Pollution is one of the most significant problems affecting many nations across the globe. World Health Organization (WHO) estimates that 23% of global deaths (12.6 million) are associated with environmental factors, with air pollution responsible for 7 million deaths annually. The transport sector contributes approximately 15% of air pollution. Countries such as Pakistan, India, and China have the highest levels of air pollution, but they are putting in place measures to reduce pollution as per the international standards.
A case study by Gibbons (2017) is about a company manufacturing pollution-eating bikes to minimize pollution in urban areas. The bicycles absorb polluted air and pump out clean air as one pedal. The bikes are part of a global project to clean up most polluted cities across the globe. The purpose of this research paper is to explore the feasibility of the pollution-eating bicycles in a new market-Ghana. Accra, Ghana has been ranked as the most polluted city in Africa and among the top ten polluted cities in the world. The paper starts with a theoretical and conceptual perspective of PESTEL analysis tool. A PESTEL analysis of Ghana identifies the factors that will allow and hinder the adoption of the pollution-eating bicycles. Lastly, the paper will conclude with recommendations to enhance the organization’s success in Ghana.
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Conceptual and Theoretical Perspective
PESTEL is a tool and technique for environmental scanning. According to Sridhar et al. (2016, p. 217) environmental scanning tools were first discussed by Aguilar (1967) as processes that seek information about events and relationships in the company’s external environment. The information will assist the managers in charting the organization’s future course of action. The external environment is divided into two: the operating environment and the general environment (Kaplan & Norton, 2008 p.62). The operating environment entails suppliers and other stakeholders that deal with the firm directly. The general environment is made up of the social, political, regulatory, economic and technological conditions.
The external environment analysis has been modified over the years. In the 1970s, PESTEL was called STEPE analysis (social, technical, economic, political and ecological). Over the years, it has changed to PEST, PESTLE, and STEEPLE among other acronyms. PESTLE analysis focuses on the general environment. The related concepts in the PESTLE framework are Political, Economic, Social, Technological, Legal, and Environmental factors (Graham, 2018 p.32). A study by Jarzabkowskiet & Spee (2009 p. 87) on strategic management tools concluded that PESTLE is a common environmental scanning tool for practitioners because it paints all the realities of the business environment.
The theoretical framework for PESTEL analysis is built on strategy analysis. The theoretical framework combines the perspectives of strategy analysis frameworks and strategy orientation (Isoherranen, 2012 p.29). Dunning’s eclectic theory provides the theoretical framework for the PESTEL analysis and entering a new market in international business. The theory focuses on the choice of entry into a global market. The theory proposes ownership-specific variables and location-specific variables that will guide the entry of the organization into the new market. According to Dunning (1988 p. 108), the choice of entry into the new market takes into consideration the ownership advantages, location advantages, and internalization advantages. PESTLE analysis is used to determine the location and internationalization advantages.
Examination of PESTLE factors
In the case study, Daan Roosegaarde, a Dutch designer is partnering with Ofo, a Chinese bike-sharing startup to design an anti-pollution intervention. The result of the partnership is a bicycle that emits clean air as one cycles. Ofo is the company behind the Smog Free Tower in Beijing, which is a seven-meter construction that sucks dirty air like a giant vacuum cleaner and filters it using ion technology to emit clean bubbles of air through its ventilation (Gibbons, 2017).
Roosegaarde partnered with OFO which is based in Beijing with the aim of bringing back the bicycle culture in the city. The bicycle culture has disappeared in China as everyone wanted cars, but environmentally conscious individuals are beginning to adopt biking (Song et al., 2017 p.285). Taking this innovation to Accra, Ghana will be a challenge for Roosegaarde and Ofo because of the unique factors in Ghana’s external environment. Ghana is a lower-middle income nation in West Africa with a population of 28 million. Ghana is undergoing rapid economic development, and many people are moving to urban areas in search of better opportunities. Accra is the capital city of Ghana, with a population of 2.27 million in 2018. The hospitality and real estate development in Accra is on the rise to accommodate locals and expatriates who are moving to Accra.
