WILLIAMS & COMPANY - THE BUSINESS ENVIRONMENTS: MACRO- & MICRO.

Macro environment

Williams & Company (known as WC) is a South African-based management consulting firm. WC is a medium-sized business that has been in existence for 20 years.

The firm provides consulting services to corporations including business optimisation consulting, project management, productivity improvement training, and improvement measurement systems.

In the last decade the business environment, locally and internationally, shifted drastically. WC had to contend with the following changes:

• A world-wide economic down-turn which resulted in large businesses going down. The financial services industry took serious strain as lending practices were confronted by governments and regulatory bodies. This lead to the institution of new compliance, governance and risk management policies.
• Certain countries headed towards bankruptcy which required international intervention and assistance provided by the world bank.
• The market generally, across industry sectors, became much more cost sensitive. A trend emerged where the start-up rate of new small and medium-sized enterprises (SME businesses) diminished. Liquidation in the SME sector increased at an alarming rate.
• Due to corporate restructurings and down-sizing, and greater risks for entrepreneurs in the SME sector, retrenchments became the order of the day, and new employment creation stagnated.
• The management consulting industry was not unaffected. Business models changed, and consultancies merged and formed joint ventures to achieve greater market share and drive competition out. Consultancies also expanded into new markets particularly in Africa and Asia in response to limited growth opportunities in existing markets. Utilisation of new technologies particularly in information management became a priority in order to create more cost-effective structures, and to gain advantage in greater access to market intelligence.
• In the South African context, government initiated a more aggressive push towards Broad-Based Black Economic Empowerment (BBBEE). This changed the ownership profile of businesses, as well as procurement and supply policies and practices. The drive towards employment equity became sharper, and labour legislation became much stricter concerning resourcing and employee relations. Furthermore, employee development became regulated in terms of skills development legislation. The financial services industry became more regulated as far as credit supply was concerned.
• Moreover, substantial increases in fuel prices in South Africa, driven by the oil price, and energy supply capacity challenges and the consequent increase in costing of electricity, had a major inflationary impact across the economy.
• Instability in commodity prices and worsening industrial relations strained the resource sector, a major contributor to the South African economy.

WC launched several initiatives to respond to the changes in the business environment. A major strategic movement was to form a business partnership with a global consultancy to ensure access into Africa and to achieve market consolidation. The cost of royalties paid to their international partner became an issue because of exchange rate volatility and a weakening Rand. This affected WC's cost of sales significantly.

The following provides perspective on the financial impact of changes in the business environment and the effectiveness of WC's response to these changes:

Impact	2008	2009	2010	2011	2012
Sales	R18 mil	R16.5 mil	R12 mil	R11.5 mil	R9.8 mil
Operating profit margin	38%	36.5%	24%	22%	16%

The partners of WC had to intervene urgently. They realised that it was necessary to become much more aware and conscious of their external environment.

Micro environment

After conducting a comprehensive business environment scan, the partners of WC identified several external opportunities and threats. They learned that strengthening the business internally and minimising weaknesses would be critical in building capability to exploit opportunities and remove threats.

WC's partners executed a complete diagnosis of the internal functioning of the firm. They did this through:

• Employee interviews
• An organisational effectiveness questionnaire
• Financial analysis
• Focus groups with key leaders in the business
• Feedback from clients by means of a survey
• A competitor assessment.

The following business and organisational strengths were identified:

• Management competence
• Technical capability
• Brand presence in the resource sector
• Industry knowledge
• Investments in research and development of the practice
• Successful implementation of projects
• Development of existing clients.

In addition to strengths, these weaknesses came to the fore:

• Narrow product and service offering
• Outdated and inflexible pricing
• Lack of expertise in new information and communication technologies
• Complicated commercial processes and procedures
• Lack of new business development
• Inappropriate employment and talent sourcing approach.

The partners and executive of WC convened to discuss the strengths and weaknesses. The primary outcome of the meeting was to agree on improvement priorities going forward.

Source: Erasmus, B. 2019. Introduction to Business Management. 11^th edition. Cape Town. Oxford University Press Southern Africa.

Discus the initiatives could WC take to improve its micro business environment.