Internal Factors Using Swot Analysis Business Essay

Nigeria economy has always derived its source of revenue from agricultural sector. Oil palm have been itsoil palm. This has changed due to crude oil discovery in the late 60’s. has been one of the most dynamic of Nigeria’s agricultural sub-sectors.

The development of the economic oil palm had continued to attract the attention of various administrations in Nigeria since the colonial period to date. This was not unconnected with its economic importance as a very important source of edible and technical oils of a huge National revenue earning potentials. Palm oil and palm kernel oil, the major products of oil palm, were once very vital to Nigeria’s export trade as Nigeria was a leading producer of oil palm produce in the world. However, since 1965, there has been a noticeable decline in her oil palm production (Mgbeje, 2004).

However, challenges facing the commercial agriculture in Nigeria is access to land. In global terms, taking oil palm for example, a five thousand hectare plantation is relatively a very small plantation. To be commercially viable and competitive,

an oil palm plantation that would have modern processing facilities (oil mill, turbine/boiler for energy generation etc.) should not be less than ten thousand hectares. The larger the size of the plantation, the higher will be the efficiency of operation. But despite the abundant arable land available in most parts of Nigeria, the process of acquiring land for large scale agriculture is very cumbersome due to the land tenure system.

The increased demand and shortage of supply has led to rising food prices. Research and technology is essential to develop new crops and to increase crop yields.

Presco focus is on delivering sustainable agriculture through innovative research and technology. The company is a fully-integrated agro-industrial establishment with oil palm plantations, a palm oil mill, a palm kernel crushing plant and a vegetable oil refining and fractionation plant. It was the first of its kind in West Africa.

Presco Specializes in the cultivation of oil palm and in the extraction, refining and fractionation of crude palm oil into finished products. It’s supplies specialty fats and oils of outstanding quality to customer specifications and assures a reliability of supply of its products year round. This possible-ness is made by the integrated nature of the company’s production process. And its the Nigerian market leader for specialty fats and oils.

Presco is a public limited liability company incorporated on September 24, 1991 under Nigerian law. Its corporate head office is at the company’s Obaretin Estate near Benin City. It’s holds the Obaretin Estate (a concession of 7,000 hectares) and the Ologbo Estate (a concession of 6,000 hectares), both located in Edo State, and the Cowan Estate, a concession of 7,500 hectares in Delta State. Presco today consists of:

Oil palm plantations and 10,537 hectares of 9,812 all which are mature. A palm oil mill with a capacity of 48 tonnes fresh fruit bunches / hour. A refinery / fractionation plant with a capacity of 100 tonnes / day. A palm kernel crushing plant with a capacity of 60M tonnes / day.

Presco employs about 2,161 people, also a Subsidiary or Siat SA, a Belgian agro-industrial company Specialized in industrial as well as smallholder plantations of tree crops, Mainly oil palm and rubber and allied industries processing palm oil mills zoals, palm oil refining / fractionation, soap works and crumb rubber factories.

The company’s operations are fully integrated with plantations, palm oil mill, palm kernel crushing plant and vegetable oil refining plant. It is the only fully integrated operation in Nigeria.

This coursework reviews the external factors that have had an impact on how Presco, one of the Nigeria’s leading agro-industrial establishment with oil palm plantations , is meeting this dual challenge of increasing crop yield and productions through PESTLE analysis. This involves identifying the political, economic, social, technological, legal and Environmental factors.

POLITICAL FACTORS

Businesses can be affected by many aspects of government policy. In particular, all businesses must comply with the law. They must also consider the impact of any forthcoming legislation on their operations. This may require taking action before the legislation comes into effect.3 For example, recent public sector budget cuts by the Federal government and increased fees in higher learning and tertiary institutions are affecting the education sector. For students this has meant making key decisions about how they intend to pursue their careers. This in turn has meant that academic providers need to review how they will meet the challenges of generating income.

Presco identified that these changes in the educational landscape could have an impact on the number of potential employees with the skills and competencies that it requires. For example, it had to consider the affordability of higher education for students and how this could influence long-term development opportunities within the company. The increasing cost of becoming a student may restrict the social mobility of talented individuals and they may then need to consider alternative routes to gaining qualifications and experience.

