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Running head: ENVIRONMENTAL SCANNING AND ANALYSIS 2

ENVIRONMENTAL SCANNING AND ANALYSIS 2

Environmental Scanning and Analysis

P. Suresh Kumar

(1712000)

University Canada West

Professor: Dr. Pauric P. O’Rourke

Date: 24-05-2020

Environmental Scanning and analysis

Introduction

Hatch (2019), defines environmental scanning as the gathering of internal and external information related to an organization that can be used to critically monitor the status of the internal condition of an organization and the external condition of the same. Internal environment includes the structures set withing and organization, its employees, its culture, and way of operations. The external environment includes the macro-environment of the organization, other industry players that are immediate to the organization and natural environment. Environmental scanning entails utilization and possession of information related to patterns, occasions, relationship, and trends withing the internal and external environment of and organization (Sarsby, 2016). Pestel analysis is commonly used to scan the macro-economic aspect of an organization which is also the external environment, while SWOT analysis is used measure the firm-level and Core competencies analysis is used to measure the internal environment of an organization .

Environmental Analysis is a strategic tool utilized by strategic managers to assess the position of an organization. The analysis is translated and used making corporate decision and laying out of strategic plans. Today’s market is extremely competitive and what worked for an organization previously may not always be effective. This creates a need for strategic managers to adopted analysis mechanism whose information obtained is used to making organizational decision, which are geared in positing the organization better in the market and industry (Borges, 2018). Pestel analysis expanded means political, economic, social, technological, legal, and environmental factors that affect and organization. SWOT analysis expanded means the strength, weakness, opportunities, and threats that an organization contains or that characterize and organization. Core competencies analysis measures and organizations systems, structure, resources, and policies. Strategy formulation calls for thorough environmental and scanning to identify opportunities and threats facing and organization both internally and externally.

Goals and purpose on environmental scanning and analysis

The main of this process is to provide information that would help the organization identify its threats and opportunities withing the organization and outside the organization. It helps decision makers plan and develop strategies that are practical and applicable in and organization. Abu Amuna (2017), states that it also helps an organization channels the right resources and time towards efforts necessary in the business and eliminate resources that have become obsolete and no longer working for the business. For a business to survive and grow it needs to be aware of what is happening around it whether internally or externally so that it can stay abreast of the changes. In setting up of long terms and strategies this process plays a crucial role since its puts everything in place without necessarily identifying whether its working or not. When everything is put into perspective then all the decision makers are in apposition to pick and drop ideas and concepts in the relation to the specified organization and not applying concepts that worked for other organization. Strategies and goals set are customized to work for the organization under analysis.

Environmental scanning and analysis in indiscriminative and cut across all the structures and systems that govern an organization, from the senior management, to the employees, to the customers, competitors, and rivals. There is no better way to influence change or make decisions related to an organization without the influence of these processes. Additionally, is helps and organization have and inventory of its resources, its strengths, opportunities, weaknesses, and threats (Hatch, 2019). The organization can optimize its operations, resources, policies, and structures should they choose to utilize findings of the analysis. Cost-cutting decisions, change of culture, merging and acquisition of organizations is also done with the help of an analysis, it would therefore be accurate to state that it also influences investors decision.

Company Background

Old Mutual is a pan-Africa financial institution that offers financials services related to investment, insurance, savings, and banking. The company was formed in 1845 as an insurance company in Cape Town by John Fairbairn. John Fiarbairn together with a team of one hundred and sixty six members formed the first mutual aid society in South Africa and named it Mutual Life Assurance from which the capital was borne out from the one sixty six members (Giamporcaro, 2018) . The company took an uphill growth dominating the market and became one of the leading financial institution in the country. In 1885, the company changed its name to South Africa Mutual Assurance so that is would own its origin and its market. Giamporcaro (2018), states that the company dominated the South African market capturing a third of the financial and insurance market leaving two thirds to other markets. The objectives of the company are to grow customers into achieving lifelong financial goals by investing them in ways that create an affirmative future for them, their community and society. The company has approximately thirty thousand employees operating in fourteen countries in Africa and Asia. Today is on internalization journey with its operation functioning all over Africa and a branch in China, and Latin America.

