By Reporter Anita Obieroma
This is a table to show the contrasting economic environment in Kenya and The UK.
The gross domestic product of the UK has reached $501,698 million,this second quarter of the year.This is an increase of 0.4%, which shows that the economic activity in the country is increasing.
In comparison to Kenya the Uk has a greater domestic gross product The GDP of Kenya expanded by 6.3 percent in the second quarter of 2018, following a 5.7 percent growth and beating market expectations of 5.7 percent.This shows the increase in spending in the economy based on rising incomes allowing people to have more access to goods and services.
Uk has a greater GDP although the rates at which kenya is improving is drastic.
The UK has started raising interest rates due to from 0.5% to 0.75%, this is because the economy happened to suffer a bit in the first quarter of the year,they are trying to boost economic growth through this.This increase in interest rates can affect the rate of borrowing in the country as people are reluctant into borrowing due to the interest involved. The Central Bank of Kenya positioned its benchmark interest rate steady at 9.0 percent at its September 25th 2018.
The unemployment rates in the UK is at 4.0% right now, This means that the number of jobless people have increased which can reduce spending therefore lowering economic activity. In comparison to Kenya UK has a lower rate showing that the standard of living for people is better in the country. The unemployment rates in Kenya are quite high reaching a percent of 11.52%, it is starting to decrease of 2018,where there are more businesses being open allowing for more people to work. Comparing this to the unemployment rates in UK , Kenya has by far surpassed them.
For the table above we can see the contrasting nature of each economic environment.This is how such factors will affect the chosen businesses.
The influence of the GDP in Kenya results to the tea board of kenya having greater purchase of tea,due to increased spending in the country and this allows for more kenyans to purchase the good,This increases the profitability of the business therefore increase in output and productivity.
The interest rates in the country have being stabilized , although they are still high for people to borrow at. This could prevent people from taking out loans and wanting to save their money more,so this could mean that he business might not want to buy new machinery due to expense and the could lead to slower rates of productivity ,creating a less efficient working environment for the business.
The unemployment rates in the country will influence the business into hiring more workers especially for tea farming,this is because labour has become cheaper which means that the business could gain a larger working force and produce more.
As for the UK business which is Kering ,which is fashion inclined, it is influenced by this factors as due to an increasing GDP in the economy,This causes the business to maybe lower to cost of their prices because, there is greater availability of Jobs in the country which means more people will be hired, further leading to more spending ,which means that more people are able to purchase goods of greater expense,which means for a business like Kering they will have an increase in profitability as more people are able to purchase their products.
The interest rates which are gradually increasing in the UK will mean that Kering might have a loss because due to this increase in interest people wont have as much to purchase such expensive luxury items from kering ,especially since it is not a necessity,this means that the purchase of their products will be reduced,which can affect the level of profitability, But since it is specifically made for the niche market in particular this won’t be of a great disadvantage to the business.
The unemployment rates in the country will influence the business to maybe increase their prices,because the number of people who can afford these goods are now decreasing and the business still needs to meet break even so this forces them to raise prices.
Comparing how these business face challenges due to economic environment , For Tea Board of Kenya they could be challenged with the fact that unemployment can create insecurity within the workforce and this can lead to no motivation,therefore making employees work less efficiently and this will further affect productivity levels, so they won’t be making as much tea. Business activity could also be affected in terms that due to high employment rates the skill in that industry could be lost and this means that TBK will be putting out more money for specialized training.
On the hand Kering will be affected by unemployment by the fact that people will start demanding for inferior goods and less quality,this could affect the customer base that Kering as it could become less as not as many people can afford it. As the unemployment rates in the UK are rising this means that there could be rising crime in the country,and for a business like Kering that sells luxurious items,it will be hard for them to sell in specific areas due to insecurity,this can limit how far the business can expand as they can’t earn as much profit.
The tea board of kenya is affected greater by the unemployment rates than kering is dues to the economic environment.
Furthermore these two businesses are affected by political,legal and social factors.
