Pestel Analysis of Safaricom Limited (Essay Sample)

PESTEL Analysis of Safaricom Limited
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PESTEL Analysis of Safaricom Limited
Safaricom Limited is a mobile network operator in Kenya and the entire East Africa region. It is also one of the most profitable companies and valuable brands in Africa (Banka, 2013). It was established in 1997 as a government-owned corporation (Chuhan-Pole, & Angwafo, 2011). Its headquarters are located at the Safaricom House along Waiyaki Way in Westlands, Nairobi. In the year 2000, the company sold 40% of its stake to Vodafone Plc. Group, a UK-based Communications Company (Chuhan-Pole, & Angwafo, 2011). It became a public company in 2008 after selling 25% of its stake to the Kenyan public (Chuhan-Pole, & Angwafo, 2011). The company offers different services ranging from voice, data, and Short Message Service (SMS). Safaricom is also one of the leading employers in Kenya, with a workforce of about 1500 people (Chuhan-Pole, & Angwafo, 2011). Peter Ndegwa currently leads the company as the Chief Executive Officer and has been in the position since April 1, 2020 (Gitogo, 2020). This paper presents an analysis of Safaricom Kenya’s business environment based on the PESTEL model of analysis. The PESTEL framework examines several factors within an organization's external environment, including the political, economic, social, technological, environmental, and legal factors (Miller, Vandome, & Mcbrewster, 2011).
Several political factors affect Safaricom’s business operations in the industry. Political stability in Kenya and the entire East African region is necessary for the company's smooth running. The turmoil that characterized the political scene in Kenya after the last two general elections in 2007 and 2013 negatively impacted the organization. For instance, following the Post-Election Violence in the country in 2007, it became challenging for customers to access Safaricom’s services, such as purchasing airtime (Chuhan-Pole, & Angwafo, 2011). The other political factor is changes in rules and regulations governing the telecommunications industry in Kenya (Mutinda, 2012). For example, a recent move to have Safaricom’s dominant status in the market checked has not been well received by the company. The government-backed proposed regulations by Airtel Kenya and Orange Telkom, Safaricom’s main competitors that will see Safaricom’s dominance limited to pave the way for the other companies to grow in a competitive environment. It is alleged that Safaricom has been abusing its 70% market dominance in a move to limit its competitors from growing (Wokabi, 2015).
Economic factors such as interest rates, inflation, and disposable income among consumers also affect the operations of Safaricom Limited. Safaricom offers its products and services at higher rates than its main competitors, making its services relatively expensive for most customers (Wandeto, & Acosta, 2013). However, since it has more comprehensive network coverage with more than 17 million subscribers, it continues to make huge profits (Mutinda, 2012). Nevertheless, fluctuations in inflation and exchange rates have made its services inaccessible to most of its customers.