This did not just happen overnight as Old Mutual has a history of acquiring other financial institutions in an effort to venture new markets or capture a wider market in the process. In 1999 the company demutualized and moved its head office in London. The constant mergers and acquisition that Old Mutual made the company have so much going on from asset management, insurance, investments, and banking. In 2004, the company gained full control of publicly listed South African Insurance Subsidiary Mutual and Federal. In 2016 the company opted to separate its operations so as to create more value and unlock shareholders to a wider portfolio. The separation dived the businesses of the company into four namely US asset manager, African Business, British wealth manager and Nedbank. In terms of the company as an insurer it was further divided in four, Old Mutual Emerging Markets, Old Mutual Wealth, Nedbank, and Old Mutual Asset Management.

The managing director of Old Mutual Personal Finance Karabo Morule, in June 2018 showed concern of how the company would be able to retain its culture of shared values while strengthening and modernizing its customers, even after all the merging and acquisitions that had taken place over the years. It is important to note the core values of the organization as integrity, accountability and respect, the values Karabo Morule believed were a summary of the company’s culture. One of the processes that would help boost or prompt an effective culture change would be the environmental scanning and analysis since it is able to put everything in perspective. The change would be more practical to the employees, management, customers, suppliers, and all other stakeholders which in return would improve service delivery, performance, and competitiveness.

Internal Analysis

The core competency analysis is used to analyze the internal structures, policies, systems resources with an organization. In Old Mutual limited is structured in a manner that segments every service independently to promote the type of service deliverer offered to its customers. It also helps the company manage its operations independently this is through the four decisions namely African business, whose role and service delivery are focused or channeled to the African market and needs. The US asset manager is designed for the US market with its products and services specifically designed for the market. British wealth manager is also designed for the same and so is the Nedbank in Nigeria.

Old mutual is very resourceful in terms of how its products are designed since most of the products and service offered are specifically designed for a specific market. This means a product designed for Africa may not work in British and is the product in America. While one may wonder how this is possible, OM (Old Mutual) believes in collaborations and mergers and in most of its success has been attributed top the mergers made in most of these countries. In the merging process the company does not seek to control the market entered but uses the present team to understand the market and push its products in the process. The products and services of the company are also designed in a manner that considers the well being of the customers since one of the main objectives of the company is to grow and individual as it grows the community and society at large. The company, operating income is estimated to be R9,963 million with a revenue of R109,877 million. The company as at 2018 accounts for thirty-one thousand employees. This shows that the company has the capacity to achieve.

The purpose of the company is to cause its customers to thrive through savings and protection, lending, investment, and insurance. It is a one stop shop for all individual financial needs. The company also believe positive results are born out of good governance and have designed their leaders through ‘ACT NOW’ policy to yield success both to the company and to its customers. The company believes that the company success is born out of leaders, employees, and customers. Its values define the company’s culture which guide and inspires their interactions with each other and its stakeholders. Its values include, customers, the company believes in championing its customers, diversity and inclusion, innovation that makes a difference, acting in integrity, respecting communities, and serving each other, and trust and accountability.

Old Mutual is committed to sound governance and principles applying substantial levels of ethical standards in their business operations. The directors accept complete responsibility for the application of all the company’s values, policies, and corporate governance, ensuring that they are practiced throughout the company. The board represents and safeguards the interests of all stakeholders ensuring that the nature of business in practice is sustainable and is achieved by the group. The board is also responsible for compliance checks of statutory obligations specified by the companies memorandum of incorporation, Johannesburg stock exchange listings, the companies act, the Malawi stock exchange listings, the UK listing authority rules, Namibian stock exchange listings, Zimbabwe stock exchange and other regulatory requirements. The directors also have a king code which ensures that the responsibilities and principles are executed both in spirit and letters. The company governance also focuses on the company’s customers build to maintain their retention, culture to ensure that they are able to retain behavior, talent and business, and board refreshment that maintains a refreshed group with diverse knowledge and skills.

External Analysis

To analyses the company the analysis concept to be adopted is the PESTLE analysis models which will analyze the political, social, economic, technologic, environmental, and legal environment of the company. To start with is the political environment. The company is greatly dominated in Africa, which is faced with a lot in political instability mostly when their electioneering period arrives. Most of these countries like Nigeria, Zimbabwe and Sudan are faced with long periods political conflicts which greatly affect the economical functions that keep the country moving. When this happens companies such as Old Mutual are forced to close their operations as they wait for the political heat to cool down. In the process the reruns for investments are affected and the ability of its customers to invest and utilize their services is affected.

