Internal and External Business Factors for CSG

This report discusses the internal and external business factors relevant for CSG, including SWOT analysis, PESTLE analysis, Porter 5 forces, and VRIO analysis. It also identifies the gaps in the internal management of CSG using McKinsey's 7s model.

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Executive summary
This aim of this report is to discuss about the internal and external business factors relevant for
the business operation of CSG. In doing so, different models and framework such as SWOT,
PESTLE, Porter 5 forces and VRIO analysis is being done. There are number of positive as well
as negative factors for CSG are being identified. Moreover, McKinsey’s 7s model is also being
used to identify the gaps in the internal management of CSG, which should be mitigated in the
further stage. This report concluded that the gap between the employees and the upper
management level is the major gap identified for CSG.

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Table of Contents
Introduction......................................................................................................................................3
Identification of the problem...........................................................................................................4
External environmental analysis......................................................................................................4
Political factors............................................................................................................................4
Economical factors......................................................................................................................5
Social factors...............................................................................................................................7
Technological factors...................................................................................................................7
Legal factors................................................................................................................................8
Environmental factors..................................................................................................................9
Industrial analysis..........................................................................................................................10
Bargaining power of the buyers.................................................................................................10
Bargaining power of the suppliers.............................................................................................10
Threat of new entrants...............................................................................................................10
Threat of substitutes...................................................................................................................11
Competitive rivalry....................................................................................................................11
SWOT analysis..............................................................................................................................11
Strengths....................................................................................................................................11
Weaknesses................................................................................................................................12
Opportunities.............................................................................................................................12

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Threats.......................................................................................................................................12
VRIO analysis................................................................................................................................12
McKinsey’s 7s framework.............................................................................................................14
Conclusion.....................................................................................................................................15
Reference.......................................................................................................................................16

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Introduction
There are number of issues being faced by the contemporary business organizations in
terms of their operations in the current business scenario. This is due to the reason that the
current business state of affairs is complex in nature and can be judged from different
perspectives. Thus, it is important for these business entities to have the continuous process of
determination of the external and internal business environments and review their internal
effectiveness accordingly (Prajogo 2016). This will help them to identify their weaknesses in
timely manner and design their practices and policies in coping up with the change in the
business environment. However, this entire process should be done in a sequential manner in
order to have the maximum outcome for the business.
One of the business entities in Australia, which is facing complex issues in their business
operation, is CSG technologies. They are leading Australian entity in providing technology based
solutions to the businesses and thus operating in the business to business sector. It is also
identified that they are having tie up with number of global leaders such as Samsung and Canon
with whom they are offering holistic solutions to their clients. Currently, they are having their
presence in New Zealand outside of their home country. However, recently it is reported that
CSG faced loss of more than one percent of their profit in 2018 as compared to 2017. Moreover,
it is also identified that recently CSG went through change in the leadership and former general
manager of IBM in Australia and New Zealand is being taken on board. Thus, a few internal
issues can get identified for them.
This report will discuss about the internal and external business factors relevant for CSG
using the PESTLE analysis. Industry analysis will be done by suing Porter 5 forces and internal

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analysis with the help of VRIO and SWOT analysis. The internal effectiveness of CSG will also
be identified on the basis of McKinsey’s 7s framework.
Identification of the problem
One of the major problems for CSG being identified is their reduction in profitability
between 2017 and 2018. Thus, it can be concluded that internal management issues are also
responsible in reduction of their profitability. One of the major probable reasons is the change in
their leadership roles. This is causing the gap between the vision of the new leadership and the
existing lower level internal stakeholders. Moreover, lack of determination of the issues and
challenges being faced by the employees by the upper level management can also be considered
as one of the major problems for CSG (Cania 2014). This should also be noted that with the
increase in the business operation of CSG, the diversity in the workforce is also increasing. The
upper level management should manage the diversity in the workforce in order to prevent the
lack of coordination and cooperation among the employees. Differences in the needs and
expectations of the employees can also be considered one of the major characteristics of the
problem for CSG. This is due to the reason that with the increase in the workforce, the needs and
expectations of the employees are also getting diversified and it is more challenging for the
managers to meet these expectations (Brewster 2017).
External environmental analysis
Political factors
CSG is predominantly operating in the Australian market and thus the political factors
relevant in Australia will be considered. Australia is having capitalist and democratic type of
government with open market approach. Thus, the probability of government interference in the

