Introduction
Ikirezi Natural products, a Rwanda-based essential oils company was founded in 2005 by Dr. Nicholas Hitimana. The company specializes in the production of essential oils for exportation to international markets as well as for domestic customers. Being the only producer of essential oils in Rwanda, the company faces many challenges, but it remains committed to improving the quality of life for the farmers. The company’s vision is to continue producing high-quality essential oils in partnership with farmers. It currently produces five types of essential oils, including Geranium, Patchouli, Lemongrass, and Eucalyptus. Having focused on international markets, the company wants to venture into the domestic market which has the potential to increase the company’s sales revenues and profitability. This discussion provides a detailed PESTEL (political, economic, social, technological, environmental, and legal) analysis. The analysis examines how each of these external factors affects Ikirezi Natural Products Company.
Political Factors
The company operates in a stable political environment. The launching of a new constitution in 2003 paved the way for the election of a transformational government led by President Kagame. Since then, the country has witnessed massive growth and a politically stable environment. The implementation of an ambitious development blueprint that seeks to transform the country into a middle-income nation has elevated the lives of Rwandans (Reyntjens, 2013). Regional integration, good governance, skilled human resource capital, world-class infrastructure, modernization of the agricultural sector, Strong private sector are the main pillars behind the stable political environment. The stable political environment coupled with transformational leadership allows companies such as Ikirezi to continue growing and expanding to international markets (Malunda & Serge, 2012). The recent strategy to focus on the domestic markets is based on the ease of doing business in Rwanda and the potential market for essential oils in Kigali.
Economic Factors
Rwanda has experienced economic prosperity over the last two decades. The country’s gross domestic product has grown at an average of 8%, which is a relatively high growth rate in Africa. The high economic growth has resulted in a rise in per capita income and a reduction in poverty levels. Vibrant economic policies and reforms have also led to the ease of doing business and elevated the country’s status in Africa (Streeter & McNaught, 2008). The agricultural sector has also received a major boost to increase exports and diversification. The favorable economic environment allows Ikirezi to thrive in the international markets as well as in the domestic market. The rise of the middle class population means more market for the company’s products domestically.
Social Factors
Being a community interest company, Ikirezi main goal is to maximize the social welfare of the community. It currently partners with 4 cooperatives in different locations and employs over 100 farmers directly. Hundreds of farmers also benefit from skills-based training that the company provides annually to fulfill its objective of transforming the communities. The company combines the best business practices with the sustainable social goals to increase net profits, offer dividends to farmers, strengthen the business, initiate developmental projects, and expand operations. Since its inception, the company has improved the lives of farmers through the provision of tangible and intangible benefits (Stephanie et al., 2017). Being a socially responsible company paves way for more growth and expansion in the domestic market.
Technological Factors
The uses technology to extract essential oils from raw materials. For example, the distillation process is carried out by a distillation machine. There are technicians who oversee the whole production process, ensuring that accurate heating and cooling occurs (Stephanie et al., 2017). However, bottling and packaging of the finished products are done manually. In addition, much of the farm-based activities are labor-intensive, which allows the company to hire a high number of farmers and farming assistants to provide guidance to farmers. Being a community-based company whose goal is to improve the lives of farmers, the company is better of being labor-intensive.
Environmental Factors
Effective production of essential oils relies on rainfall patterns since the raw materials come from farms. Climate change has recently affected crop production with the traditional seasons becoming unpredictable (Stephanie et al., 2017). As a result, water is becoming a scarce resource, forcing farmers to rely on irrigation to achieve their production goals. Thus, climate change poses a great risk to the company as lack of enough rainfall affects crop production. However, the recent intervention by the government to provide integrated management of water resources as well as expansion of irrigation networks is a move in the right direction.
Legal Factors
Ikirezi operates in a safe and secure legal environment with unmatched ease of doing business. The process of paying taxes and obtaining a business permit is easy and straightforward in Rwanda. In addition, social enterprises are considered the same as private entities as far as taxation policies and incentives are concerned. Thus, Ikirezi takes advantage of government incentives and tax holidays advanced to private companies to expand (Nowak, 2018). In addition, the government’s effort to commercialize the agricultural sector and to provide soft loans to agribusinesses means more opportunities for the growth of Ikirezi Company.
Conclusion
Overall, Ikirezi’s PESTEL analysis shows that Rwanda offers a conducive environment for small enterprises looking for growth. There are immense opportunities and ready markets for essential oils in Rwanda that the company should grab. The rise of the middle class coupled with high economic growth provides the company with unlimited growth opportunities.
References
Malunda, D., & Serge, M. (2012). Rwanda case study on economic transformation.
Nowak, W. (2018). Doing business in the fastest growing least developed countries. Economic and Social Development: Book of Proceedings, 537-543.
Reyntjens, F. (2013). Political governance in post-genocide Rwanda. Cambridge University Press.
Stephanie T. Coker, Yeareen Yun, Brettany Tucker, Yamatha Saint Germain, & Enkhzul Altangerel. (2017, March 29). Ikirezi Natural Products: From the Farm to Your Spa, Perfumer, and Home. http://www.cornellpolicyreview.com/impact-with-essential-oils/?pdf=4622
Streeter, R., & McNaught, M. (2008). Prospects for Prosperity: Rwanda and the Entrepreneurial Society. Civic Enterprises.
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