Consequently, the cost of living and pollution has gone up in Accra making it the most polluted city in Africa (Arku et al., 2015). A study by Solarin et al. (2017) explores the pollution haven hypothesis in Ghana using CO2 emissions between 1980 and 2012. The study concludes that pollution haven does exist in Ghana. According to the World Health Organization (WHO) index, Accra has 98 with respect to particulate matter making it a highly populated city. Accra has a rate of 102.61 according to Numbeo (Solarin et al., 2017). The pollution problem in Ghana makes it the perfect choice for bicycles that emit clean air.
Political Factors
The first three components of the PESTLE analysis are political, economic, and socio-cultural factors. The political landscape in Ghana is stable. Ghana’s political and electoral machinery continues to step towards effective political system build on democratic principles. Ghana is one of the most politically stable nations in Africa since the beginning of the 21st century. The stable political environment has led to the growth in agricultural output, investment, infrastructure, and education. While democracy does not guarantee political stability, it presents a good foundation for the firm to thrive (Gheibi et al., 2018 p.480).
Since 1992, Ghana has not experienced any problems with the transfer of power from one political party or one candidate to another. The political freedom in Ghana promotes foreign investment as foreigners are not worried about uncertainties that come with political instabilities due to changes in regimes. Ghana was position 111 in Global Competitiveness Index 2017-2018, making it one of the top destinations to invest in Africa. Ghana scored 3.72 out of 7 because of the business and trade regulations, economic factors, and infrastructure that make it hard for foreign businesses to operate (Solarin et al., 2017). Ghana’s ministry of trade and industry is responsible for issuing business licenses, regulations, and policies that guide local and international firms. The department also advises the government on policies concerning growth, development, and private sector policies. The process of opening a foreign company is not long; the company has to submit the company name, address, MOA, VAT and other requirements. The corporate tax for foreign companies is 25%, but companies in specific industries such as the pollution-eating bikes are viable for tax breaks or reduced taxes.
Other political factors include corruption, bureaucracy, and environmental policies. Corruption is rampant in Ghana; political administrators have made a habit of asking for bribes and embezzling public funds (Forson et al., 2015, p.301). Ghana was position 81 out of 180 countries in the transparency index in 2017 because of the many cases of bribery, nepotism, graft, and favoritism in the Ghanaian government. Ghana has created many bodies to fight fraud and corruption, and the agencies are yet to get rid of corruption.
Inefficient bureaucracy also plagues Ghana. The hierarchical structure in administrative organizations, rigid laws, and impersonal relations lead to slow processes and delay in transactions (Osifo, 2015). Getting businesses licenses takes more than the required time, and this creates room for corruption. The inefficient bureaucracy discourages foreign investors which is why Ghana was position 120 in the “Doing business” index. The low position is due to corruption, bureaucracy and Ghana’s reluctance to come up with new reforms.
Ghana has come up with green policies to encourage the development of the green sector and compliance with sustainability rules (Dramani, 2012 p. 13). The Partnership for Action on Green Economy (PAGE) reports gives an overview of the green economy in Ghana. In the PAGE report, pollution-eating bikes fall under the green industry. Products in the green industry improve the efficiency of energy, water, and other raw materials or control pollution. Ghana is yet to create a comprehensive policy to guide the green industry, but the industry benefits from government support regarding policies, taxation, resources unlike other sectors (PAGE, 2015). The Environmental Protection Agency (EPA) will access the effects of the pollution-reducing bikes before offering support.
Lastly, the relationship between the host and the foreign investor country also affects the success of the business. Ghana has good relations with China. Ghana is one of the first nations in the African continent to establish diplomatic ties with China. By the end of 2016, the bilateral trade volume between China and Ghana was at $5.9 billion. Ghana also has good relations with the Netherlands. The Netherlands continues to support the development and monitor the progress of Dutch companies in Ghana.
Economic Factors
The economic factors determine the success of a business. Ghana has a stable economy with an upward trajectory for the past few years. According to Akolgo (2018, p. 147), Ghana’s GDP expands on an average of 1.5 percent for every quarter with an average of annual 6.95 percent growth between 2000 and 2018. The economy grew by 6.8% in the first quarter of 2018. Ghana’s steady economic growth means that people have a disposable income to buy pollution-eating bicycles. Ghana has a poverty rate of 24.2% which is lower than the poverty rates of most African nations. However, the increasing income is yet to be enjoyed by all Ghanaians. Cooke et al. (2016, p.3) argue that the income inequality in Ghana has risen with the Gini coefficient from 37 in 1992 to 42.3 in 2013.