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business affairs is less for CSG. According to the global economy, political risks in doing
business in Australia are low, which denotes that CSG is having favorable condition in operating
in the country. However, as per the global competitiveness index, it is identified that inefficient
government bureaucracy is one of the major problematic factors of doing business in
Australia(weforum.org 2019). This is a major challenge for the managers at CSG to the initiate
the change in the organization in minimal time.
Economical factors
Tax rates are the second most problematic factors of doing business in Australia. This is
also posing challenges for CSG because higher tax rates are increasing the end price of their
services and reducing the potential clients for them. This is also reflecting in their reduction of
profit margin in 2018. Labor participation rate in Australia is fluctuating in nature. According to
the global economy, labor participation rate of Australia is standing at 64.81 percent as of 2017
and it is showing downward trend(theglobaleconomy.com 2019). Thus, it is posing challenge for
the managers at CSG to have the seamless supply of human resources in the organization for
different job roles.

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Figure: 1
Most problematic factors of doing business in Australia
Source: (weforum.org 2019)

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Figure: 2
Labor participation rate in Australia
Source:(theglobaleconomy.com 2019)
Social factors
Australia is having upward trend in terms of social globalization in the country and this
denotes that intensity of globalization in the country is increasing. However, in the case of CSG,
the organizational change process should be more rapid and frequent in line to the global trends.
Moreover, the issues in relation changing of employee trend due to globalization is also
challenging for CSG in maintaining the uniformity of their management approach. Moreover,
according to the global competitiveness index, poor work ethic among the national labor force is
also considered as a major problematic factor of doing business in Australia(weforum.org 2019).
Thus, it is also a major challenge for managers at CSG to manage the ethical practices and
principles in the workplace.
Technological factors
CSG is offering technological solutions and thus the impact of technological factors is
more for them. According to the innovation index, the ranking of Australia is gradually
decreasing from 2015. This denotes that the intensity of innovation in the country is reducing and
CSG will face the problem managing their competitive advantages by means of generating
innovations.

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Figure: 3
Innovation index of Australia
Source: (theglobaleconomy.com 2019)
According to the global competitiveness index, Australia is having the ranking of 27 in
terms of availability of latest technologies(theglobaleconomy.com 2019). This denotes that CSG
will have the access to latest technologies to be used in their process but the employee
management will be important in this case. This is due to the reason that resistances from the
side of the employees will cause failure of the technology implementation.
Legal factors
Australia is scored at the higher end in terms of rule of law even though the scoring is
gradually reducing. However, the higher level of rule of law in the country denotes that CSG

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should have to adhere to more legal complexities in their business operations. This may create
hindrances in their internal workplace management along with managing the employees.
Figure: 4
Trend of rule of law in Australia
Source:(theglobaleconomy.com 2019)
Restrictive labor regulations are another challenge being faced by the managers at CSG
and it is considered as the most problematic factor in doing business in Australia(weforum.org
2019). Thus, there are number of legislations and legal standards to be faced by the managers in
managing their employees. This will bring complexities as well as involve more cost in the
process.
Environmental factors

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CSG is not directly involved in any environmental aspects and thus also do not have any
direct impacts on the environment. Moreover, the technological solutions being offered by them
is more environmental friendly and can help the business in further enhancing their sustainability
in the long term.
Industrial analysis
Apart from the external factors analysis, it is also important to initiate the industrial
analysis in order to determine the competitive factors. The following sections will discuss the
major competitive forces.
Bargaining power of the buyers
Bargaining power of the buyers of CSG is high due to the reason that there are other
options available to them. Customers will look for cost effective options and thus the service cost
is determined by the market forces.
Bargaining power of the suppliers
Bargaining power of the suppliers is low due to the reason that majority of the services
are being developed in-house by CSG. Thus, the impact of the suppliers in the business decisions
of them is low.
Threat of new entrants
Threat of new entrants is moderate for CSG due to the reason that new entrants will
require huge capital for investment and expertise and infrastructure for competing with the
established players. However, on the other hand, the established players from other countries can
enter the Australian market easily and they will be able to compete effectively with CSG.

