Tuesday, 3 March 2020

Indian Business Environment


Indian Business Environment

Environment literally means the surroundings, external objects, influences or circumstances
under which someone or something exists. The environment of any organization is the
aggregate of all conditions, events and influences that surround and affect it.
The framework of business environment can be divided into three broad dimensions:
Internal Environment, Macro Environment (External Environment), and Micro
Environment (Relevant Environment, Competitive Environment).
Internal environment is internal to the organization and it is controllable. The important
internal factors are as follows: culture and value system, Human resource, mission and
objectives, and nature and structure of management.
External or Macro or General Environment consists of factors external to the industry that
may have significant impact on the firm's strategies. It consists of six broad dimensions:
Demographic, Socio-cultural, political/legal, technological, economic and global.
Globalization has also enabled India to become the software superpower of the world. All
global organizations now have a new and vast market, as well as cheap manufacturing
hub, which has compelled them to change their global marketing and manufacturing
The environment is constantly changing in nature. Due to many and varied influences
operating there is dynamism in the environment causing it to change its shape and character
Micro Environment or the competitive environment refers to the environment, which an
organization faces in its specific arena. This arena may be an industry, or it may be what
is referred to as a strategic group.
Professor Michael Porter of the Harvard Business School has demonstrated the state of
competition in an industry as a composite of five competitive forces.
According to him, five forces are: threat of competition, threat of new entrants, threat of
substitutes, bargaining power of suppliers and bargaining power of buyers.
According to Andrew Grove, the former CEO of Intel: "Porter's five forces model ignores
a sixth force: the power, vigor and competence of complementors". Complementary
products are those products that add value to some other product.
A strategic group is to identify a more defined set of organizations so that each grouping
represents those with similar strategic characteristics. They are not a formal group or an
association; in fact they are conceptual clusters in the sense that they are grouped together
for the purpose of improving analysis and understanding of competition within their
The face of the Indian economy has changed drastically since 1991. Earlier, pricing in India
was governed by administered price mechanisms, but market forces today govern pricing.
India's external position is also significantly stronger. Exports, specifically of services,
have grown substantially in 2004-05. Growth in services has largely been fueled by the
information technology boom in which India has emerged as a world leader.
The thrust of reforms in the financial sector relates to privatization and restructuring.
Public sector banks have been permitted diversified ownership by law subject to 51 per
cent holding of Government/RBI/SBI. IFCI and IRBI were converted into public limited
The process by which organization monitors their relevant environment to identify
opportunities and threats affecting their business is known as environmental scanning.
Analysis is done by means of a search of verbal and written information, spying, forecasting
and formal studies and information system.
Various changes take place in the environment and it is difficult, cumbersome and a costly
affair to keep a regular eye on every aspect of these changes. So it is essential for a
strategist to rate the environmental factors on the basis of criticality and then invest time
and resources in environmental analysis.
Changes in the microenvironment may be systematic or discontinuous. Gradual changes,
changes in a phased manner, or those that are predictable are systematic changes.
ETOP is designed to present programs that foster development of new cost-effective
environmental technologies. It is an education-based organization. It concentrates on
workplace skills and job competencies.
It is important to 'scan' the external environment before creating business plans or when
evaluating existing ones. Doing this takes the form of a SLEPT analysis and thus there is a
scanning or an investigation of the Social, Legal, Economic, Political, and Technological
influences that can be or likely to be on a business.
Some management gurus believe that in today's turbulent business environment the best
scanning method available is continuous scanning. This allows the firm to act quickly,
take advantage of opportunities before competitors do, and respond to environmental
threats before significant damage is done.
When we refer to environmental scanning, we usually refer just to the macro environment,
but it can also include industry and competitor analysis, consumer analysis, product
innovations, and the company's internal environment.
Planning in India dates back to the 1930s. Even before independence, the colonial
government had established a planning board that lasted from 1944 to 1946. Private
industrialists and economists published three development plans in 1944.
India's centralized planning process is governed by seven cardinal policy objectives:
growth; social justice & equity; modernization; self-reliance; food; productivity and
employment. These would continue to be the guiding principles for the Eleventh Plan
(2007-12) which commences from 1st April, 2007.

Ad-Hoc Scanning: Short term, infrequent examinations usually initiated by a crisis
Business Environment: Aggregate of all conditions, events and influences that surround and
affect a business
Notes Complementary Products: Products that add value to some other product
Continuous Scanning: Continuous structured data collection and processing on a broad range of
environmental factors
Corporate Intelligence: Technique of adopting industry/research expertise to analyse the
information available on competition
Critical Success Factors: Areas in which good results will help ensure an organization's success
against competition
Environment Scanning: Process by which organization monitors their relevant environment to
identify opportunities and threats
ETOP: Environmental Technology Opportunities Portal
External Environment: Factors external to the industry having significant impact on the firm's
Internal Environment: Internal to the organisation and can be controlled
Macro Environment: Environment, which an organization faces in its specific arena
Regular Scanning: Studies done on a regular schedule
SLEPT Factors: Social, legal, economical, political and technological factors
Spying: Corporate espionage
Strategic Groups: Clusters of competitors that share similar strategies
Substitute Products: Products that can replace another product

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