty level states that there will be
more demand of cement in future. Thereafter, technical factor states that by upgrading the
technology, Tuffstuff Ltd can improve the quality of cement and cut cost of production (Galende,
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2006). From the above report, it can also be concluded that is feasible for Tuffstuff Ltd to enter
the market of Rwanda. By Pest analysis proper overview of market can be obtained. Thereafter,
it also state the impact of various political, economical, social and legal factors on the operations
of company in host country. The Swot analysis help in identifying the strength, weakness,
opportunities and threats involved in new expansion project of company in Rwanda.
5.0 RECOMMENDATIONS
 Tuffstuff Ltd can do intense promotion to boost the sales in target market of Rwanda. It
also motivates employees to work hard to attain career growth through getting promotion
at higher level.
 Since, local individual lack work experience, more training and development should be
provided to them. This will help in building strong and competent human inventory.
 To reduce cultural gap between the UK based employees and Rwanda company should
enhance communication level between different levels.
 Cultural leadership can be used to manage difference in culture. This will also help to
assess the needs, demands and requirement of employees which belongs to different
culture.
 Tuffstuff Ltd should also consider porters five force analysis while preparing business
strategy. This model will help the business to assess the bargaining power of suppliers
and customers, threats from the other organizations and also from substitutes. One of the
major advantage of using this model for Tuffstuff is that it walso help to assess the
position of rivalries in market.
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REFERENCES
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