The political factors that affect on their business activities are Increase or decrease in tax which is a mandatory finance charge which the business pay to government to help fund public expenditures . Then there is Employment law which is the area of law that governs the employer-employee relationship. There is also Political Stability which is how politically stable the economy is and how it is run by the government.As for the legal factors they are Consumer law which is made to prevent consumers against unfair trade and credit practices . Then there is Import/Export law this is the law that allows for the trade of goods from different countries.There is also Discrimination law which is to prevent unequal or unfair treatment based on a person’s age, disability, gender, national origin, race, religion, sexual orientation, genetic makeup, and other personal characteristics. The social factors that affect the business are Lifestyle which is how people carry their day to day activities and the things that are needed to do that. Then there is Social classes which is the economic status of consumers and how they are divided. There is also Buying Habits which means how often a consumer purchases such goods.
There are influences of these factors towards the business activities of both organizations. The influence of political factors is that through the adjustment of the fiscal policy,the taxation rates can start to rise ,like in the UK the rising taxation rates will end up i less income for Kering due to how much if being taken out,then in kenya the tax rates are not that high so this makes the business revenue stable.
It is also impacted by the import/export law which can restrict the business from how much they can take in or out of the country. In the UK the import prices are rising ,so for a business like Kering which imports most of its products from france it could affect the prices of their good to be placed higher since importing can be expensive. For a business like TBOK which would import things like machinery from maybe china where the labour is cheaper,the import duty is 16% which is quite high and this could hinder productivity as to slow it down as the business is trying to cut down on costs by not buying new machinery . This could mean that they won’t be selling as much as they are trying to reduce cost of production.
Then the business TBOK can be influenced by the provision of infrastructure which is given by the government, so this means they can get more land to farm tea in kenya.Such acts can help reduce business costs and increase the demand of their products in certain areas. As for the UK the countries stability and well built infrastructure allows them to open up several shops ,which can help them widen their consumer base. The fact that the uk also offers good education ,as the UK is know for flexible workforce and highly skilled worker ,this will benefit Kering in working more productively.
The influences the legal factors will have on the businesses are Minimum wage law,this could mean that if there was an increase in minimum wage which can happen in both kenya and Uk,the this means that Kering and TBOK will have higher expenses as they have to pay workers more. Such a change can lead to workers being made redundant to cut cost for the business.
They can also be affected by sales of goods act, which for Kenya if not complied to can lead to legal issues,so for TBOK it means that they can give the customers less grams of tea at the same price because that is unfair trade and this can make the business look bad and stop potential customers from approaching. As for the UK such acts are taken very seriously and failure to comply can even lead to prison time, so for Kering they can’t sell fake luxury items or this can be seen as fraud.
Furthermore the Safety laws can affect the everyday activities. For TBOK they have to make sure that the farming environment is very safe for workers so they can carry out task properly,it this law is not met then there would be less production due to interruptions in work. For the Uk were crime rates are increasing ,Kering has to make sure that the area they position their business is safe so that there are lower encounters of theft and putting employees at risk.
The influence the social factors have on the businesses are Lifestyle which is one of the greatest influencers,will determine how much people will buy. For Kenya were drinking tea is aa very common lifestyle ,It allows for the consumer base to continue increasing as well as the consumption of tea. In the UK where shopping for luxury items is quite common this means that the business will not struggle to sell their goods,the taste in change and fashion also influence what kind of products Kering should sell.
Another social influencer is the social economic classes of people, In the UK the right advertising will have to be done to attract the persons of interest like for Kering their promotions should be done in a place where a lot of wealthy people are to attract them to buy these luxury items.
In Kenya the socio economic classes influence what kind of tea they would prefer, like for TBOK their prices are affordable for everyone regardless,this allows for a wider range of consumers.
These businesses are also influenced by buying habits of the consumers,as stated earlier drinking tea is overly common in kenya and it is a habit they have developed,so this influence TBOK to have stable revenue because regardless of the situation people will continue buying it.This means that they won’t have high inventory levels left. In the UK the habit of buying expensive goods is not very common as people tend to be very thrift in spending so this means that the rate at which people buy such goods is reduced,Kering will not benefit in profitability.
The three business activities that are affected the most is Promotion,Productivity in the business and transportation.
Promotion is affected by the socio economic status of people because the area in which a product is advertises tends to lean towards the socioeconomic group. In the Uk the growth of the wealthier class in actually increasing so this allows Kering to promote almost anywhere now and can increase the consumer base ,therefore bring in more profit.This can also tell the organization how much they need to spend on promotion,this gives them a better sense of direction so they dont waste their money.
