Introduction
Environmental assessment is a very important exercise that enables a company to make a stringent analysis of all the factors that it is incapable of controlling. The uncontrollable factors have a significant effect on the business’s operations and may affect productivity and profitability levels. Environmental factors differ from country to country, and they significantly affect companies that operate internationally.
Frito-Lay is a company that operates in various nations across the globe, and it is prone to experiencing the negative or positive effects of environmental factors. The economic, social, political, labour, and legal factors of a particular nation will always affect the operations of international businesses (Bowker 6). These factors might threaten or offer some opportunities for Frito-Lay Company that deals with snacks (“Our Company Vision” 1). This paper will take a stringent analysis of the environmental factors that may affect the Frito-Lay Company in Egypt.
Socio-cultural forces
Socio-cultural components
Different countries exhibit different social and cultural practices. The cultural practises, the consumption patterns and cultural believes in Egypt would affect Frito-Lay company in one way or another. Most Egyptians are Muslims, and Christians comprise only 10% of the entire population (Oxford Business Group 8). However, the culture and lifestyle of people are changing in the contemporary world as people are in desperate need of instant products. Religion has no significant effect on the demand for snacks and processed foods that are associated with convenience in most cases. The negative attitudes and believes that despised fast foods and instant food products are slowly becoming outdated as people are having busy schedules (Mahajan 17). This presents a very great opportunity for the Frito-Lay Company, and there is a high possibility of having increased sales in Egypt.
On the other hand, various social, cultural factors would affect Frito-Lay Company negatively. It is noteworthy that Egypt is an African country that may have a negative attitude towards products from Western nations. Therefore, they may desire to promote local companies and disregard Frito-Lay’s products. Although the diplomatic relationship between the Western countries and African countries would intervene, the negative attitude will be a threat to the Frito-Lay Company (Wendrich 17). Moreover, the rise of lifestyle diseases obligates health institutions to discourage people from consuming snacks and processed foods. The negative insights about snacks and processed food may reduce the sales of Lays chips in Egypt.
Hofstede’s four dimensions
In analysing the culture of a country using the Hofstede’s four dimensions, it is important to take a stringent analysis of the power distance, individualism, masculinity, and uncertainty avoidance. Economists indicate that Egypt and the United Arab Emirates (UAE) have similar cultural business environments. The two nations have high power distance, high uncertainty avoidance, they are collectivists, and they embrace masculinity.
In Egypt, males are dominant in society, and they take care of the finances (Peterson 18). This is a great challenge for Frito-Lay Company, as women tend to consume snacks more than men do. Therefore, with the limited rights of the women, the company may not experience high sales.
Egypt has a high power distance between the poor and the rich. The issue of inequality amongst classes is widespread across the countries, where, a few prominent people influence decisions in the country. In most institutions, the hierarchy of authority prevails, and Frito-Lay Company may have difficulties in reaching its target customers. The powerful, influential, and wealthy people will influence the demand for the company’s products by dictating the taxation laws for foreign products.
The country emphasises on collectivist aspects with a heavy emphasis on family values (“Social and Cultural Factors in Extension” par. 2). The elderly people always emphasise the importance of togetherness, and people are taught to be their brothers’ keepers. Frito-Lay may have difficulties in convincing the collective groups that its products are worth purchasing. However, once the collective groups perceive Frito-Lay products as worthwhile, the company will have a competitive advantage over its competitors, and it would experience increased sales.
Egypt is a country with a high uncertainty avoidance rate (Sowers, 11). The Egyptians avoid surprises, and they are very cautious about everything. This will be a great challenge for Frito-Lay Company, as it will have to be careful when introducing new packages for their products. They may have to invest heavily in the advertisement to avoid catching the Egyptians by surprise.