SCHORLARSHIP AWARDS SCHEMES

Presco has therefore reassessed its workforce strategy. It has now engaged in schemes to ensure it has enough workers with the right skills both now and in the future. To address the changes in the educational landscape, Presco has introduced apprenticeships and enhanced its graduate scheme. The company has embraced the strategy of direct training as it provides the company with a new pool of talent, with the focus on individuals who have decided to specialise in Agro-Allied or Agricutural Science degrees. This is why Presco has embarked on creating Apprenticeships in 2007. This widens the range of talented young people that Presco needs and supports the organisation’s long-term commitment to career development of its employees.

Also, in 2007 Presco launched a five-year sponsored degree programme with the University of Benin. The degree programmes B.Sc (Hons) Agro-Allied Management and B.Eng (Hons) Agricultural Engineering attract applications from students throughout the nation. These degrees allow students to combine academic study with on-the-job learning. Students spend one day a week studying on campus and four days a week working at Presco. Presco pays the course fees as well as offering students an attractive salary from day one. Upon graduation they can further develop their professional career within Presco.

As part of its sustainable focus, Presco has also responded quickly to government initiatives on climate change and reducing emissions. For example, it has been involved in the development of a new concession into a sustainable integrated project for conservation and oil palm production.

In October 2006 Presco entered into a contract with the DOEN Foundation, based in the Netherlands, for the co-funding of the Green Ologbo Project. This project is part of Presco’s development programme for what will become the Ologbo Estate oil palm plantation and is aimed at ensuring that the planning and execution of this development and its long term management is carried out in a sustainable manner.

ENVIRONMENTAL FACTORS:

Organic waste is one of the key issues faced by the oil palm industry, especially in Nigeria where lowland rain forests contain high levels of biodiversity.

Presco Believes strongly in sustainable production based on the reduce, reuse,recycle principle. All the organic waste from the mill is used in the plantation as a natural soil enhancer helping to minimize the use of fertilizers, or as bio-fuel for the boiler to produce green energy with the turbines.

Pest and disease:

Constant phytosanitary supervision is Implemented to react pre-emptively to pest and disease occurrences. This is preferred to extensive chemical use. By conserving the natural predator-prey cycle Presco keeps its palms free of undesirable pests.

Further More, the natural occurrence of insects Promotes the full pollination of the female flowers. Mill and plantation operate as an integrated system in respect of waste disposal. The residues of the mill (empty fruit bunches, fibers, kernel shells, ash, palm kernel cake (PKC) and effluent) are recycled. Once fresh fruit bunches are processed and fruit latvian removed for oil extraction, about 20% of the volume of the fruit bunches is recycled as empty fruit bunches (EFB), All which are returned to the field as mulch and a valuable substitute for chemical Fertilisers. After extracting palm oil from the mesocarp of the fruit latvian removed from the fresh fruit bunches the remaining fiber, the shredded empty fruit bunch and the shell are used as fuel in the boiler, All which in turn steam generation rates for processing.

Presco has been running for 75% on Green energy. Ash from the boiler and PKC That can not be oversold Also make good fertilizer and are applied in the plantation. Mill and refinery effluents are anaerobically digested in three large retention ponds. A fourth pound, which is aerobic, completes the process. The solution at the end of the process contains some nutrients and is applied to the plantation as liquid fertilizer. No effluent is released into any river. In recognition of its continuous Efforts to operate in an ecologically-friendly manner-, Presco received the prestigious Environment Award from the Nigerian Conservation Fund in 2000. An Environmental Impact Assessment / Social Impact Assessment for Ologbo Estate was Carried out by Blue Fin in 2003 and was approved by the Federal Ministry of Environment in 2004.

SOCIAL FACTOR:

Social factors relate to changes in the behaviour, tastes and lifestyles of communities on a local, national and international scale. Presco, guided by its host community Policy, has embraced this aspect of society with several community development projects as a practical demonstration of the spirit of partnership with and goodwill towards the people in the host communities.

Such projects include the Presco Scholarship Scheme under which ten students from host communities at Cowan, Obaretin and Ologbo each receive NGN50,000 as a scholarship grant. Also water pumps and boreholes are actively maintained in 11 villages. Other projects are assistance to primary and secondary schools, maintenance of roads, provision of electricity in host communities and the offer of employment to indigenes of host communities.

Presco also designed and built a model primary school for the children of Agbomoba and neighbouring villages in Ikpoba-Okha Local Government Area. The project was carried out by Presco with co-financing from the Edo State Government.