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Threat of substitutes
Threat of substitutes is high for CSG due to the availability of similar service providers in
the Australian market. Majority of their competitors are offering similar sets of services to the
customers. However, the intensity of the substitutes is getting changed rapidly in this sector
considering the fact that development of technologies is frequent in this sector.
Competitive rivalry
Competitive rivalry in the sector where CSG is operating is high due to the presence of
number of same types of firms. Moreover, the market opportunities in Australia are limited and
each of the present entities are competing for gaining the major market share in the same region.
This is further contributing in offering cost effective and holistic services to the business clients
in order to increase their value proposition.
SWOT analysis
Swot analysis will be done to determine the internal factors of CSG and it will further
help the managers to coordinate between the internal and external identified factors.
Strengths
One of the major strengths for CSG is their Australian born tag. This is due to the reason
that this factor acts as the emotional selling proposition for the customers. In addition, the
diverse service portfolio of them is also having advantages by being able to cater to larger target
segments. Thus, the market coverage for them is also more in their existing market. Research and
development is strength for CSG due to the reason that it is helping them in developing newer
services for the customers.

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Weaknesses
One of the major weaknesses for CSG is their lack of diversity in the workforce, which
will have adverse implications in the long term. This is due to the reason that selection of the
employees from different social backgrounds will cause issues. Another weakness for them is
their limited market presence. Currently, CSG is present only in Australia and New Zealand and
thus they are having lower brand identity compared to their global competitors. Moreover, they
are also having smaller workforce, which is another restriction in developing the business
further.
Opportunities
Entering in the new foreign countries especially in the developing economies such as
India and China will help CSG to increase their market revenue and share. Their brand identity
can also further get enhanced. Moreover, outsourcing some of their process to the third party
vendors will help them to reduce the involved cost and increase the profitability. However, it
should be noted that the probable opportunities for CSG will get changed with time.
Threats
CSG is facing the threat of disruptive innovation. This is due to the reason that
emergence of new disruptive innovation will pose challenge for CSG in maintaining their
existing clients. Moreover, the emergence of global economic recession will reduce the financial
capability of the business clients and they will invest less in buying the services of CSG. Thus,
the market potentiality of CSG will get hampered.
VRIO analysis

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According to the resource based view, the major resources for CSG are technology,
human resources, financial resources and brand value. VRIO analysis will be initiated in order to
gain an understanding about the level of competitive advantages that can be gained from these
identified resources.
Valuable Rarity Inimitability Organizational
capability
Human resources  
Financial
resources
 
Technology   
Brand value    
Human resources are one of the major resources for CSG and this is also creating value
for the entity as well due to the fact that the skills of the employees are contributing in the
providing effective service delivery process to the clients (Pesic, Milic and Stankovic 2013).
Moreover, CSG is capable enough in managing their smaller workforce and maximizing the
productivity. Financial resources are also adding value for CSG by enabling them to invest for
further development and expand their business operation. Moreover, the recent expansion of the
business by CSG across the country is denoting that they are having the organizational capability
to make the best use of the available financial capability (Chatzoglou et al. 2018). Technology is
also adding value for CSG because it is the effectiveness of their technology that is providing
more utility to the clients and enhancing the value proposition. The technology cannot be
imitated due to the reason that there are patents and other intellectual properties associated with

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it. The rapid development and evolution of the services offered by CSG is the proof for their
organizational capability towards technological resources. Lastly, the brand value of CSG is
valuable in attracting the potential clients for new services. In addition, it is rare because no other
entities will be able to match same intensity of the branding as CSG. It is also inimitable because
brand value cannot be copied rather it is earned.
McKinsey’s 7s framework
McKinsey’s 7s framework is having 7 elements that covers the different aspects of the
organizations and this analysis will help to identify the gaps in CSG in regards to their identified
problems. The first element is strategy, which denotes the plan to gain competitiveness. In the
case of CSG, the change in the leadership roles is the part of this plan. However, the desired sets
of competitiveness to be gained from the plan are not detected (Singh 2013). Thus, with the
change in the leadership roles, strategy is yet applicable for CSG. The second element is
structure and hierarchical organizational structure is being followed in CSG. Thus, the change in
the leadership roles caused impact in the lower level employees. Due to this hierarchical
organizational structure of CSG, the issues of employees take time to get communicated to the
upper level management. Thus, due to the presence of the hierarchical structure of CSG, all the
job roles are pre-detected and flow of information is being done though proper channels. It is
denoting that the value of structure is applied in CSG. The next element is systems, which are
daily operations done in the workplace. Job roles are specified for each of the internal
stakeholders and are being done based on hierarchical orders (Alshaher 2013). Moreover,
intensive approach of human resource management is also followed for the smaller workforce to
get the job done perfectly. There are no instances of failure in the systems being detected in the