Impact of major issues and response to the issues
Due to the high distance power, the number of poor people is significantly high. In fact, poverty is one of the biggest problems in Egypt, and it has a significant effect on the consumption levels of low-class people. Frito-Lay Company can respond to this issue by introducing packages of all sizes at different prices to capture customers of different financial capabilities. Like the UAE, the official oral and written language in Egypt is Arabic. Frito-Lay Company will have to label its products in both English and Arabic, and it will have to train its international employees to speak Arabic to converse with the Egyptians.
The issue of masculinity is insinuating, and Frito-Lay Company will have to establish strategies to empower the women (“The Egyptian Labour Market in a Revolutionary Era” par. 2). It may decide to establish employment opportunities for women to empower them financially (US Aid 2). The company should bring awareness to the potential consumers that the Frito-Lay products sold in Egypt are healthy snacks that are free from cholesterol. Generally, Frito-Lay Company will have to take a survey to have a clear understanding of the social-cultural norms in Egypt. The survey will enable the company to identify its weakness, address them, and work towards meeting the demands of the Egyptians.
Economic and socio-economic forces
Dimensions of the economic and socio-economic forces
The success of any international business depends on the economic and socio-economic conditions of the country in which the business operates. Indeed, a poor country is likely to have low-valued currencies that have low economic value in the international market. The main economic activity in Egypt is farming, which is prone to economic shocks. Exportation of unprocessed agricultural products generates minimal income to the farmers, and thus, the economic empowerment of the farmers is quite low
However, over the past few years, the Egyptian economy has experienced a drastic growth due to the arrangements that relived the country from external debts. The International Monetary Fund (IMF) has played a great role in helping Egyptians to experience an improved macroeconomic environment. The sound monetary policies have enabled the Egyptians leaders to portray accountability and responsibility of their actions. This is a very great opportunity for Frito-Lay Company as it is assured of operating in a favourable business environment. There is great transparency of all international economic proceedings, and the Egyptians are slowly experiencing an increased GDP. This means that Egyptians are becoming enlightened, and the person per capita income is on the rise. The spending power of the citizens is likely to rise in the near future, and more customers are likely to have the desire to consume Lays chips among other processed food products than before.
Impact of major issues and response to the issues
As discussed, the Egyptian government is employing efforts to accommodate foreign investors, and Frito-Lay Company is likely to experience high sales revenue and high profits. The company should take advantage of a stable economic environment to explore and exploit all markets in Egypt. The company should increase its productivity, and work towards enhancing the relationship that the Egyptian government aims at developing with foreign investors. It is noteworthy that the Egyptian government is working tirelessly to tame inflation, avoid deficits, and encourage foreign investors. This scenario is very encouraging for Frito-Lay Company that is a foreign investment company. Most importantly, the Frito-Lay Company should boost the farmers by purchasing unprocessed potatoes at a considerably fair price to empower them.
Legal forces
Patents, trademarks and other conventions
Business legal procedures are very crucial for any business that intends to operate in a foreign company. Indeed, Egypt has very strict regulations regarding the patents and trademarks of foreign investment companies (Trade Barriers in Egypt 4). Since western countries are very strict with counterfeit products, the Egyptian government obligates foreign companies to pay heavily towards the protection of their trademarks and patents. The laws governing businesses in Egypt are very thorough, and Frito-Lay Company must comply with the legal restrictions to avoid penalties. However, since Egypt is striving to maintain a positive relationship with foreign companies, it has developed an encouraging legal environment for foreign investors. Although the pathways to obtain legal patents and trademarks are thorough, the foreigners are assured of quality outcomes.
Impact of the major issues and respond to the issues
As discussed, it is evident that the Egyptian government is strict when it comes to legalisation matters. Therefore, Frito-Lay Company will be obligated to convince the government that their products are quality and genuine. The company will have to invest in research and development of its products to ensure that they are highly demanded. In such a case, the Egyptian government will offer trading permits to Frito-Lay Company with little resistance. Most importantly, the company should take advantage of the freedom to conduct business in Egypt once it has obtained all the legal requirements. It should maximise its productivity and profitability levels before the expiry of the trade permits.
