Strengths – The things that the organization does well or better in comparison to its competitors

e.g. brand recognition, reputation, market share, cost leadership, profitability, quality, staff retention, well-trained staff, and customer loyalty.

Weaknesses – The things that the organization does not do so well in relation to its competitors

e.g., low productivity, high staff turnover, outdated technology, liquidity problems, high fixed costs, poor employer-employee relations, skills gap in the organization, over-reliance on a product or particular market, or a poor corporate image.

Opportunities – External factors that provide openings (prospects) for an organization to succeed

e.g., new technologies, favourable demographic trends, economic recovery, and new prospects in overseas markets.

Case Study: Hyperinflation in Germany, Venezuela, Zimbabwe and Hungary

History has recorded some staggering rates of hyperinflation, leading to the collapse of the economy or even the currency. Examples include Weimer, Germany (1923) when prices soared so quickly that people used wheelbarrows to carry their cash!

More recently, in 2019, hyperinflation left Venezuela in a major economic crisis as average price levels exceeded 1.3 million per cent! However, this is still relatively low compared with Zimbabwe which recorded an inflation rate of an incomprehensible 231,000,000% in July 2008. This was caused by the government’s gross mismanagement of the economy between 2003 and 2009. Zimbabwe had fuelled inflation by printing banknotes with a denomination value of 100 trillion Zimbabwean dollars (ZWD100,000,000,000,000)! This meant the currency became literally worthless, so was eventually abandoned (and replaced with the US dollar).

However, the largest denomination banknote ever officially issued for circulation was in 1946 by the Hungarian National Bank for 100 quintillion pengő (100,000,000,000,000,000,000, or 1020; or “100 million trillion”). In July 1946, Hungary’s daily inflation hit a world record rate of 207%. This meant that prices doubled every 15 hours! Today, Hungary’s highest denomination banknote is a modest 20,000 forint (the currency that replaced the pengo). As a member of the European Union (EU) since May 2004, the long-term goal of the Hungarian government is to replace the forint with the euro.

Adverse weather has negative impacts on businesses

• Sept 2010 - Major flooding hits Kaohsiung, Taiwan, costing the economy $211m.

• Dec 2010 - Snowstorms hit the whole of the UK, causing major disruptions to all businesses during the festive season.

• Feb 2011 - A shattering 6.3-magnitude earthquake hits Christchurch, New Zealand.

• Feb 2011 - South Korea experiences its heaviest snowfall in a century, bringing the country to a standstill.

• Feb 2011 - Cyclone Yasi hits Queensland, Australia – the country’s worst ever storm.

• Mar 2011 - Devastating 9.0-magnitude earthquake hits Japan (the worst in Japanese history), followed by a destructive tsunami.

• Nov 2013 - Super typhoon Haiyan (Yolanda) hits the Philippines with winds of up to 275 km per hour and waves as high as 15 metres.

• Aug 2014 - A 6.5-magnitude earthquake in Zhaotong, China, damaged or destroyed almost 155,000 homes and 268 schools, plus roads and other infrastructure. Around 230,000 people were displaced.

• Apr 2015 - A 7.8-magnitude earthquake struck Nepal, damaging or destroying nearly 900,000 buildings, and leaving almost 1 million children out of school. This was Nepal’s deadliest disaster on record, taking the lives of almost 9,000 people.

• May 2015 - A severe and prolonged heat wave hits southern India, with temperatures reaching 118 degrees Fahrenheit and claiming 2,000 lives.

• Sept 2018 - Super Typhoon Mangkhut became Hong Kong’s most devastating typhoon, causing havoc across the economy and causing schools to close for up to a week.

• Aug 2020 - Hurricane Laura wiped out electricity for 500,000 households and businesses. The 150 mph winds left behind major damage to property and people's livelihoods.

• Nov 2020 - Hurricane Goni brought catastrophic winds and rain to the Philippines, affecting an estimated 20 million people in the country. Strong winds of up to 175 kmph were recorded, marking Hurricane Goni the world's strongest storm in 2020 - a year that was plagued by the devastating and widespread impacts of the coronavirus pandemic. Around 400,000 homes were destroyed or damaged, according to the International Federation of Red Cross and Red Crescent Societies.

• April 2024 - The UK recorded its wettest Arpil since records began in 1871. The BBC reported that the UK economy failed to grow in April as the particularly wet weather put off shoppers and also slowed down construction projects.

The political environment in a STEEPLE analysis refers to the role that governments play in business operations. It affects business operations in an array of facets. Examples include, but are not confined to, the following:

• The degree of political stability in a country has a large impact on business and consumer confidence levels. For example, prolonged political conflict within a country is likely to threaten prospects of foreign direct investment. The UK’s decision in 2016 to pull out of the European Union (the decision known as “Brexit”) has caused huge instabilities to British businesses and the UK economy.

• Restrictions on international trade, such as the use of quotas (quantitative limits) on the number of imported goods that can be sold in the domestic economy. The government might also impose tariffs (import taxes) in order to protect domestic jobs. Another example is the use of subsidies to help domestic firms be more competitive. For example, the governments of the European Union provide subsidies to their farmers. The Hong Kong and Chinese governments provide subsidies to protect their domestic film industries. However, this makes it more difficult for MNCs trying to sell their goods in overseas markets.

• Different tax laws or changes in the tax system have a significant impact on business operations. For example, many MNCs are attracted to countries where migrant workers do not pay any income tax, such as in Bahrain, Brunei and Kuwait. Similarly, MNCs can be attracted to countries that do not impose sales taxes, such as in Saudi Arabia, Gibraltar and Hong Kong SAR.