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case of CSG. Thus, it can be concluded that CSG is having proper implementation of system in
place.
Shared values are the next element that denotes the values being followed in the
organization. Recently, solution based culture is initiated in CSG and this is also creating gaps in
determining the issues with the employees. All the internal stakeholders are being trained and
developed accordingly and they are all centered towards achieving the expected goals in terms of
solutions. Hence, all the internal stakeholders are bound by common shared values. Style denotes
the leadership approach in the workplace. In the case of CSG, the recent change in the leadership
roles is expected to have more consensus based leadership roles otherwise the gaps with the
employees will still remain, Staffs or human resources of CSG are having diverse skills and
expertise and it is their ability in creating value for CSG (Shiri, Anvari and Soltani 2014). It is
reported that former IBM executives are hired in the leadership roles of CSG and this will have
positive impact on the style of leadership to be followed. This is due to the reason that the former
executive of IBM will have the knowledge and understanding about to maximize the
productivity of the employees in this sector.
Conclusion
Thus it can be concluded that employee issues are the major shortcomings for the
management of CSG. In this report, there are different models being involved to identify the
external and internal business environmental factors. It is identified that CSG is having majority
of threats to be faced from their external business environments. In addition, the intensity of
industry competitiveness is also high for CSG. Lastly, based on the McKinsey’s 7s framework,
the key reasons for the management issues are being identified. This report identified that

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majority of the challenges for CSG are in relation to their employee management mainly due to
their business expansion and changes in the external business environment. The change in the
expectation of the existing employees and differences in the opinion in the diverse workforce are
the major challenges for CSG to mitigate.

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Reference
Alshaher, A.A.F., 2013. The McKinsey 7S model framework for e-learning system readiness
assessment. International Journal of Advances in Engineering & Technology, 6(5), p.1948.
Brewster, C., 2017. The integration of human resource management and corporate strategy.
In Policy and practice in European human resource management (pp. 22-35). Routledge.
Cania, L., 2014. The impact of strategic human resource management on organizational
performance. Economia. Seria Management, 17(2), pp.373-383.
Chatzoglou, P., Chatzoudes, D., Sarigiannidis, L. and Theriou, G., 2018. The role of firm-
specific factors in the strategy-performance relationship: Revisiting the resource-based view of
the firm and the VRIO framework. Management Research Review, 41(1), pp.46-73.
Pesic, M.A., Milic, V.J. and Stankovic, J., 2013. APPLICATION OF VRIO FRAMEWORK
FOR ANALYZING HUMAN RESOURCES’ROLE IN PROVIDING COMPETITIVE
ADVANTAGE. Tourism & Management Studies, pp.575-586.
Prajogo, D.I., 2016. The strategic fit between innovation strategies and business environment in
delivering business performance. International Journal of Production Economics, 171, pp.241-
249.
Shiri, S., Anvari, A. and Soltani, H., 2014. An assessment of readiness factors for implementing
erp based on agility (extension of mckinsey 7s model). International Journal of Management,
Accounting and Economics, 1(3), pp.229-246.
Singh, A., 2013. A study of role of McKinsey's 7S framework in achieving organizational
excellence. Organization Development Journal, 31(3), p.39.

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theglobaleconomy.com 2019. Compare countries | TheGlobalEconomy.com. [online]
TheGlobalEconomy.com. Available at: https://www.theglobaleconomy.com/compare-countries/
[Accessed 2 Apr. 2019].
weforum.org 2019. [online] Www3.weforum.org. Available at:
http://www3.weforum.org/docs/GCR2017-2018/05FullReport/TheGlobalCompetitivenessReport
2017%E2%80%932018.pdf [Accessed 3 Apr. 2019].