Colombia is one of the first LatAm economies you need to understand to be considered informed about the region. Mexico is a great start, and you certainly need to be “fluent” in USMCA and IMMEX (links), but our neighbor to the south is a special case. All of LatAm is, but Mexican business policy is more special than most. If your business needs an option in the region, someone is going to bring up Colombia. It could be you, or it could be that Gen-Z know-it-all Squiyler from Data Analytics. Here’s a good new tool – the STEEPLED framework – to get up to speed on a new market or economy:
Introduction to STEEPLED Analysis: A Powerful Tool for Business and Negotiating
This article is a continuation of our Business Environment Analysis (BEA) of Colombia Business Environment Analysis (BEA) Part 2 – The Colombia Message. – Globalism2.com. It turns out that while I wasn’t looking, they made a beloved, once-simple tool even more complicated. They added a D for Demographics to my trusty 360-degree framework STEEPLE(D). So now we are working with 7 categories of data to scan, or briefly review, for making better strategic decisions. This is especially true about negotiation strategies and partnership situations. So the new acronym ruling the life of would-be business environment analysts is STEEPLED:
- Social
- Technological
- Economic
- Environment
- Political
- Legal
- Ethics
- Demographic
Demographics is the new one.
Understanding Colombia’s Business Landscape: Opportunities and Challenges
Remember that our ultimate goal is to develop a business strategy or winning negotiating strategies to BUILD A BUSINESS. So we are looking for bad news as well as good news. Our next step will be to contact SWOT analysis on Colombia, so we will need the entire range of available data and information. That’s the main strength of the STEEPLED framework – it is comprehensive and objective. You THINK that your squishy processor is capable of objectivity and broad perspective, but it can’t. That’s why smart analysts used frameworks like STEEPLED.
Social Factors: Unraveling Cultural Norms and Consumer Behavior in Colombia
Society or Social factors are part of the very original STEP framework, and it’s basic to our style of business environment analysis. We will examine values, attitudes, trends, consumer behavior, lifestyle trends, and cultural influence. Our focus, however, is to determine if our investment, our staff – and ourselves – will be safe in the new environment. We look for STABILITY and SECURITY in this section. The stability of the government, institutions, and relationships is one of our main indicators. When it comes to security, we have two concerns. Is our business safe from organized or concerted security risks? Those include crime, corruption, military conflict, or environmental problems. Are we buying property in a war zone? Are we building in a floodplain? Next, will our people and our property be safe from street crime and random events?
Colombia has a new government, an untested peace, and resurgent cartel activities. Of course all good analysts are watching these factors. For now, though, it seems that Colombia is riding the region’s reform wave.
Colombia passes the S test, but bears watching.
Technological Innovations: Leveraging Tech Advancements for Business Growth
Technology breaks down into two broad categories for business environment analysis. First – are the locals trainable for office and factory work? Are they technologically proficient enough to work in a modern factory or office. Are they technologically proficient enough to use modern tools and systems? The second test has a higher bar: can they contribute to the development, improvement, and/or localization of our technology?
In other words – Test 1 is can they consume tech? and Test 2 is can they create tech?
If you want to set up a factory or processing center, you care about passing Test 1. If you want to tap into a market, you want to pass Test 2.
Colombia, with a literacy rate of 95.6% (slightly higher than Mexico – MUCH higher than the US’ 88%) and 160% mobile penetration (3 mobile devices for every 2 people) easily passes Test 1, and seems poised to outperform on Test 2. Not only are Colombianos as technologically proficient as Americans, but their Spanish is considered the best in Latin America. Need a LatAm call center or back office anyone? Colombia is standing by to take your call.
Economic Outlook: Analyzing Market Trends and Investment Potential in Colombia
The economic data we want here is pretty basic. Remember our approach to business environment analysis is to take a series of increasingly specific scans. At this broad level, we are looking for “knock-out factors” that will quickly and definitively disqualify a choice – so that we can move on to the next possibility and get on with our lives. For production centers, we are looking for reasonable GDP growth, moderate per capita GDP, low inflation, and moderate unemployment. If you want to market to a new region, focus on the per capital income numbers. The magic phrase you are looking for in the commentary is “burgeoning middle class”.
Here are stats we collected in our pre-STEEPLED pass.
That inflation looks pretty high, and I have questions about GDP growth and unemployment numbers. Those figures can live together, but there’s a story building. For now, the high unemployment confirms other data points indicating low wages and low costs.