Economic factors such as inflation, interest rates, labor market, poverty levels, taxation and access to credit financing also play a significant role in international business. Inflation in Ghana rose to 10% in 2018 whereas the prime lending rate remains at a steady 17%. Policymakers attempt to keep the interest rates per the global outlook. Ghana’s exchange rate is impressive and favorable to foreign investors. The Ghanaian cedi (GHC) is the currency of Ghana. The fluctuations in GHC are slight, for instance, $1 equals to 4.73 GHC in 2018. The stable exchange rate implies that the prices of importing pollution cleaning bikes will not fluctuate.
Ghana has abundant natural resources to enhance income generation. People move to urban areas in search of better employment opportunities, and this explains why the population of Accra is high (Yeboah et al., 2013, p. 143). There is an availability of skilled, semi-skilled and unskilled labor in Ghana to offer their services to new companies.
Socio-Cultural Factors
Socio-cultural factors include population growth rate, age, lifestyles, attitude towards pollution, and biking. Ghana has a population of 28 million with an average of 2.2 % growth rate. The population growth for urban areas is on the rise, hence the increasing pollution. Accra and Kumasi are the two most populous cities in Ghana. A significant portion of Ghana’s population is under the age of 30; the median age is 21.1. The 15- 64 age group makes up over 60% of the population (Bonga-Bonga et al., 2016, 156).
The Ghanaian society does not recognize the basic socioeconomic classification, but from the income inequalities, the society is divided into upper, middle and low income. The Accra region has the highest income on average in comparison with other regions; thus many people can afford vehicles. Ghanaians have adopted a “westernized lifestyle,” and this affects their dressing, eating habits, homes, and other aspects of their lives (Dionisio et al., 2010 p. 14). Owning a car in Ghana is associated with wealth, and bigger and faster cars that consume a lot of energy are owned by the rich.
Recommendations and Conclusion
The political, economic and social factors in Ghana will determine the strategies that will be used to market the pollution-eating bicycle. The political factors such as the stable political environment, green policies, and good international relations will help the company to set up in Ghana. Given the high rates of pollution, the Ghanaian government will welcome companies that will help it to address the pollution problem. A notable weakness in Ghana’s political factors is the high levels of corruption and bureaucracy.
Since Ghana’s economy has been on a steady rise, thus Ghanaians have a disposable income to buy pollution-eating bicycles. The biggest challenge will be encouraging people to use bikes when they are used to using vehicles. In Ghana, vehicles are valued and many works hard to buy cars to use for their everyday commute to work. The company will rely on the government support, NGOs, and environmentally-conscious individuals to encourage Ghanaians to adopt a biking culture. The government can encourage cycling through campaigns and by creating safe cycling lanes to encourage Ghanaians to embrace the pollution-eating bicycles.
According to Acheampong (2017), the perception of self-confidence, personal control and ease of cycling have the most substantial influence on the decision to cycle. This shows that socio-cultural and environmental factors are affecting the decisions to cycle. Additionally, bicycles are seen as a means of transport for those who cannot afford cars and the cost of public transportation. Fortunately, car ownership in Ghana is still low with 6% of the households owning cars. The organization should work towards changing the perception towards cycling. Cycling should not be seen as the cheapest, but the safest and fun mode of transportation that has health benefits. Young people going to colleges and work should also be encouraged to cycle so that they will keep up the cycling lifestyle as they grow up.
In conclusion, the PEST analysis shows that Ghana has a favorable external environment to make it possible for the pollution-eating bicycles to be successful. There are a few political, socio-cultural and economic challenges that will affect the adoption of the pollution-eating bikes, but they can be solved by understanding each problem and coming up with the right strategy that will be acceptable for Ghanaians. Sustainable transportation solutions will be highly successful in Ghana since the car ownership is still low. The company can build on the high ownership of bicycles by providing pollution-eating bikes at affordable rates. The company has to be keen on the external environmental changes that can affect the company’s future.
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