Strategic management essay
External analysis Essay
An important step in the strategic management process is the analysis of external environment, including the consideration of economical, technologic, social, cultural, demographic, environmental, political, legal/governmental and other factors. External audit also includes competitor analysis and the creation of a competitive profile matrix. The organization I have chosen for analysis is ACF International; this is a nonprofit humanitarian organization the purpose of which is to end world hunger and help the people in need all over the world.
ACF international is considered a world leader in the fight against malnutrition. The company pursues many international initiatives, establishes contacts with governmental organizations and addresses emergency situations as well as the causes of malnutrition in many countries.
ACF International has implemented a number of steps against hunger and malnutrition in such countries as Angola, Azerbaijan, Armenia, Bolivia, Colombia, Philippines, Georgia, Guatemala, Guinea, Lebanon, Malawi, Niger, Peru, etc. Evidently, in each of these countries the factors affecting the organization are different and have to be considered independently. In this paper, external environment for ACF International in 7 countries will be analyzed, namely in Armenia, Philippines, Bolivia, Colombia, Guatemala, Lebanon and Niger. The specifics of nonprofit and humanitarian organizations is that they do not have to face competition; instead of this, they commonly unite their efforts in order to address major problems. Thus, the paper will consist of five parts: socio-cultural, environmental and demographic factors, technological factors, economic performance, political, legal and governmental factors, and other external factors (including the humanitarian infrastructure in the selected countries). For each group of factors, the opportunities and threats (external issues) for ACF International will be considered.
A. Socio-cultural, environmental and demographic trends
Overall, among environmental, socio-cultural and demographic factors the most important trends related to the activities of ACF International depend on the level of poverty and education in the country, and on the water resources, sanitation situation and agricultural opportunities available. Demography and the impact of the environment are also important, as well as the probability of natural disasters and other emergency situations. Let us analyze the above-mentioned factors in the chosen countries.
The population of Armenia is approximately 3 million people, the global hunger index for the country is “moderate”, and the rate of malnutrition in children under 5 y.o. was measured as 4.2%. The situation with sanitation and drinking water in Armenia is satisfactory: 96% of population have access to improved water, and 90% have access to sanitation. Literacy is close to 100%, but education expenditures are quite low (3% of GDP). The number of people below poverty line in Armenia exceeds 26%, and the country is dependent on exports, since agriculture is often ineffective. Environmental problems include the draining of Lake Sevan used for hydroelectric power stations and possible lack of water supplies in future, deforestation and soil pollution. In Armenia, ACF International has provided support for income generating activities, provides tools and seeds for agriculture; the organization has also initiated support for gain, honey and berry businesses.
The opportunities for ACF International in Armenia are centered around agriculture and income generation opportunities for the population. There is a demographic threat: infertility problem has become common among Armenian families. One more opportunity aimed for addressing possible increase of poverty and hunger is the use of alternative sources of energy.
The next country is Philippines, where the hunger is rated as “serious” by global hunger index, and malnutrition in children below 5 y.o. is 20.7%. Although 91% of people have access to good drinking water, only 76% have access to sanitation facilities. In Philippines, there is high possibility of natural disasters: typhoons, earthquakes, tsunamis, volcanoes, etc. The rate of poverty is high (32.9% of people below poverty line), despite the recent economic recovery, since the income is inequitable distributed. Among major environmental problems there are deforestation, pollution of water and air and erosion of soil.
In 2009, ACF International launched emergency response for the victims of the typhoon and flooding. The organization mobilized the distribution of food, water, emergency kits, blankets etc. Another ACF initiative in Philippines is public emergency campaign for training vulnerable families best practices of hygiene and sanitation. Overall, in Philippines malnutrition and hunger are mostly caused by poor sanitation, food shortage, high prices and devastating effect of natural disasters. Moreover, although governmental programs partly helped to increase the effectiveness of agriculture, nutritional problems persist, most of all, due to low awareness of population about sound nutrition.
ACF International should focus its activity in the Philippines around educating people on proper sanitation and nutrition habits, to prepare emergency help and locations for the victims of natural disasters and help seasonal workers (one of the most impoverished groups) to find other sources of employment and to live a sustainable life. Threats for the activities of ACF International can come from the exhausting natural resources,
Bolivia is also rated by the Index of Global Hunger as “serious”; malnutrition in young children here is 4.5%. Here the nutrition problems are related to water and sanitation factors: only 86% of people have access to clean drinking water, and only 25% have access to sanitation facilities. The level of literacy is also comparatively low, only 86.7% of total population. More than 30% of population are below poverty line; the country also experiences severe problems with healthcare. Natural disasters such as flooding are additional sources of social problems. Soil erosion resulting from poor agricultural practices is a major environmental threat in this country.
The activities of ACF International here include creating boreholes to provide access to clean water, establishing hand-washing stations and latrines to improve sanitation, and helping the victims of flooding. Existing opportunities include, first of all, further improvement of sanitation and focus on sustainable use of scarce resources. Health education, medical treatment and other health care initiatives might also be very helpful for Bolivians. Threats may arise from crime level and drug trafficking, and existing social unrest might affect the initiatives of ACF International.
