Imagine you have been assigned the project of expanding the e-commerce services of your organisation in the Africa region. Your manager believes this project has a lot of potential and would generate great revenue for the company. Now, you have been assigned the task of leading the PESTEL analysis for the Africa region. How will you approach this problem at hand?

Let’s hear from our subject-matter expert, Prashanth about the PESTEL framework and further apply the framework and gain solution to the hypothetical situation mentioned above.

So, let’s get started.

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You now have an overview of the 'PESTEL framework'. Let’s quickly summarise the framework:

The ‘PESTEL’ framework is one of the most commonly used frameworks for problem-solving. The different elements of the framework are as follows:
- Political - This relates to factors such as the political system, the strength of the government and the opposition, the government's outlook and how it influences the economy.
- Economical - This relates to factors that affect the economic prosperity and well-being of all constituents, including a nation, its citizens and its corporates.
- Social - This relates to factors that affect the social fabric of all constituents, including a nation, its citizens and its corporate entities. It includes factors such as demographics, cultural norms, attitudes among others.
- Technological - This relates to attributes that affect the adoption of technology to drive nation-building, corporate environments as well as people's lives.
- Environmental - This relates to ecological, environmental and sustainability aspects such as weather, climate, and local topology that can deeply impact businesses, customers and citizens.
- Legal - This relates to the aspects of legality that can impact greatly how businesses can operate, the costs of operation, the ease of access to these offerings and the demand for products.

Now let's discuss the 'PESTEL' framework with regards to our expansion project in the African region. Firstly, let's decide which countries we will be expanding to. So for the initial phase of expansion let's consider South Africa and carry out the PESTEL analysis.

Political - South Africa operates under a parliamentary system as a representative democratic republic. The political environment of South Africa is unstable because of protests, violence, political unrest, mismanagement and corruption. Hence leading to slow economic progress. With this, we can conclude that the political scenario is not in favour of our project expansion.
Economical - South Africa has a mixed economy i.e., it allows private organisations to run most business. Also, South Africa is positioned as the 33rd largest economy in the world with GDP ranged at approximately 804.69 billion international dollars.
Another factor to be considered here is the corporate tax in South Africa for non-resident corporations. The tax rate applicable to corporate income of both resident and non-resident companies is a flat 28% (Source: PwC 2018). Hence the tax rates are high but it can be concluded that the economical environment overall is favourable.
Social - South Africa’s population is roughly around 58.8 million. It is a multicultural society with diverse origins, cultures, languages, and religions. South Africa is a young country with a median age of 27.6 years. Hence, we can conclude that the social environment is favourable for the e-commerce project as young people are well versed with online services.
Technological - Out of all the African countries, South Africa is one of the most technologically advanced nations. It has made enormous progress in mobile software, and online shopping is flourishing with technological advancements. Hence it is a favourable factor for our project too.
Environmental - South Africa faces a few environmental changes. As an e-commerce brand, there are no major environmental regulations. However, being a young country there is growing awareness amongst youth about environmental-friendly products. Hence, the packaging of the products has to be environment-friendly. Broadly the environmental factors are favourable.
Legal - South Africa encourages foreign direct investment and there are no restrictions for the e-commerce sector. Hence the legal environment is lucrative.

Overall with this analysis, we can conclude that South Africa can be a potential market for expansion in the African region.

In the next segment, you will learn about Porter’s Five Forces framework.

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