In the current business world, firms are competing to establish unique and distinctive capabilities to achieve a sustainable competitive advantage in their marketplace. In international and domestic markets, competition is entering into a new phase where performance and product quality are more important to the customer than price, and hence firms must review their strategic capabilities to keep up with the changing demand in the marketplace. This paper will use pestle analysis to examine the strategic capabilities of Aveng Company.
Aveng is a construction company that deals with different products and services and whose headquarters are in South Africa. The company offers products and services in engineering, infrastructure, and construction. In construction and engineering, the company offers services in pipelines, mechanical, marine, civil, and tunneling among other activities (ICD Research, p. 116).
PESTLE is an acronym that stands for political, economic, social, technological, legal, and environmental factors (Bensoussan & Fleisher, p. 169). The acronym describes the macro-environmental factors used in strategic management. This paper will analyze each of the factors in Aveng Company.
Aveng Company has diversified its geographical presence as a strategy of obtaining a competitive advantage. The company has spread its operations in 25 African and Asian countries (ICD Research 117). Each of the stated countries has different tax policies, employment laws, environmental regulations, trade restrictions, and tariffs, and political stability. Most of the companies that the company has invested in are politically stable; which shows that the company has been careful in choosing the countries to invest hence averting risks and losses due to chaos. Political conditions of different countries significantly affect the ability of a firm to penetrate its developing and emerging markets.
Due to its political stability, South Africa received support initiatives from Africa Development Bank. The objective of the bank was to support infrastructure services and to rehabilitate, develop and expand infrastructure projects in South Africa. Being one of the major construction companies in, South Africa Aveng Company might be a beneficiary of the projects.
In the year 2009, Grinaker-LTA which is part of the Aveng Company was awarded OSHAS 18001 and ISO 14001 certification in civil engineering. In the same year, McConnell Dowell which is a company within the Aveng group was also awarded New Zealand Constructors Federation Award (ICD Research, p. 118). This clearly shows that the Aveng group has been careful to adhere to terms and regulations not only in its own country but also in other countries.
Economic analysis in this paper scrutinizes the impact of the economy, inflation rates, and domestic demand on the performance of Aveng Company. The South African economy has been growing over the years, which subsequently translates to an improvement in the company’s performance. In 2010, the South African GDP was expected to grow at a rate of 2.8%. In 2011, the GDP was expected to grow at a rate of 3.7% (ICD Research, p. 119). The higher the GDP growth rate, the higher the development rate in the country. Development in the country would mean development in the country’s infrastructure and improvement in the construction industry of which Aveng Company is a part. Further, the lower the inflation rates the higher the rate of development in the country and hence the better the performance in the construction industry. Over the years, the inflation rates in South Africa have been decreasing. Between the years 2009 and 2011 the inflation rates decreased by 1.9% while the total domestic demand grew from -1.8% in 2009 to 5.9% in 2011 (ICD Research, p. 119). The growth of the GDP in South Africa, decrease in the inflation rates, and increase in total domestic demand has led to significant growth in domestic construction. An increase in demand for domestic construction will subsequently lead to an increase in the performance of the construction companies. Since the Aveng Company constructs both commercial and residential houses and infrastructures, it is a beneficiary of growth in the construction industry.
The society in which a firm is located can significantly influence its performance. One of the major challenges facing firms in South Africa is a crime. Crime costs firms based in South Africa 3.2% of their sales. The crime rate is highly influenced by the unemployment rate which increased in 2009 by 24.5% (ICD Research, p. 120). Since the company has its headquarters in South Africa and most of its operations are done there, it is prone to criminal activities in the country.
Different countries operate under different human rights legal protection. In recognition of this, the Aveng Company has incorporated human rights protection in all its operations to avoid discrimination based on age, race, marital status, physical features, nationality and beliefs. Aveng Company also recognizes the individuality of each employee, respects their absolute privacy, and their rights in relation to freedom of association.
Technology is one of the main focuses of major companies in their efforts to achieve a sustainable competitive advantage (Bensoussan & Fleisher, p. 169). The fact that the Aveng Company deals with a wide range of products is a clear indication that it has advanced in technology. McConnell Dowell Corporation Ltd deals with construction, chemical, power, industrial plants, and engineering which need confiscated technology. Aveng Manufacturing Limited manufactures products used in construction by other companies within Aveng Company. Further, E+PC Engineering and Projects Co. offer services in engineering and design which are done by using sophisticated software (ICD Research, p. 119).
The legal aspect in PESTLE analysis focuses on the impact of the world and national legislation on a firm. Since Aveng group operates in diverse countries within Africa and Asia, it operates under different legislations. Aveng Company recognizes that corporate governance is a central point in succeeding and has therefore shown commitment in ensuring high standards of governance. The group also follows a King report on corporate governance in South Africa and JSE limited requirements.
On the environment, PESTLE analysis examines the impact of Aveng on environmental issues. McConnell Dowell Corporation Ltd. (MDC) is a part of the Aveng Company. Some of the services and products of the company have a high potential of polluting the environment. These services include mining, gas production, and construction of the infrastructure. Other companies practicing mining and construction within the Aveng group include E+PC Engineering and Projects Company and Moolmans. Activities that lead to the production of dust (mining and construction) may lead to respiratory diseases among the locals. E+PC Engineering and Projects Company handles sulphuric acid and other waste gases which have a great potential of polluting the environment in case of leakage (ICD Research, p. 118). However, the Aveng Company has been on the frontline in protecting the environment and in reducing environmental impacts that result from its activities. The company also promotes operating procedures and policies that reduce its environmental impacts and conserve resources. Further, the Company uses natural resources, water, raw materials, and energy effectively. Aveng Company also aims at controlling emissions, wastes, and discharges, and recycles used material to conserve the environment.
- Bensoussan, Babette E. and Fleisher Craig S. “Analysis without paralysis: 10 tools to make better strategic decisions.” Upper Saddle River, New Jersey: FT Press, 2008. Print.
- ICD Research. “The future of construction in South Africa to 2015: Infrastructure and industrial investments to be key growth drivers.” Construction Industry Forecast Report. 2011.