Colombia experiences a number of environmental problems such as damage of soil and water due to pesticide overuse, and air pollution. Here the index of global hunger is “moderate” and early malnutrition rate is 5.1%. The rate of HIV/AIDS is high (0.5% of all population), and the overall level of healthcare is poor, while the risk of infectious diseases is quite high. Access to drinking water is good (99%), which cannot be said about sanitation – only 74% of population have access to sanitation facilities. In 2010, the country experienced a severe flooding, which led to 6 billion damage to the economy. 45.5% people are living below poverty level, and this is the major cause of malnutrition in Colombia. Here ACF International helped to promote hygiene, supported grain businesses and helped the people to recover after the flooding. The main opportunity is to help to make agriculture more effective and to improve sanitation, both with providing sanitation facilities and by educating people. Most threats follow from criminal groupings and people engaged in the production of heroin and cocaine.
For Guatemala, the threat of hunger is serious and malnutrition rate for children below 5 y.o. is 17.7%. Many social and economic problems are related to natural disasters: earthquakes, hurricanes and tropical storms. Among Guatemala’s environmental problems, there are soil erosion and water pollution; access to sanitation facilities is medium (81% of population). 98% of people can access clean drinking water, and the level of unemployment is comparatively low. At the same time, economy is affected by corruption and money laundering, more than 50% of people live below the poverty level, while 15% of people live in extreme poverty. The causes of malnutrition in Guatemala are varied: droughts, decrease of coffee exports and reduction of coffee prices. Pool schooling and health care in rural areas also contributes to these problems. ACF International has helped people in Guatemala to improve their revenue-generating activities, provided seeds, tools and training for better agricultural techniques, and helped 50,000 of victims who suffered during the 2010 flooding. Further opportunities for ACF International include educational initiatives and collaboration with governmental programs aimed at reducing poverty, especially in the rural areas.
In Lebanon, the hunger index is low, early malnutrition rate is 4.2% and there are virtually no problems with clean water and sanitation now; the major causes of social problems and hunger here results from war conflicts, pollution and natural disasters such as sandstorms and dust storms. 28% of people are below poverty line, and the rates of labor and sex trafficking are threatening. The country’s development is promising to be stable, and here ACF International should focus on emergency help, educating the kids and supporting income-generating activities.
Niger should be on the top of the list for ACF International since the hunger index there is alarming, and about 40% of children below 5 suffer from malnutrition. The country suffers from recurring droughts, and there are numerous environmental problems such as soil erosion, growing deserts and overgrazing. Population of Niger is quickly increasing (population growth rate is 3.64%), but the health care is quite poor, and many infectious diseases put the population at risk. Only 48% of people have access to clean water, and only 9% have access to sanitation facilities. More than 63% of people are below poverty line. In Niger, ACF International has provided treatment to malnourished children and contributed to health care activities. Further activities should be centered around health care and education, since the population growth rate and the state of agriculture in Niger can lead to rapid increase of hunger in this country. The main threat for the initiatives of ACF International in Niger is the lack of support, infrastructure and funding, and the absence of sustainable technologies.
B. Technological factors
For ACF International, the impact of technological factors is different from other factors. While the four other groups of factors determine the environment within a country and serve as a framework for developing the strategy for the organization, technological development are adopted by ACF International worldwide and best practices are passed from country to country as part of the mission of ACF International. Thus, for ACF International the availability of new technology and access to modern (often US and Europe-originating) technologies is more important than current state of technology in a particular country. Moreover, most countries with high poverty level experiencing threats of malnutrition and hunger belong to developing group, where the technology sector is lagging compared to the developed countries. From this perspective, ACF International has to determine appropriate technologies and help the countries in need to develop and apply these technologies.
In Armenia, the level of education is comparatively high, but the access to technology and the development are hindered by the struggling economy and bureaucracy. ACF International should use all possible opportunities and unite the existing NGOs to improve the situation in the country.
In Philippines, the level of technology is effective and the government is taking a lot of step towards reforming it, but it is necessary to specifically address rural issues in Philippines. A warning sign is the decreasing consumption of vegetables; this is another issue which ACF International should pay attention to. In Bolivia, technology is quite poor and ACF International should first of all helped to make agriculture more effective and to establish more sources of clean water. In Colombia, there is also a need to make agriculture more effective, but it is more difficult to introduce technology to Colombian people due to high engagement of population in illicit drug production.
C. Economic performance and forecasts
Economic situation worldwide and especially in developing countries is directly related to demography, poverty and other factors causing malnutrition and hunger. Economic forecasts should thus be used in strategic planning for ACF International as predictors of the need for emergency help in many countries.
For example, in Armenia, severe economic recession started in 2009, and although in 2010 the situation improved, currently the country is at risk of default. This means that people living below poverty line in Armenia (more than 26%) will be the first to suffer from recession, and the opportunity for the organization is to help Armenians find sources of income related with manufacturing or agriculture before the recession hits them. Armenia is part of WTO, and there might be new opportunities for help from WTO members. There is an associated threat – programs related to income generation take a lot of time, and it might happen that their effect will be seen later, after the recession. ACF International might need governmental support to launch new initiatives timely in Armenia.
