The day-to-day management of a business seems to flow like a breeze until something unexpected happens in the macro environment. Albert Einstein once said the measure of intelligence is the ability to change. Change is inevitable, but the trick is knowing how to adapt when change comes.
A PEST (Political, Economic, Social and Technological) analysis is a process for identifying the political, economic, social and technological factors that affect supply chains – both locally and globally.
Let’s define each element in the PEST analysis:
Adapting to change
In South Africa, we saw in 2014 businesses that had to change their business strategy in order to adapt to the changing socio- political and economic environment.
The South African Post Office (SAPO) strike, which lasted over a crippling five months, affected many businesses, which depended on the service provider as part of its broader supply chain. A group of affected specialist magazine publishers had to go to the drawing board following the strike and look for alternative solutions to the problem at hand, and have since issued a tender for alternative distribution arrangements for their magazines that were previously undertaken by the SAPO. According to the Sunday Times, more than 15 million letters and parcels were piled up on a single day in depots around the country.
The platinum strike was another headline-maker last year. The dispute regarding wages and conditions of service between the Association of Mineworkers and Construction Union (AMCU) and the main platinum producers lasted five months, with an agreement eventually reached on 24 June 2014 from 23 January 2014.
Major financial loss
The strike by the National Union of Metalworkers of SA (Numsa), which has more than 220,000 members in a sector accounting for 15% of the economy – three times the size of mining, brought the sector to a standstill. The strike has hit platinum production in the world’s top exporting country, with companies reporting a combined loss of R23.8bn (£1.3bn, $2.2bn) in earnings. This obviously had a significant impact on the businesses. This resulted in many of the mining operations shutting down some of their operations, resulting in job losses for many as means for mine operators adapt to the change and to survive the turbulent times. For the country as a whole the lesson would be to move away from dependency on the mining sector and diversifying on the other sectors, in order to get more GDP growth, and of course earlier negotiations and building better relations between labour and businesses (mining operators) would have produced a different outcome.
As the government gears up to spend R4tr on infrastructure in the next 15 years, there are lessons from Eskom’s new Medupi and Kusile power plants learned, as large, highly complex construction projects, have been plagued by the usual technical and contractual delays, but also by labour unrest.
Whatever business industry your business operates in, it should be common practice to continuously remain the “uncontrollable” macro environment, monitoring closely the company’s Strengths, Weaknesses, Opportunities and Threats.