Political forces
Political structure and political parties
Egypt is a democratic nation that has a strategy that enables its citizens to participate in political matters (Brown and Hamzawy 66). The Egyptians have the power to dictate the nations to establish trade agreements and chose to abandon. Therefore, the autonomous country will have a positive effect on the entry and performance of the Frito-Lay Company in Egypt.
Stability of government
The political environment in Egypt has been stable over the past few years. Consequently, the economic environment has stabilised considerably (“Analysis of Egypt’s Business Environment” par. 3). The Egyptian government treats foreign investors and tourists with the utmost respect as they value their contribution to the Egyptian economy. Since 2000, the number of foreign investment companies in Egypt has risen considerably, and Frito-Lay Company will find it worthwhile to invest in Egypt.
Trade restrictions
Initially, Egypt had very strict trade regimes for foreign investors. However, the 2002-2007 National Development Plans amended the trade restrictions, and the government revised the tax regime (Maugiron 45). Currently, an ongoing modernisation and restoration strategy in Egypt aims at allowing free trade and liberalising business activities with Arab countries (American Chamber of Commerce in Egypt 6). The country has plans to develop free trade agreements with the US, and the Frito-Lay Company will benefit greatly if Egypt attains its ultimate goal. The reduction of unilateral trade agreements is playing a great role in encouraging interdependency (“Egypt” par. 6). Moreover, the country removed the import bans, and Frito-Lay Company will benefit from the mentioned approaches that Egypt employs to accommodate foreign investors.
Impact and response to the major issues
Being an Arab country, Egypt may not readily accept Frito-Lay’s products as the country has only signed free trade agreements with Arab countries. However, Frito-Lay Company will be obligated to establish an exceptional relationship with Egypt at individual levels. Moreover, the company will have to be cautious of any instances of political instability that may occur during elections or during conflicts. Since Egypt is still evolving, it is prone to political and economic failures. Therefore, Frito-Lay will have to develop a way to absorb possible shocks without necessarily affecting the business. It will be necessary for the company to develop a work plan that would play a significant role in predicting the future market and political trend of the company.
Labour forces
Overall size and sector of the workforce
The overall size of the workforce in Egypt has grown significantly due to the increasing population. There are about 600,000 new entrants into the labour market annually. The unemployment rate in Egypt is about 9.4%; therefore, the Frito-Lay Company is assured of sufficient human labour. The workforce mainly consists of native Egyptians, as the immigration rates into Egypt are considerably low (Assaad and Krafft 6). The human labour comprises of both skilled and unskilled people.
Assessment of labour trends
The labour trends change from one time to another because the Egyptian government struggles to address the unemployment issue through reform programs. The number of immigrants into Egypt is considerably small, and the labour trends may remain at the same levels depending on the number of grandaunts released every year (“Egypt Business Forecast Report” 9).
Employer-employee relationships
The employer is obligated to maintain an exceptional relationship with the employees. The Egyptian government has strict laws that guide its citizens against mistreatments, and any foreign company has to adhere to the set employment laws. All employees are obligated to provide health insurance covers for their employees, and there ought to be a beneficial relationship between the employer and the employees (“Doing Business in Egypt: Labour Regulations” 2).
Impact and response to the major issues
It is evident that human labour is readily available in Egypt. However, the strict labour laws will obligate Frito-Lay Company to behave responsibly when dealing with employees. The salaries and wages of employees should tally with the educational level, the experience of the employees, and the nature of the job. If Frito-Lay fails to adhere to the set employment laws, the consequences may be adverse. The company may face charges for violating the law, and worse of it is the fact that the Egyptians may have negative reputations about the company (Kosher, Rashed & Riad par. 7). Therefore, Frito-Lay’s executives will have to establish a way to familiarise themselves with the Egyptian employment laws. The company will have to employ modern labour techniques to understand the employees’ rights and employ the best measures while engaging in employment contracts.
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