Due to the political instability in most of these African countries, the African market is also characterized by unstable trends which have an economic effect to almost all the industries within those countries. Being an investment company when the rates of inflation are high in these companies, the people propensity to save is affected which means that they can no longer utilize the company’s products and services which in the long run affects investors returns and the company profitability. The average GDP growth projections in most of the countries where Old Mutual operates are relatively low in most African countries meaning that though the company may still be making profits, it doesn’t always reach the targets in some or even all of its operating offices in Africa. Additionally, the globe today is faced by unpredictable economic trends which makes it quite difficult for the company to make long term decisions regarding its products and services and expansion plans.

Africa being a third world country is still in the process of developing which creates a huge gap between the poor and the rich. There is a great social distinction between those who can afford their products and those who have no idea of the kind of products and services that the company offers, let alone the name of the company. Some of the social set-ups believe that ‘Old Mutual is a company for the rich’, which is not always the case. The company is also faced with the challenge of digital adoption which affects its socialization ability to the masses who believe that everything they need is found online. The company has also not been able to sell some of its products like the insurance motor due to its inability to connect or interact in a way that the people understands or appreciates the product.

The company is yet to fully adopt the BFSI (Banking, financial services, and Insurance) technology which puts the company at a disadvantage with companies that have fully complied to the technology. With the challenge of integrating information technology enabled services (ITES) the company is yet utilize technology in building its customer base and product reach. This may be the case to due to poor infrastructures in the companies that they operate in and the adoption of the such services to the customers. Most African customers believe in the importance of physical contact with service providers and therefore the company choses to invest more what values their customers consider in their product and service delivery. Automation and artificial intelligence has overtaken on of the BFSI industry in most developed countries and most of these key players have adopted such technologies, how ever they have not been fully received by the customers and clients in most of the African countries but in China and Latin America there seem to be a few improvements.

In terms of regulations and compliance, Old Mutual is very compliant with the regulatory frame works on most of the legal proceedings with most of its operating countries. It believes in the power of compliance and governance. Before any entry in a country and market the company ensures that is meets the thresholds of the central banks of the assigned countries. It would therefore be accurate to say that Old Mutual is not faced by a lot of legal and compliance scandals. In terms of competitors, customers, and service delivery, it has ensured to maintain integrity and honest to ensure and it never has to face the lawsuits and other legal related legal procedures. This through having strong board of directors, corporate governance and core values which built up the culture of the organization.

Old Mutual environment is characterized by very many financial institutions, insurance companies, mutual funds investment companies and asset management companies. All these remain to be the company’s greatest threat in the financial market. Being found in many countries its competitors varies since their competitor may be local, regional, and international. However, the company has been able to do a lot of mergers and acquisition of local financial institutions which in once way help the company in customer acquisition and distribution of their products and services. An example is the UAP Old Mutual Group in Kenya which acquired both a financial institution by the name Faulu Micro-Finance and insurance company by the name UAP Insurance. By acquiring this the company was able to gain access to their customers and clients and make products and service that can be utilized through the two mergers (Ajowi, 2019).

SWOT Analysis

The strengths of the Old Mutual company include its diverse portfolio of products and services which makes the company able to make profits through different channels. The company is also a market leader in terms of provision of insurance services in most of its operating countries. The company has track record of acquisition which as mentioned earlier helps it position itself well to competitors since in the process of acquisition they not only acquire a company but also some of its customers through tailor making product and services to be utilized by the merging companies. This is a long-term competitive advantage which most competitors feel threatened ed by. The company’s culture of championing customers and customer inclusion promotes the kind of value for service that they offer to their customers which promotes customer loyalty and retention. Despite having many competitors around, the company’s value for customers keep the customers hooked.

The company however is face with the weakness of a concentrated business model, in the sense that the company portfolio is saturated in a manner that makes the company have so much to handle. This is a risk in the sense of research and development unlike most companies which only focus on maybe insurance and banking only. When a company focus in providing one type of product or service, they can make innovations and improvements to such based-on customer reviews, preferences and recommendation. In Old Mutual case they constantly must handle all manner of comments and review innovations and recommendation which poses them with the risk of focusing of one product and neglecting the other. Additionally, in the recent past Old Mutual was faced with the challenge of no confidence with the CEO Peter Moyo and the company’s board. In response to this Iain Williamson was selected as the acting CEO.

