2.1.1 Technology
Technology is the knowledge which involves scientific and technological capabilities in an industry and the entire society (Samson and Daft 2009, 76). As a developing country, South Africa is still considered to be having a low level of technological capability. One of the problems of small business development in South Africa is their incapability to utilize Information Technology into their business. They did not have sufficient experience and understanding to implement and develop IT Infrastructure inside their business (IT challenges Faced by Businesses in Africa, 2010).
2.1.2 Sociocultural
Sociocultural is the study of demographic characteristics as well as norms, customs and values of the general population (Samson and Daft 2009, 95). In South Africa, a lot of small businesses are still subjected to the problem of racial discrimination. Small businesses in South Africa still judge their employees based on their skin colors; they favor the whites more than the blacks. White people are given more job opportunities, they are also more likely to be promoted and receive higher salaries. Furthermore, an organization who employs both white and black people tend to give the more heavy and tedious works to the blacks (Daniels, R 1996).
2.1.3 Legal-Political
Legal-Political in a business context is the study of political activities designed to influence organization behavior (Samson and Daft 2009, 98). A high number of small businesses in South Africa had been criticized for unfair dismissal issues. The law in South Africa is considered to be quite lacking in power, and employers have the tendencies to take advantage of this situation in doing improper treatment to their employees, as well as other illegal behaviors (Fair and Unfair Dismissal, 2010).
2.2 Task Environment
2.2.0 Customers
Customers are the people and organizations within the organizational environment who needs goods or services from the organization (Samson and Daft 2009, 99). One major problem of small business developments in South Africa is the low quality of their customer service. Small businesses lack the human resources and experience to understand and satisfy their customer’s needs. Customers were frustrated when they always receive different feedbacks from the staffs (Poor Customer Service Could Cost Companies Millions 2010).
2.2.1 Competitors
Competitors are the businesses who are in the same industry or different type of businesses providing goods and services to the same type of customers (Samson and Daft 2009, 99). Small businesses in South Africa faced a high number of competitors, and the competitions are not limited to fellow small enterprises, but also with the large corporations. Many small businesses were unable to compete with the large corporations due to lack of human resources, inability to adapt in the competitive environment, and weak information gathering systems (Lighthelm and Jongh, 2009).
2.2.2 Suppliers
Suppliers are the people or organization who provides raw materials that are used to produce an output (Samson and Daft 2009, 100). Small businesses in South Africa have had difficulties in finding suppliers. Small businesses have less bargaining power than the large corporations and most suppliers are only willing to supply their materials only to the large corporations since they have more bargaining and purchasing power compared to the small businesses (Ngobese and Ravhugoni, 2010).
- The Internal Environment
The organization also has an internal environment, which includes the elements within the organization’s boundaries. The internal culture is composed of current employees, management and, especially, corporate culture, which defines employee behavior in the internal environment and how well the organization will adapt to the external environment.
3.1 Employees
Employees are those who are hired to provide services to a business or organization in exchange of salaries (Samson and Daft 2009, 378). The problem that small businesses have had with employees is the overtime payment issues. The normal working hours in South Africa is 8 to 9 hours per day or 46 hours per week, however a new rule which reduce the working hours to 45 hours per week had been enacted. Traditionally, small businesses requires employees to work overtime to gain more profits, but under the new rule, small businesses are likely to lose more than they could gain profits (Solomon, R 2010).
3.2 Cultures
Cultures can be defined as a set of key values, belief and understanding, as well as ways of thinking among members of a society (Samson and Daft 2009, 115). Understanding the culture of a potential business partner and/or potential customers is an essential aspect in any business. When someone is engaged in a business or doing a business meeting with an African, it is important to greet them with a warm smile and make several informal conversations as an introductory remark; because for Africans, first impressions are very important. Many businesses, including small businesses, fail to understand this and tend to rush up things so that they could directly discuss the business topic, this often cause them to lose opportunities in building a good relationship with their clients. The sad truth about this issue is that foreign businesses tend to have a jaded habit to belittle the Africans; due to their way of thinking that South Africa being a third world country with an obtuse populace (Doing Business in South Africa, 2010).
3.3 Management System
Management is the attainment of organizational goals in an effective and efficient manner through the process of planning, organizing, leading, and controlling company’s resources (Samson and Daft 2009, 32). Lack of management skills is one of the most evident problems in running a small business in South Africa. Small businesses may have contributed 40% of the country’s GDP, however, they have a failure rate of almost 80% each year. This problem is primarily due to the small businesses in South Africa not adopting good corporate governance to actually apply decent management practices, another reason is the lack of sufficient risk management; this cause small businesses to be incapable of recognizing the risks of their operation and thus they are bound to make mistakes and failed their projects (Labuschagne and Niekerk, 2010).
- SWOT Analysis
S.W.O.T analysis is the analysis of the strengths, weaknesses, opportunities, and threats that affect organizational performance. Strengths are positive internal characteristics that the organization can exploit to achieve its strategic performance goals. Weaknesses are internal characteristics that may inhibit or restrict the organization’s performance. Opportunities are characteristics of the external environment that have the potential to help the organization achieve or exceed its strategic goals. Threats are characteristics of the external environment that may prevent the organization from achieving its strategic goals (Samson and Daft 2009, 263). Below is a hypothetical SWOT analysis of operating a small business in South Africa, on a side note, it is highly recommended for a small business to make a SWOT analysis to recognize their plus and minus points before actually starting their business.
- Conclusion
South Africa is a country located at the Southern end of Africa. South Africa has a population of 49+ million people coming from different kind of cultures, including the indigenous Africans, Asians, and Europeans. Development of small businesses in South Africa had been a problematic issue and is becoming clearer over time. Small businesses had faced various constraints in its wake; courtesy to Daft’s three organizational environment schemes, the problem relies in the area of general, task and internal environment. The problems from the general environment include the poor economic condition of South Africa itself, low level of technological capabilities, and racial discrimination. From the task environment is the problem of poor customer services and lack of competitive edge. While from the internal environment is the problem of poor employment relations, cultural incompatibility, and lack of management skills. These factors had been proved to be a major obstacle for small business entrepreneurs in successfully developing their businesses.
- Recommendations
In engaging with the problems that small businesses in South Africa had faced, it is recommended that they:
- Seek assistances from professional business consultants in developing a business plan for them before they actually start operating their business. A fine business plan could act as a good initial guideline to give small businesses the advice of which action to take. It would also give them a clear list of goals to be achieved in short-term and long-term period; also note that the situational SWOT analysis is also included in the business plan. It is recommended that they seek assistances from a professional since small businesses in South Africa tend to lack the experience and knowledge to do things on their own.
- Make a training program for the employees to improve their skills and knowledge regarding their jobs. This action would most likely requires the cooperation of the local government; the government should also provide assistances in the training program as to reduce unemployment and address the problem of de-skilling of the long-term unemployed. As for the business’ side, they could further boost their employee’s motivation by providing extra rewards or entitlements, such as Employee of the Month program.
- It cannot be emphasized enough that in order for any businesses, not only for small businesses, to achieve success; they need to remove the understatement stereotype towards the people they are working with: the Africans. A good relationship between employers and employees are necessary to create a productive collaboration to produce a good result. Members of the World Bank could help to create a campaign regarding this matter, and encourage the expats to pay respect and understand the indigenous Africans better.
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