Introduction to PEST Analysis
PEST analysis could be defined as a process of analyzing the external factors that affects the operations and the performance of a firm. Most factors considered under the PEST acronym include the external macro-environmental factors. The P.E.S.T acronym stands for political, Economic, Social, and Technological factors that affect the performance of a firm. Indeed, PEST analysis is critical in determining external threats that are likely to affect the operation and performance of a firm. Analysis
PEST analysis is essential in establishing the gearing level of SALIM GROUP, and also to determine the significance of both the internal environment and the external environment. The elements of the pest analysis were arranged in a logical way to foster concise interpretation of the context in which the SALIM GROUP is endowed. SALIM GROUP has diversified into various ventures, which are embedded in the food industry in Indonesia (Dieleman, 2007, P 12). However, other subsidiary companies provide the basic inputs that are needed to enhance the welfare of the company. Thus, the arrangement of key elements in the PEST analysis depicts the rationality of such elements to enhance the operation environment of the company. For instance, the elements are divided into the internal and external environment, according to the specific areas that such forces impact in the reputation of SALIM GROUP. For instance, political and economic aspects are stratified in one pool, as they are exogenous factors that cause either disparity of enhancement of profits in the company or collapse. Thus, the elements were arranged in such a manner to make feasible conclusions on the way the analysis could be useful to make the management of the large conglomerate an easier task. Principally, the pest analysis determines the competitive strategies that SALIM GROUP can use to gain a competitive edge, and also complement the management strategies that are advantageous to attaining harmony in diversified companies.
PEST Analysis
Political
Politics is a major driver of the full development of the Indonesian Food Market. The past four decades can be associated with a drastic transformation on how the political forces affect the private sector. For example, the introduction of democracy stabilized the economy, and hence SALIM GROUP operates under a conducive environment, in which the safety of business processes is guaranteed. In this regard, political forces thrive to minimize the effects of adverse relationships in the market. Moreover, the government ensures that the political environment under which the major conglomerates provides room for personal growth and hence attains better revenue for the SALIM GROUP.
However, some incidences of political control could prove detrimental to the welfare of the SALIM GROUP, and hence the management tends to uphold better reputation by adhering to the regulations that are bound to govern business processes and the favorability of the business environment. For example, the existence of unfavorable political state makes the costs of operating SALIM GROUP to increase, as the need to provide better security infrastructure, crops up, for safeguarding the key assets for SALIM GROUP.
Economical
Economic implications of SALIM GROUP are favorable, as the increase monetary circulation, creates more demand for food commodities, which forms the major basis of the companies’ operations (Dieleman, 2007, P 15). Moreover, the better the economic status, the more the government revenue that is acquired through the established taxation regimes in Indonesia. The economic implications that foster the development of SALIM GROUP include the increased foreign investments, which either provide market or even provide the basic inputs that SALIM GROUP needs in its daily operations.
Social
Social aspects of SALIM GROUP include the responsibilities that the strategic management provides for the purpose of establishing a social responsibility for the company. For instance, SALIM GROUP is provided. Social perspectives of companies’ dictate the reputation that a company is bound to get in the corporate world. Moreover, social forces paint the distinctive image of the SALIM GROUP.
Technological
Technology forms the operating efficiency that is attributable to food companies, by ensuring that mitigation strategies like preservation of food do not cause excessive costs for the industry. Indonesia provides the domestic and foreign companies with the incentives to attain better prices for their products, by providing the essential technologies that are vital to the industry. The complexity of different processes in entities such as the noodle production creates the need to ordain the latest technology, so as to endorse SALIM GROUP with adequate efficiency. Moreover, there are mainstream technological requirements for every food-based company (Dieleman, 2007, P 34). Technology is diverse, as there exist virtual technology and the tangible technology. Therefore, as a firm that deals with processing, and the exportation of exotic products, it is essential to consider the implications of technology on the welfare of the company. Furthermore, technology is capable of actuating the economies of scale needed by SALIM GROUP to enhance the overall welfare of primary stakeholders in the company.
Potential Future Development
The future of SALIM GROUP is faced by imminent threats by competing firms, as well as new opportunities that will crop up in future practices, due to the current trend of agricultural technological advancement. For instance, the new and innovative food companies from drawbacks to the operations of SALIM GROUP. However, new competitors are also an opportunity for the company, as they provide strategies of imitation so that SALIM GROUP can stay ahead of the competition. The development process of SALIM GROUP is dependent on the ability of the company to formulate feasible adaptation means which enhance the competitive strategies constantly. Competitive strategies are caused by the adaptation of new technologies, and how best the company can maintain efficiency in the use of such technologies.
Moreover, the future of the company is determined by the substitute goods that are likely to cause drawbacks in profit in the industry. In this case, the dynamism of the market is engaged by an inverse relationship. Ideally, the more the substitutes the less the profits that are likely to be attained. The bottom line is, most of the future predicaments faced by SALIM GROUP are maintained by the way the company conforms to changes in the competitive strategies, to maintain a favorable profit base.
Recommendations
Due to the nature of competition experienced in the contemporary world, it is essential for SALIM GROUP to establish precise development strategies which are advantageous for extensive operations. For instance, the company could start by receding the divestitures that the management feels are a drawback to the company. Moreover, the company could also adopt the strategy of mergers, as well as horizontal integration. First, the specific growth strategies for the company must include activities which are aimed at reducing the nature and amount of risks that the company faces in its diverse operations. For instance, the production of noodles, in combination with the exportation of palm oil, can cause risk exposures which are difficult to manage. Thus, the company must make premeditated decisions, considering the actions of competitors, to avoid the incurrence of liabilities which distort the capital structure of SALIM GROUP.
In conclusion, it is essential to consider the way technology can be ethically acquired without the incidence of malpractices within competitors. SALIM GROUP can adopt the horizontal integration, which ensures that innovativeness is constantly evolving in the company.
Reference
Dieleman, M. (2007). The rhythm of strategy: a corporate biography of the Salim Group of Indonesia. [Amsterdam], Amsterdam University Press. http://public.eblib.com/choice/publicfullrecord.aspx?p=420068.
