Pestle analysis of a furniture industry in South Africa-Steinhoff International

Steinhoff International was founded in 1964 by Bruno Steinhoff. It is a South African International
retail holding company. It has branches in four major continents of the world including Africa,
Europe, North America and Asia Pacific. The operations are carried out by the company in the form
of manufacturing, retail, logistics, sourcing and corporate services. The company has around 26
manufacturing facilities and 12,000 retail outlets. The business model of the company is considered as
a strong and an efficient model which ensures successful growth of the company. The sourcing and
manufacturing is done by the company at low cost. The products are then provided to the customers
while maintaining extensive retail footprint. This the reason behind the growth of the company. The
main office of the company is located in Stellenbosch, Western Cape in South Africa whereas the
headquarters are in Amsterdam, Netherlands. The company’s business model is “ Our business is to
be a low-cost producer and distributor of furniture. Our marketing thrust is global, catering for the
mass middle market”.

The main mission of the company is to provide the opportunities to customers of buying products
which can improve their life and can add value to their living. Further, the company wants to provide
the material to the consumers at affordable prices. The main strategy of the the company is to become
a leader in the furniture industry at the global level. The retail vision of the company for their
consumers is “Provide everydaty products at affordable prices at consumer’s convenience”.

Apart from having an effective strategy of growth and development, the company is still prone to
several external factors which can affect its business and advancement in near future. PESTLE
analysis is a highly effective tool to analyse the effects of external factors viz. political, economic,
social, technological, legal and environmental factors on a particular business which can further help
the management to take the appropriate actions and modify their strategy for company’s benefit and
advancement.

The pestle analysis of Steinhoff International is as follows:

Political –

Uncertain political climate- In 2017, South Africa suffered from second recession in eight years.
Further, the country was hit by a severe drought in 2015 whose effects were harsh on the country. The
people of the country have still not been able to recover completely from its impacts. And the African
National Congress (ANC) which was the past government of the country which ruled the country for
around 22 years was also suffering from huge crises. The intensity of corruption is also high in the
country. Therefore, a feeling of instability is consistently resulting in low confidence among the
business people in the country. It has been observed that only 30% businesses of the country have
confidence on the economy. Because of repeated fighting of political parties with each other, they are
not able to focus on the framing of appropriate policies for the country’s development. When the
scenario of the country is so uncertain any accounting scandal of Steinhoff can put the company under
severe crisis. Moreover, because the political environment of the country is not favourable, a quick
recovery from the losses cannot be expected from the company.

Economical-

The currency markets is South Africa are presently going through sharp fluctuations. This can lead to
losses in the businesses which are still emerging and want to make a fast progress in the country.
Moreover, when the economy of the country is in a fluctuating situation, the investors are least
interested in investing their money in the businesses as the returns are not ensured. The declining
economy of the country can be an unfavourable factor for the company’s growth.

Social-

Job losses in South Africa- There is a fear in the South African Clothing and Textile Workers Union
(SACTWU) regarding the accounting scandal of Steinhoff. They fear the job losses of people
associated with this company in the future. As the share price of the company came down by 90%, the
survival of the company seems difficult according to the Union and hence they doubt the job security
of the people who might be working with the company. Because of the troubles within the company,
around 130000 employees are spending their lives with the fear of loss of job. Moreover, there is huge
concern about the crash of the stock price of the company in the mind of local trade unions.
Moreover, this may further have serious repercussions on the pensions of the employees as well. In
addition, the unemployment may rise further by 30% due to lack of “fast sustainable growth” in the
subsequent years.

Growth of purchasing power in Europe- A rise in purchasing power by 0.7% was recorded in
Europe in the year 2016 which indicates the greater power of European countries to buy goods.
Further, this scenario was observed at the time when the country was going through several issues like
refuges crises, Brexit, terrorism. The increment in the purchasing power was found to be highest in
the Central and Eastern European countries. The rise in purchasing power reflects the increased ability
of the consumers to buy more products which may include the needed as well as luxury goods. The
increased purchasing power can provide huge profit to Steinhoff.

Technological- Digital advancements occurring in South Africa and other countries can ensure
advancement in the retail sector as well. The operations related to financing can be improved
immensely by employing the use of recent technologies. Further, as all the countries are now going to
exploit 4G and 5G technologies, the business houses can be benefitted immensely from this
advancement. Moreover, enhancement in the smartphone technology with smartphones now available
at cheaper prices can result in 24/7 access to the E-commerce market of the company and hence can
ensure huge profits for the Steinhoff. Moreover, with digital advancement, customers can be shown
personalized choices without any intense efforts.

Legal- The company Steinhoff, went into a serious lawsuit related to an accounting scandal in South
Africa in the year 2017, and the people have still not been able to recover from that completely. This
scandal has largely impacted the investors’ trust on the company’s business and reputation in the
international market. Therefore, in coming times the company has to be highly cautious to not indulge
in any legal issues which can impact company’s survival.

Environmental- The company has to ensure to not indulge in any serious environmental issues or
violation of environment laws as far as manufacturing of goods is concerned. The production of
furniture from wood and other goods should be well under the sustainability laws proposed by the
environmentalists.