• Governments are huge establishments that also function as an organization. They are major consumers of goods and services in domestic and international markets. This can provide many opportunities for businesses.

 Case Study - Mass demonstrations in France

Nationwide protests in France took place following the government's plans to introduce a 75 per cent income tax rate in 2012 for individuals earning incomes in excess of €1million ($1.09m per year). However, the proposals were overturned, with some analysts arguing that the government would actually receive more tax revenues by cutting tax rates. This is because lower income taxes can create greater incentives to work and also help to reduce tax avoidance and tax evasion. Mass demonstrations began in Paris in November 2018 due to protests against the government for its perceived unfair tax system.

Read this article from the South China Morning Post about the political turmoil that caused Hong Kong’s tourism to fall by 40% in the summer of 2019. Pro-democracy demonstrators and ant-government protestors caused havoc for businesses such as Hong Kong Disneyland and temporary closure of Hong Kong International Airport.

Discussion points

1. How many stakeholder groups can you identify from the article?

2. Apart from businesses directly involved in tourism, which other businesses were most affected by the protests?

3. What contingency plans can businesses make in order to minimise the impact of political crises?

Legal factors in a STEEPLE analysis refer to the laws that affect the way in which businesses operate as well as how customers behave. Changes in the legal systems or laws have a direct impact on business operations, including the production and sale of certain goods and services. Examples of legal factors in a STEEPLE analysis include:

• Legal procedures for the growth and expansion of businesses, such as laws about setting up a sole trader business or share issues on a stock exchange.

• Minimum quality standards must be met in order to protect consumers and the general public. The Volkwagen Scandal is an example of how quality standards can have major implications on a firm’s operations, corporate image and profits.

• Consumer protection laws safeguard the interests of consumers. These laws include trade descriptions (such as rules in labels and packaging), and weights and measures.

• Employment laws*, such as changes to the National Minimum Wage, maternity and paternity leave, maximum working hours, statutory sick leave, health and safety at work, and anti-discrimination laws.

• Intellectual property rights (IPRs) help to protect the intellectual ideas and creations of businesses. These laws cover copyrights, trademarks and patents.

• Laws on environmental protection and climate change can change the way in which a business operates and on foreign direct investment.

• Some products are deemed so harmful that they are banned or have age limits imposed (such as the purchase of alcohol or tobacco). In some countries, such as Australia, cigarette advertising is totally banned, including on cigarette packets.

Case Study - Findus' Food Fiasco

In February 2013, frozen food supplier Findus had to withdraw all its beef lasagne products from British supermarkets after authorities determined that 100% horse meat was found in some of its products. This contravened the UK’s Trade Descriptions Act.

The firm’s website states:

“For over 50 years, Findus has stood as one of Britain's best loved names in food. Using only the best ingredients and a generous pinch of imagination in our recipes, we'll help you prepare great tasting and effortlessly good food straight from your freezer.”

Case Study - Culture and the Legal environment

In May 2012, international pop music star Lady Gaga had her concert banned in Indonesia. Authorities deemed her style too inappropriate for Indonesians.

Lady Gaga’s world tour of her Born This Way Ball concert was outlawed in Jakarta due to major concerns from Islamists and local community leaders. More than 50,000 tickets had been sold for the event.

Ethics refers to the moral values and beliefs that apply to businesses and how they operate. There is an increasing expectation for businesses to consider the impact of their operations on all stakeholder groups, society as a whole and the environment. Essentially, it is about doing the right or moral things as part of their corporate social responsibilities (CSR). Examples include:

• The fair treatment of workers

• Fair trade deals with suppliers

• Ethical marketing practices

• Observing intellectual property rights

• Principled accounting procedures

• Operations that are sustainable and protect the environment.

 Case Study 14 - The Volkswagen diesel scandal

In September 2015, the US Environmental Protection Agency (EPA) issued a notice of violation of the Clean Air Act to Volkswagen (VW) - Europe's largest car manufacturer. The EPA found that Volkswagen had deliberately reprogrammed its diesel engines to cheat laboratory emissions tests.

The nitrogen oxides emitted from VW's vehicles (which causes air pollution) were about 40 times higher than what is legally permitted in the USA. The EPA found that VW had been deliberately untruthful and unethical. This resulted in the German car manufacturer's share price plummeting and the CEO eventually resigning over the diesel scandal.

The EPA had discovered that approximately 11 million VW vehicles manufactured between 2009 and 2015 were programmed to bypass environmental standards and regulations set by the EPA. An additional 500,000 of these cars were estimated to have been exported to the USA.

VW stated it would spend $18.32 billion to rectify the emissions scandal - that's around $50,191,780 per day for an entire year! This was an extremely expensive crisis for the company, yet it could have been handled far more effectively. In April 2017, a US federal judge ordered VW to pay a $2.8 billion as a criminal fine for ‘rigging diesel-powered vehicles to cheat on government emissions tests’.

Case Study 15 - Tobacco 'advertising' in Canada

Due to potentially unethical business practices, the government may need to intervene to protect the individuals and society as a whole. This is covered under the Legal and/or Political aspects of a STEEPLE analysis.

For example, many government had place legislation on the advertising and sale of tobacco products. In Canada, Health Canada (the government department responsible for helping Canadians to maintain and improve their health) passed a law in November 2019 requiring cigarette producers to strip off their logos and designs and adopt “drab brown” as the default colour for all tobacco brands. This was part of the Canadian government’s attempt to reduce the appeal of such “deadly products” and to discourage young teens from smoking.

Source: adapted from Global News Canada