Malnutrition problems in Philippines are not strongly related to economical problems; however, they are partly related to the weak efficiency of tax collection, and to a large number of seasonal workers in the economy. Here with governmental support ACF International can try to develop educational programs for these employees and create a better employment balance in the country.
Bolivia belongs to the poorest countries in Latin America, and despite economic growth in the recent 3-4 years, the economy is still unstable due to low investment level and high food prices. One opportunity here for ACF International is to unite with powerful neighboring countries and to provide food at more reasonable prices for the poorest groups of population in Bolivia.
In Colombia, the recent governmental strategies have improved the development of the economy, and compensated the people who lost their land. Further implementation of these policies might help to reduce unemployment, and here ACF International might also help the impoverished.
Lebanon economy was weak before 2009, and only during the last 2 years the growth has been witnessed due to improvement of tourism sector and the relative stabilization of sociopolitical situation.
In Niger, the very geographical position of the country and the population growth rates are threatening to make hunger even worse, and here measures should be immediately taken. ACF International might seek the support of large international organizations such as World Health Organization to address Nigerian crisis.
D. Political, legal and governmental aspects
Political and legal factors are important for ACF International since many actions need the help of the state, especially when long-term effect is needed, e.g. in health care or educational sphere. However, ACF International is not directly depending on political decisions, and thus if adequate governmental support is absent, the organization can turn to domestic companies or seek the help of other international NGOs. In fact, the presence and development of NGOs in the target country is as important for ACF International as governmental support.
Armenian government and economy are strongly related to Russian system, and thus its rigid structure and bureaucracy might impact the implementation of the programs of ACF International. The opportunity of seeking support from other world organizations and countries (e.g. from WTO members) should be used to reach the objectives of ACF International. In Philippines, the government is actively fighting malnutrition, and it will be quite effective to partner with state structures to address the causes of hunger.
In Bolivia, illicit drugs are a major problem and contribute to health problems of the population. In Colombia, extreme violence and strong criminal groupings hinder social development, and in these countries ACF International can only unite with more successful neighboring countries in Latin America to oppose crime and to help the society progress. There aren’t many NGOs in Lebanon, and thus making connections with world organizations and helping to establish local initiatives to combat poverty is a good opportunity for ACF International there.
In Niger, high rate of corruption and ineffective policies make collaboration for ACF International doubtful. Here it would be more effective to combine efforts with other powerful international organizations and neighboring countries to address malnutrition steps. The threats arise from crime groupings and general ineffectiveness of infrastructure in Niger.
E. Other external factors
The state of NGO’s and their activity are the major external factor which is important for realizing the mission of ACF International. One of the goals of the organization is to help the communities become sustainable and to unite effort with local organizations to make long-lasting changes. In Armenia, about 3% of people are involved in nongovernmental organizations, and their readiness to help is a great opportunity for ACF International. The major threats are the lack of funding for nonprofits in the country, and the lack of experience in the nonprofit sector. It is possible to overcome this threat through educating Armenian volunteers and attracting international communities to fundraise for Armenian nonprofits.
In Philippines, the nonprofit sector is growing and ACF International already established partnerships with 3 organizations. NGOs in Philippines are effectively interacting with state programs, and thus it is possible to achieve significant effect in a short period of time. Possible threats in this sphere may come from unsupportive officials at middle levels and showcasing habits. Nonprofits in Bolivia are rather weak, and most NGOs operating in the country are international. It might be useful to help create strong insider organizations and to provide the necessary education to their representatives. The major threat here is the lack of help from the government and the rigidity of state sector.
Colombia has a diverse history of nonprofit activity, and the nonprofits are often autonomous from the governmental structures, which makes collaboration with these organizations very desirable. ACF International should use this opportunity as much as possible. NGOs in Niger are very weak, and most of them are foreign initiatives, and thus an opportunity for ACF International is to help strengthen educational and health care network, and possibly to support and unite local initiatives.
The analysis of five groups of factors affecting external environment for ACF International has shown that for different countries, the causes of malnutrition can vary, as well as the activities of the chosen organization. Most often, malnutrition and hunger are related to the lack of clean drinking water and the lack of sanitation facilities. Another factor affecting malnutrition is poor state of agriculture and ineffective use of land (resulting in land erosion). Poverty and economic decline also cause nutritional problems; problems in education and health care spheres accompany economic problems, and vise versa.
Among other important factors, there are political and legal influence on ACF International, and the existence of local NGOs as well as their effectiveness. The opportunities and threats of ACF International are also different for every country. Most often they are related to improving access to water and sanitation, helping to launch health care and educational centers, and providing emergency help in the regions where natural disasters often cause economic suffering and malnutrition. The threats faced by ACF International relate to the lack of state support for their initiatives, poor infrastructure and the lack of professionals able to implement the programs, opposition of criminal groups and the effects of bureaucracy on nonprofit activities.