In 2000 the electrification of Agbomoba village in Ikpoba-Okha Local Government Area of Edo State was completed with assistance from Presco. Obagie and Uroho communities were also connected to the National electricity grid in 2009, while Ekosa and Owanoba communities were provided with electricity solely financed by Presco Plc.

Annually Presco provides several university and polytechnic students with industrial training and research placements as well as giving opportunities under the National Youth Service Corps programme.

In an effort to ensure that the company’s presence has a positive impact on the lives and social well-being of the host communities, the relations department handles all aspects of community relations. More specifically, it focuses on employment, educational infrastructure, road rehabilitation, scholarships for students, provision of electricity, water supplies and other essential facilities.

ECONOMIC FACTOR

Economic factors relate to changes such as costs and prices of goods, interest rates, wage rates, exchange rates and the rate of inflation. These all affect the ability of businesses to generate profits and need close monitoring. Changes in the wider economy impact on businesses. (www.businesscasestudies.co.uk)

In 2008-09, the Nigerian economy went into recession. This had a negative impact on the agro-industry. During this period unemployment was rising. Even people in work felt the effects of the recession. Many employers were forced to cut wages or to keep pay rises very low.

As a result, this had a direct impact on Presco operations. This was just one of the factors that forced Presco to restructure its operations. The company was required to obtain funds from the bank to finance this restructure. However, Presco was able to survive the economy downturn and is one of the largest employers of labor in Edo and Delta states in Nigeria, with a total of about 3,250 employees as at February 2013. Indirectly, Presco’s operational restructuring positively impact on the livelihoods of many more people through transport contracts, construction contracts, fresh fruit bunches and kernel purchases from farmers, as well as by the company being a large consumer of goods and services.

Another important economic influence on a business is the level of competition in its markets. In the Agro-industry Presco is facing increased competition from rival competitors like OKOMU Oil and other companies. Presco also faces competition from local farmers. Although local farmers do not have Presco’ reputation and expertise, they are able to offer low prices.

Presco response to this difficult economic and competitive environment is a multi-channel strategy. This involves offering customers more options in how they access their products and services. The company has also increased its product portfolio. It now offers a wider selection of products to meet customer demands. This approach is leading the market, and it has enabled Presco to obtain a competitive advantage.

LEGAL FACTOR

Legal factors relate to both new and existing laws, directives and regulations governing how businesses behave. This can be in relation to other businesses, customers or the environment. For example, it is essential that all agricultural products are used safely. Responsible businesses not only abide by the law, they seek to create standards above minimum requirements.

one of the main issues in relation to plantation in Nigeria is perceived conflict with the local communities with regards to the ownership of the land. This is because of the lack of clarity as to land status and the legal ownership of land.

Despite efforts taken by the government, communities and other stake holders, this land problem has been a classic issues for years in Nigeria. A careful check on land status is necessary prior to acquiring the land or starting the planting.

However, careful consideration where taken to acquired lands from the government, host communities and individual land owners.

Also, Presco has been compliant with the health and safety regulations guiding the workforce place. The company has in his employment only adults and comply with the rules and regulations in force. This has engendered a cordial relationship with the host communities.

The Company maintains a policy of giving fair consideration to applications for employment of disabled individuals having regards to their particular aptitudes and abilities. The Company conducts its affairs in a safe and environmentally sustainable manner as well as promote the health of its employees, contractors and host communities. Presco Plc complies with all applicable environmental, health and safety laws and regulations and aims to improve its performance in these areas. Environmental, health and safety matters are integrated into business decision-making. The company operates a contributory pension scheme covering all eligible employees in accordance with the Pension Reform Act 2004. Deductions of 7.5% are made from employees’ emoluments and in addition, the company makes a contribution of 7.5% of the employees’ emoluments.

TECHNOLOGICAL FACTOR

Technology is constantly changing, which also means that businesses must change in order to keep up. This has foster rapid business growth and development in the agro-industry.

In 2008, world biofuel production will was 1.35 barrels per day (bpd and

by 2013, it has risen to 1.95 million bpd (MPOB, 2008).

However, across the range of technologies, food technology is one of the most dynamic technologies in the modern economy. Presco has responded to technical advances in this areas. For example, Presco intends to harness methane gas produced by decomposition for its sludge to use the gas for its boilers. It has initiated steps towards this projects and intends to complete the same by early 2014. Presco believes it can successfully source its entire energy requirement from waste conversion Thus, reducing its dependency on fossil fuels.