But those Inflation and GDP numbers may indicate that Colombia’s economy may already be running a bit hot. In all Colombia’s numbers look like something is about to happen, and warrants further investigation.
Still, there is no reason to stop now based on these results. Colombia passes the econ test.
Environmental Considerations: Using STEEPLED to Comply for Competitive Advantage
Business environment analysis (BEA) is a management tool, and we can use it to avoid regulatory problems and meet our corporate mission.
Our first concern is to avoid putting our people, our assets, or our reputation at risk. There is a due diligence element to this part of the process that sometimes gets shouted down by the anti-bureacracy brigade.
Just as vital to our business interests are the costs and difficulties of following all rules & requirements. Compliance is no joke in a trade-war environment, and you have to pay much more attention to regulations and restrictions now. However you feel about ESG or other political issues, you’re undoubtedly anti-fine & impoundment.
Here’s a quote from the US government’s Trade.Gov page on Colombia – Market Challenges (trade.gov):
Market Challenges (trade.gov)Extractive industries such as mining and oil and gas exploration face long and complex environmental licensing procedures and often are subject to Consulta Previa, in which indigenous and other ethnic minority groups must be consulted before projects can be carried out in their communities, and local referendums. The pervasiveness of informal and illegal mining and logging in Colombia, and the environmental damage that accompany them, tarnish the image of the mining industry in general and generate resistance to legitimate mining concerns that adhere to environmental standards and labor regulations.
Regulations and standards are another area of concern for U.S. businesses in Colombia. Regulations sometimes change without adequate notification given to the World Trade Organization, industry, and other relevant stakeholders.
Political and Legal Landscape: Navigating Regulations and Government Policies
Colombia is a major success story for democracy and freedom in LatAm – but that only counts if they can keep the progress going. The big event of 2022 was the election of Gustavo Petro and Francia Marquez as Pres & VP as reformers who aim to clean up the finances, corruption, and healthcare systems in the country. Security is till a problem as the government continues tonegotatite the armed dissident groups.
Verdict: Colombia squeaks by here. Our optimism about the potential of the new government is tempered by concerns about social unrest. Monitor this category.
Legal – Colombia is very pro-business / pro-foreign money. This is one of the strong points for Colombia – it goes out of it’s way to attract foreign businesses, big and small.
Verdict – Legal system is not a problem.
Ethical Implications: Integrating Corporate Social Responsibility in Decision-Making
The bad news here is that Colombia came in 91 out of 180 other countries. The (relative) good news is that it beat out Mexico (126) , Argentina (94) and Brazil (95) .
TransparencyOrg rankings – 91/180 for a 2022 score of 39 out of 100.
Transparency.org RANK:
- 1. Denmark
- 24: USA
- 91 Belarus
- 91 Colombia
- 91 Moldova
- 94 Argentina
- 94 Brazil
- 126 Mexico
- 180 Somalia
Demographics: The New STEEPLED Dimension that tracks population and gender
This is the new one. This tool started out as STEP, then PEST, PESTLE, STEEPLE, and now STEEPLED.
I initially got hit with a case of AFS (acronym fatigue syndrome) when I saw they had added one, but it turned out that demographics is a useful addition for business environment analysis. I didn’t realize that Colombia was the third largest country by population, or that it’s GDP was tied with Chile for 4th (after Argentina, so that one might be in flux).
A quick glance at the demographic data confirmed that Colombia is an important regional player. It is the Thailand or Italy of South America. At 52 million people, it has got the same population as South Korea – more than Spain or Argentina.
Case Study: Applying STEEPLED Analysis to Drive Business Success in Colombia
The case we started using in this series is that of a fictitious online publisher of B2B information and data considering a partnership with a firm in Colombia. In this case, the company had an operation in Mexico to act as a management base, so the new Medellin partnership could be more specialized. Business Environment Analysis is the Science of Site Selection. Part 1. The Method – Globalism2.com One idea worth investigating was using Colombia as an outsourced site of Spanish language content production and customer service.
In our case, Mexico had become expensive just as the market for B2B data and information industry was looking most vulnerable to recession.
Conclusion: Harnessing the Power of STEEPLED Analysis for Sustainable Growth
The bottom line for Colombia – Yes. Last week (link) it passed the quick test which focused on economic benchmarks and safety issues. This more rigorous use of a new & expanded 360 degree framework reveals more areas that we need to examine. Remember that a single STEEPLED scan just tells you about big picture issues and where you need to do more research. The only definite decision we want to make is whether to continue researching.