Promotion has increased in both Kenya and Uk due to access of better facilities. This political factor makes it easier for these businesses to compete and reach out to their audience. This has affected the businesses positively as they are able to sell more goods and reach out to more people.
The sales of good acts ,as the penalties are becoming more serious,are encouraging better attitudes from both business . This affects the business positively because as they abide by the rule people will see them as a trustworthy business and this can gain prestige for a business.
As political stability in kenya can fluctuate at times,this means that the productivity levels of TBOK will be affected as they wont be able to do their daily activities without political interference this could mean less output for the business. So the productivity levels are being lowered due to this. Increase in tax are also lowering productivity levels,because the business is trying to reduce cost of production by buying less resources this means that the business will not sell as much and their profitability will not increase.Therefore this could limit expansion.
The buying habits of tea are increasing this means that there will be greater production level which will benefit the business in efficiency and profit.As for kering the buying habits of luxurious goods have also increased so this will also have the same effect.
Employee law is violated in kenya quite often because they are trying to get cheap labour,This is a de motivation for employees in TBOK as they wont work as efficiently because they aren’t getting paid what they are working for.This makes the productivity of the company decrease. In the UK is been followed which makes employees in Kering feel secure and makes them increase their motivation allowing them to work more efficient,increasing productivity.
Due to increased rates to import an export in both the UK and Kenya this affects the transportation of the goods making it harder to have access to them,this can stop business activity from happening ,when the levels of business activity is reducing,the income levels also reduce.
There has been increased security in the transportation of goods,this assures that the product or resources meets the user,this will affects the business as they will be able to sends more things through various transportation mediums. This allows for a greater accessibility of goods to people and availability of resources for the business.
Kenyan tea has an increased demand in other countries, an this require TBOK to increase exportation which means they will have to pay more money to do this,but then there will not be a loss because they have entered new market and are entering the lifestyles of people,increasing the profitability of the business. As for kering the transportation of luxurious goods from france and also increasings as many more people are buying it.
The aim and objectives of Tea board of kenya are Tea Board of Kenya which is an expanding profit-based which aspires to be known nationally and internationally while promoting the name of kenyan tea. The objective of the business is Profitability so they can continue to run the business,They also have the objective of growth so they can expand their services all around kenya and internationally. There is also competitive analysis as there are several upcoming businesses making kenyan tea so they have to make sure they stay relevant in that field.These objectives are giving a clear direction of their goals and targets.
The way they could meet these goals is first through thorough market research so they can find out what countries drink tea the most, this should be the market they plan on expanding to. They need to do this because any other step forward will not be directed.Next they can plan a marketing budget ,like how much they will spend on promotion in those countries or in their surrounding environment. This is so they don’t overspend on advertisement and aren’t able to cover up cost later.Also they need to research the right area of advertisement so they approach the proper crowd. They could test the product in that new market to see how well it does firstly. Instead of putting a lot out and having left over inventory. All this will lead to greater chances of profitability and also expansion into new and foreign markets like they aimed to do.
In the future the strategy of the business can be affected by economic.political,legal and social factors. The economy- The interest rates will be reduced to 8.70% ,this will make the rate of borrowing lower for TBOK and can help them to expand like getting more tea farms and etc, this could also make it easier for the business to purchase expensive machinery,like tea grinder,as they can take out a loan more easily.This will boost business growth and this allow them to meet their goal of expanding.
Political- there are less government interference as the country is becoming economically stable,this starts causing business to be more active and this will now cause TBOK to reach the goals that they set maybe in that month,because of activeness . This has already affect the object of profitability.
Legal- Export rates rise drastically,this makes it very expensive for them to transport their tea to other countries which now limits expansion.like from now to 2020 the export rates have nearly risen by 20,000ksh.
Social- population growth in said to be increased by 2 million by 2020,this increase in people means that there could be greater consumption o0f tea in the country meaning that here will be a greater profit,this makes the aim of profitability to be met more easily. But as the population is rising there can be several business opening in this area of work which means there will be increased competition for TBOK.