Presco works in partnership with governments and environmental organisations to create products that protect biodiversity and conserve soil and water. Products that remove weeds without farmers ploughing the fields help to reduce soil erosion. This leads to improved soil quality and helps to retain water. It also improves biodiversity, which contributes to increasing bird numbers.

Presco believes in environmentally friendly and sustainable production. All factory waste of the oil mills is recycled into the plantation for used as fuel to generate process steam and electricity green. As a member of the Siat Group of Companies Actively Involved in Presco is a joint research program with CIRAD. This research program focuses on developing criteria for sustainable and Environmentally responsible plantation development and management.

Increase Production

By Increasing the planted area and yield per unit area improvise caught using modern planting materials, total production will increases. Presco plans to plant and replant a total of 2000 hectares between 2011 and 2013 at Obaretin and Cowan Estates. Presco is continuously working to Acquire and increases its land bank and is on verge of a major acquisition.

Internal factors using swot analysis

Luecke (2005) in his elaboration of SWOT analysis in the ‘Harvard Business

Essentials’ series, elaborates that goals complement strategy, and that goals cannot stand in isolation and must draw upon insights from the influences of

the external environment and their organization’s internal capabilities.

SWOT analysis looks at internal forces which are essentially controllable by top management and therefore, according to Seetharaman (1993) we could identify forces by first asking whether it is an internal factor and if so we proceed to ask whether it is a favourable (strength) or unfavourable (weakness); if the answer is ‘no’ then the force is either an opportunity or a threat.

The SWOT analysis which is carried out in the following manner based upon the conducted research are as follows, based on the content analysis of documents pertaining to Presco PLC, the strengths of the organization are identified. The weaknesses of Presco is identified. Once the strengths and weaknesses of Presco have been established, the next step is to identify the environment in which the corporation operates and what opportunities can the corporation exploit to sustain its competitiveness. Finally, the threats facing the company are identified to ensure that Presco could mollify the threats which could affect its competitiveness and sustainability.

Presco businesses span across the palm oil industry, from the

downstream sector to the upstream sector. Presco’s agronomy and

analytical services include plantation estates, the palm oil mills produce

crude palm oil, palm kernel and biofuel and its refineries and fractionation and kernel crushing plants are made up of oleo-chemical plants and specialty fats plants One of the Most Efficient Palm Oil Producers.

Presco is one of the most efficient palm oil producers,.This strength stems from Presco’s belief that the most efficient business model can be a very effective environmental model. Based on this model, Presco strategizes to maximize outputs from their plantations and factories while minimizing the inputs required using an efficient and effective plantation management program. The efficient use of land

translates into lower fertilizer, pesticide and energy usage as well as

benefits for the environment.

In its annual reports, Presco claims that its superior performance in terms

of oil yield and production cost per hectare compared to the industry’s

average is partly attributable to its advances in agronomy sciences.

Presco’s strong advocate of development of agro-science and technology to improve crop and oil yields to meet increasing global demands is evidenced from the

production . As its modest contribution towards achieving higher yield per

hectare, Siat s.a. (the parent company of Presco) in March 2007,

signed a Research Support Agreement for high quality oil palm seed

selection in Africa with INRAB (a research institute in Republic of

Benin) and CIRAD (research institute in France). The objective of

this agreement is to set up an experimental block in Presco. The

trials, scheduled to run over a period of 5 years, from 2010 to 2014

is intended to achieve the following objectives:

a. to select high-yielding fusarium-resistant crosses

b. to assess the interaction between Genotype and Environment

(GÃ-E)

c. to study the interaction between Genotype and Mineral

Nutrition( GÃ-E)

Champion of Environmental Friendly Practices

Environmentally friendly practices are taken seriously by Presco Plc. Content analysis of its annual reports shows examples of its efforts to promote environmentally friendly practices. Some examples include its practice of returning empty fruit bunches and palm fronds to the land. This reduces the need for fertilizer by 40-50% and provides compost to enrich the soil naturally and to reduce erosion

caused by rain. Another practice is the extensive use of kernel shells

and fibre to provide renewable energy to produce the steam needed to

extract the palm oil from the fruit. Nearly 98 percent of Presco’s fuel

consumption for steam generation at its mills is from these renewable

Resources.

Some key efforts IOI uses to promote sustainable oil palm cultivation

include (1) zero burning and biomass preservation, (2) integrated pest

management, (3) soil management and energy saving initiatives and

(4) RSPO Certification for Oil Palm Estates (Annual Report 2008).

