1.

Industry Analysis
The macroeconomic situation of Zambia (PESTEL Analysis)
PESTEL stands for Political, Economical, Social, Technological, Environmental and Legal
analysis and is used to describe a framework of the macro-environmental factors that are used to
scan the business environment of a given industry (Verma, 2009).

Political factor
Generally the political situation in Zambia has favored positively on the milling business
industry. In terms of tax, purchasing maize does not attract tax. Value Added Tax is exempted on
maize (Vat Liability Guide booklet). This makes the cost of buying maize affordable.

Economic factor
Since 2004, Zambia has undergone improved macro-economic stability in contrast to previous
years of significant foreign exchange rate volatility, high inflation, rapid currency depreciation
and high interest rates (Deloitte, 2013). As of October 2016 the inflation rate is at 12.5% as
compared to September 2016 where it stood at 18.9% (Ministry of Finance, 2016). This may be
due to factors such as people having disposable income resulting from an increase in salaries
meaning they will spend more, an opportunity for companies in the industry to produce more.

Social factor
Zambians are now adopting a healthier lifestyle. Most companies in this industry produce more
of roller meal than breakfast meal. There is an increased demand for roller meal than for
breakfast meal. Generally it is all age groups of the whole population that consumes food made
of maize meal be it Nshima, porridge (Mulenga, 2015).

Technological factor
In this industry what is of prime importance are the production technologies of making the
maize meal. This is the trend companies will start following as they try to satisfy the new
demands of customers who are becoming more sophisticated and expect more value for their
monies.
Environmental and legal factors
For the natural environment, there will be need to regulate the agricultural production of maize,
especially with the use of pesticides and fertilizers.
There are many milling companies on the market producing the same product. This environment
is highly regulated as to the quantity manufactured and prices set. But also, it is heavily
politicized. This makes it tricky to operate in this market.
The maize meal market is under limited legal scrutiny. There are no product norms to be
satisfied, just like the product does not require someone to have a license to manufacture maize
meal. The only regulation is to follow production rules as set by the Zambia Environmental
Management Agency (ZEMA).

From the above analysis, we can conclude that the production of maize meal is a lucrative
business in spite of the shortcomings given by PESTEL Analysis. It is important however, to
appreciate the fact that these will have a minimal impact on the business because our product is
an all-year rounder and demand will always be there, if not increasing.

2. The micro-economic situation of the milling industry- Porters five forces

Michael Porters five forces analysis framework is used to analyze the industry, specifically the
external environment of the industry. The driving force behind this model is to determine the
attractiveness of the industry (Bhasin, 2016).
Porters Five Forces of Competition model encompasses (1) Rivalry, (2) Threat of substitutes,
(3) Buyers power, (4) Suppliers power and (5) Threat of new entrants.

Rivalry
The competitive landscape in Zambia is very stiff because the larger portion of the market share
is owned by most large maize millers which are well established companies with strong customer
loyalty as the quality is the same. The rivalry may increase due to the high storage costs,
switching costs and if our product differentiation is low.