2.

0 Evaluating a Company’s External Environment

Macro Environment consists of forces which provide opportunities or possess threats for a
company and the forces consist of political, economic, social factors and technological
factors known as the PEST analysis. PEST analysis is one of the most useful and structured
tools to analysis the evaluate a company’s external environment. According to Barry Haynes,
Nick Nunnington (2010), it is useful to start by identifying external factors that may have an
impact on that future strategy. Therefore to set the future strategy for Ray of Hope café, we
should consider evaluate the external factor that might directly and indirectly affect the
business operations.

2.1 Political factors

Policies and regulations which are set by government authorities are considered Political
Factors. Political Government of Malaysia has always support businesses to grow in
Malaysia and they have never imposed any political pressure on organizations. The political
condition is very stable in Malaysia. This political stability has ensured for many local and
multinational corporate to do their investment and running business operation smoothly. It
also implies positive factors for Ipoh Town to expand their investment and expansion
activities in Malaysian market

Besides that, the legal factors which is indirectly related to political may also play a very
important role may affect the future strategy of Ray of Hope café. Approximately 65% of the
populations in Malaysia are Muslims and this Islamic law is applicable for them in terms of
family matters and religion issues (Palumbo-Liu, Robbins & Tanoukhi 2011). Malaysia has a
very strict law in terms of Halal and Haram foods and because of this complex legal system,
an organization needs to recruit legal service professional to monitor the organization’s
business behaviours and operational activities in order to make sure that business operation
and activities are strictly within the constraints of the legal systems. As for Ray of Hope café,
they already have a Halal certificate which is an added advantage for them but unfortunately
the café is located in a residential area where 85% of the population are Chinese. Therefore
having this “Halal Certificate” might not be an added advantage for this café instead it might
increase the cost for the café since the cost to obtain a Halal Certificate is quite expensive.

2.2 Economic factors

Malaysia is a middle-income country and is a developing economy in Asia. Malaysia is

attempting to achieve high-income status by 2020 and in order to achieve that Malaysia
moving further by attracting investments in Islamic finance, high technology industries,
biotechnology, and services. In year 2014, the national average monthly household income
was RM 6,141 and Perak average monthly household income was only RM 4,268 which was
30% below the national average. This shows that the salary earned by residents in Perak is
lower than RM 4,268 and this also indirectly indicates that residents in Perak will be very
calculative in terms of price. Ray of Hope café is currently pricing their food at a higher
range of price which might be the reason they are not receiving much customers.A set lunch
food consisting of Nasi Kerabu with chicken and drink is served at RM 15. Customers can
either get extra item for the set lunch or cheaper set lunch in Ipoh area and especially at
Bercham area because there are alot of shop selling variety of delicious food and economic
food at cheaper price. This price issue can be disadvantage for this café.

2.3 Social factors

"Social factors include the demographic and cultural aspects of the external environment.
Companies need to have a clear understanding of the society and the population to which
their products and services are directed" (Hannagan, 2005). Therefore Ray of Hope Cafe
should consider social cultures while making strategic decisions to avoid possible conflicts.
Bercham population covers 20% of Perak population which consist of 710,000 residents.
From this population one third of the full time residents are elderly people whereas two third
of the residents are youths who have already moved to other cities such as Kuala Lumpur,
Johor Bharu or Singapore for better opportunities. Therefore Ray of Hope should be able to
come out with strategies to attract the one third of the residents to café. They could try to
provide free vouchers, membership coupon or serve their cuisine in buffet style in order to
attract this elderly generation to visit their café.

2.4 Technological factors

"Technological changes have a major impact on most organizations and can have an effect on
the competitive edge of a company and make it more or less cost-effective compared to its
competitors" (Hannagan, 2005). Technology has created a society which expects instant
results. A faster exchange of information and materials can benefit businesses as they are able
to respond promptly to changes within their operating environment (learnmarketing.net 2009).
Now a day’s almost every cafe in Malaysia provide wireless Internet connection where
customers can enjoy and use their laptop, smart phone and any other devices very easily. Ray
of Hope café could also provide this benefit in order to attract the younger generations.
Currently Ray of Hope are only using Facebook to advertise their café, they could also extend
their network by advertising in Instagram. Besides that, Ray of Hope café could also
collaborate with Food Panda or Runner to deliver their food to their customer. Tourism of
Perak has also come out with an idea to promote food tourism in Ipoh by the help of social
media influencer. Social Media Influencer would need to produce writings, photos and videos
for Perak Tourism and upload these on their social media accounts with captions that feature
a link to Tourism of Perak’s website. By doing this, Ray of Hope could also attract tourist to
visit their café and enjoy their food.