CSR-Oriented Organization

Presco places utmost importance on corporate social responsibility (CSR).

In fact, the Presco’s Corporate Social Responsibility (CSR) principle

is encoded in its ‘Vision Presco (Annual Report 2011). The emphasis of

this principle is to achieve commercial success in a balanced,

responsible manner by addressing the interests of all stakeholders. The

key CSR initiatives currently undertaken by Presco involve maintaining

good business practices and sustainable cultivation, supporting

educational activities, caring for the community, enhancing employee

welfare and conserving the environment and wildlife.

Supporting and promoting education is an important area of Presco’s CSR

initiatives. Presco provides scholarships, gives out Young Achievers’ Award to outstanding and bright students to motivate students to excel in both academic and coco- curriculum activities, and has a student adoption programme which

provides financial assistance to help underprivileged children, sponsors

schools under its School Adoption Programmes.

The guiding principles for Presco’s CSR initiative with regard the

environment are to promote conservation particularly energy and other

resources and to improve on environmental care in their business

operations for example improving effluence treatment and waste

management.

Weaknesses

Financial Vulnerability

One of the few weaknesses of Presco is its financial vulnerability. As it

is subject to face risks such as interest rate risk, price fluctuation risk, credit risk, as well as liquidity and cash flow risk (source: Annual Report 2008). Although Presco operates within an established risk management framework with clearly defined

guidelines with are approved by the board, it still faces financial

vulnerability due to the highly unpredictable nature of business.

Given the current global economic situational position as a top-tier palm oil producer, efficient operations, good access to capital and bank markets and the management’s strong track record in managing the palm oil business through the industry cycles.

Opportunities

Growing Palm Oil Market Globally

For Presco, the growing palm oil market in Europe has offered

opportunities for expansion.(source: annual report 2008). Thus, Presco undertook

a project to increase its refinery capacity through an expansion of a

palm-oil storage tank plant in the Benin and the project is expected to be completed in late 2013. This increased refinery capacity provides opportunities to serve Presco’s global markets better.

Threats

Lack of Land Bank for Expansion

In the oil palm industry, the lack of land bank is a major threat to all oil

palm planters including Presco. As most of the delineated land for

agriculture is almost used up, Presco will need to outsource more land from other

neighboring Countries. The issue of scarcity of land

bank is further aggravated by NGOs high propensity to link agricultural

activities with deforestation (Yusof, 2007). Aside from the physical lack

of land bank, oil palm planters including Presco need to constantly address

the arguments against opening new oil palm plantations.

Unfavourable legislation and government policies

Unfavourable legislation and government policies are constant threats

to any industry including the oil palm industry. An example of this is the

Windfall Tax. As the price of crude palm oil soars, oil palm planters

became more concerned about the much higher windfall tax which they

have to pay for.

Diagnosis of Presco Plc

Although, Presco is one of the most efficient oil palm company in Nigeria.

It’s management faces the daunting task of steering the organization amidst uncertain economic climate brought about by the

meltdown of the US economy and the effects it has on other economies.

Presco’s exemplary management of its stakeholders and its sensitivity

towards their importance and needs gives Presco the added edge in

operations and enhances its ability to sustain its competitiveness. In other

words good relationship with stakeholders increases the efficiency of an

organization.

Presco’s operational strength is supported by its human resources, good

agricultural practices the technologies it uses, its strategic management of

R&D, its exemplary leadership style, its emphasis on CSR and good

corporate governance.

The emerging biofuel market and growth in demand for palm oil and other

downstream products in various regions are strong opportunities for

growth for Presco to pursue. Nonetheless, the biofuel industry and the close

link of its viability to the price of crude oil and other oil and fats also have a

downside to it.

To conclude, Presco is in a strong position to maintain its position in the oil

palm industry but needs to extend more care to mitigate the effects of its ability to properly manage its investments decisions.

Conclusion

In order for any business to grow, it is important that it understands the environment in which it operates. SWOT and PESTEL analysis is a useful tool for any business wishing to understand its internal and external environment. This allows it to devise plans and strategies to tackle the challenges it faces. It also helps it target its scientific research and technological development to increase crop output,

improve yield to enable farmers, to provide the increased demand the world needs

create biofuels to replace existing fuels and finally, to reduce society’s impact on biodiversity.