The company is yet to take advantage digital platforms and technology mostly in the financial sector, this possess as an opportunity for the company to take its product and service delivery to the next level. Though the company is found in several countries in Africa there is still untapped markets in the Sub-Saharan Africa which the company could as well take advantage of using the concept of merging and acquisition for market entry. Through technology the company could design online marketing strategies which will utilize social media and other online platforms to promote its product. This so because today everything is online, if it able to take advantage of that then is would cut of its operations costs and increase its market niche.

Despite having such opportunities, the company needs to quicken its move since they are not the only players in the market as the market is also characterized by local and multinational players such as Absa and the standard group who are slowly but consistently diversifying their portfolio to not only offers banking services but also asset management services and even insurance. In Africa traditional financial service providers such as Saccos and church owned financial institutions are being utilized by some of the people despite the risks that surround them. This is because they are easily accessible and reachable unlike the Old Mutual branches which are mostly located in towns and large metropolitans.

Discussion and Conclusion

The information obtained above is like a medical diagnosis done to a patient who in the case the Old Mutual Company. The environmental scanning and analysis have identified what is working for the company, what is not and what can be done. The management mostly the board is at this point able to make timely and accurate decision concern the future plans of the company (Chatterjee, 2017). Moreover, the company is also able to identify the changes and the improvement they need to make. One of biggest external threat that the company faces in political instability in most of the African countries which not only affects the company politically bust also socially since the company to protects the interests of its stake holders is forced to open its offices in places that are secure and shielded so that when a pollical war occurs the company is able to protect its resources and only have to keep up with economical losses. This has affected the company’s ability to reach to social aspects of people whole live in the interior or reserve part of the country creating a threat to its customer reach and creating a gaps which traditional financial organizations take advantage of. This may deny the company the chance to ever serve such customers since it also needs to protect its investment. This however may change should the company chose to utilize technology and digital platforms to reach such people. They could use technology to create products and platforms that are quick and easy to understand that such a market can use in serving their financial needs.

In conclusion such an analysis sheds light to the company in what they can do different and how they can beat their competitors. Old Mutual is not faced by with internal weakness in terms of polices, systems and structure but it is faced by external challenges which could be resolved by adopting technology and increasing their operation in much stable Sub-Saharan countries. It would also capitalize on tits strength of acquisition and product diversification venturing new markets and increasing their niche. To ensure that their portfolio is not exposed they should also focus on product research and development to ensure that what they offered is updated and relevant to its market.

References

Ajowi, B, & Reuben, J (2019). Technological, organizational, and environmental factors on the adoption of cloud computing in insurance industries in Kenya: A case study of UAP-OLD Mutual, Nairobi, Kenya. The Strategic Journal of Business & Chenge Management

Abu Amuna, Y. M, Al Shobaki, M. J, & Abu-Naser, S. S (2017). Strategic Environmental Scanning: An Approach for Crisis Management.

Borges, N. M & Janissek-Muniz, R (2018). Informal and Individual Practices of the Environmental Scanning in Organizations. In Handbook of Research on Strategic Innovation Management for Improved Competitive Advantage

Chatterjee, S. (2017). Industry-led change. In Sustainable Investing (Vol,277, No.292)

Governance Overview https://www.oldmutual.com/about/governace-overviews Retrieved 21/05/2020

Giamporcaro, S, & Leslie, D (2018). Responsible investment at Old Mutual: a case of institutional entrepreneurship. Emerald Emerging Markets Case Studies.

Hatch, M. J (2019). Organization Theory: Modern, Symbolic, and Postmodern Perspectives. South Asian Journal of Management

Old Mutual About Us http://www.oldmutual.co.za/about-us/company-history Retrieved 21/05/2020

Our Values https://www.oldmutual.com/about/our-values Retrieved 21/05/2020

SWOT & PESTLE.com (2020). Old Mutual SWOT & PESTLE Analysis- SWOT & PESTLE.com https://www.swotandpestle.com/old-mutual/ Retrieved on 21/05/2020

Sarsby, A (2016). SWOT Analysis.Lulu.com

Appendices

APPENDIX 1: Introduction

APPENDIX 2: Company Background

APPENDIX 3: Internal Analysis

APPENDIX 4: External Analysis

APPENDIX 5: SWOT Analysis

APPENDIX 6: Discussion and Conclusion