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UNDERSTANDING BUSINESS ENVIRONMENT
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Q. It is often quoted that ''the agility and ability of a firm to adapt to its external environmental variables is the strategic key to its long-term and sustained success". Critically evaluate this specific line of reasoning reflecting on the role of external environment on the performance/ long-term sustainability of any one of the under mentioned firms,
Mahindra and Mahindra
In general there are a few external factors that affect the sustainability of a firm, which are -
"The agility and ability of a firm to adapt to its external environmental variables is the strategic key to its long term and sustained success." The purpose of the following study is to evaluate this line of reasoning reflecting on the role of external environment on the performance and long term sustainability of the firm "Mahindra and Mahindra"
How the Journey Beganâ€¦..
K.C.Mahindra met Barney Roos, the inventor of the Jeep, when he visited the United States of America. From him he got the inspiration of manufacturing such an ideal vehicle for the rugged roads of India. And pretty soon the Mahindra brothers got together with a gentleman named Ghulam Mohammed and set up "Mahindra and Mohammed" on 2nd October 1945. However in 1947 India got independence, Ghulam Mohammed went back to Pakistan and the name was changed to "Mahindra and Mahindra"
This marked the beginning of "Mahindra and Mahindra" and from the last 50years they had a steady growth and evolved into a group which occupies an important position in nearly all major sectors of the economy. The current turnover of the group is 7.1 billion dollars.
Political Environment during that periodâ€¦..
During 1970-1990 Indian automobile industry was highly regulated by the Govt. and the production of private companies were controlled. Automobile manufacturers faced a lot of problem getting licenses for expansion and manufacturing of a new range of automotives.
To expand business Mahindra and Mahindra started manufacturing tractors in 1982, which proved to be a very successful venture as within a year they turned out to be the market leader.
Mahindra also got into information technology business in 1986.
However the growth of the firm was limited due to Govt.policies and the license raj. Indian Govt.started reforms in 1991 for opening the market. Though the reforms were slow but they provided an opportunity to Mahindra regarding their collaboration with ford.
During mid 90's they invested in new technologies to upgrade their existing product mainly tractor. As they were successful in rural area with tractor and farm equipment supplies, they utilized this strength for launching of new Commander range of vehicles for the rural and semi urban markets. In 2000 they also set up the new tractor satellite plant in Rudrapur.
Mahindra & Mahindra came into prominence in 2002 with a launch of Scorpio a new generation world class utility vehicle ( SUV ). The SUV was designed in house by their R&D team keeping in mind urban class market, esteemed factor and latest trend. Scorpio gave a good competition to Tata safari, which was then the most popular Indian SUV.
In 2002 the Indian government formulated an auto policy that aimed at promoting integrated, phased, enduring and self sustained growth of Indian automotive industry. It allowed 100% FDI, formulating fuel policy to meet emission norms and harmonizing the regulatory standards with the rest of world (ROW).
To increase the market share and growth of the business the company expanded in other automobile segments and other businesses. Keeping in mind the competition in car segment in 2006 they formed the joint venture with Renault, France to make the passenger car named Logan. They also entered into joint ventures with US companies to launch Navistar trucks in India. Presently the company is buying South Korea's Ssangyong, an SUV manufacturer. It will give assets to world technology for SUV's.
It is the only Indian company among top tractor brands. Today it is present in every segment of the automobile industry starting with two-wheelers, to CVs, UVs, SUVs and sedan.
Presence in Various Sectorsâ€¦.
Not just automobiles but Mahindra is also into after market services, farm equipments, two wheelers financial services, Mahindra partners division, information technology, infrastructure development systech and speciality business.
Important milestones in the history of the company -
2nd October, Mahindra & Mohammed established.
The Company was once again named Mahindra & Mahindra.
Started steel trading in association with UK suppliers.
The first business with Mitsubishi Corporation started
Mahindra Ugine Steel Company was established which was a joint venture with Ugine Kuhlmann of France.
Started manufacturing of light commercial vehicles.
Established a joint venture with Sperry Rand Corporation of USA.
Mahindra and Mahindra entered into the world market with export of utility vehicles as well as spare parts.
Mahindra Engines developed an unique diesel engine for its vehicles to beat the fuel crisis.
International Tractor Company of India merged with Mahindra to become its own Tractor Division.
Mahindra & Mahindra became the market leader in the Indian tractor market, and it still retains this position.
Mahindra Ford India Limited was established which was a joint venture with Ford Automobile Company from USA to manufacture passenger cars.
Mahindra Holidays & Resorts India Limited established.
'Bijlee', a battery-operated environmental-friendly 3-wheeler vehicle was launched.
The largest online used vehicle website in India launched by Mahindra.
A new logo was adopted by the company.
Mahindra & Mahindra set up its first satellite tractor plant at Rudrapur.
A new age tractor, Mahindra Arjun was launched.
Bolero GLX was launched in response to the needs of urban consumers.
Scorpio launched the new generation world-class sports utility vehicle that redefined the SUV market.
'Invader' was launched which is a sporty open top vehicle.
Mahindra & Mahindra Tractors was awarded the very prestigious Deming Prize for excelling in quality,it being the first tractor company in the world to receive the award.
Scorpio received a National Award for work on Research & Development.
Bolero and Scorpio launched in Latin American, Middle East and South African markets.
Mahindra & Mahindra became the first Indian company to achieve sales of one million tractors.
Mahindra Renault Limited established - a joint venture with Renault to manufacture and market Logan, a mid-sized sedan, in India.
Club Mahindra completed 10years of making a difference to the way people spend their vacation.
Mahindra & Mahindra ushered on its 62nd anniversary on October 2 2007 with significant Corporate Social Responsibility initiatives focusing on health and the environment. CSR forms a vital part of the Sustainability initiative at the Mahindra Group. The initiatives launched included Mahindra Hariyali, a programme which aims to add 1 million trees to India's green cover and inauguration of the Lifeline Express, which was brought to Uttarakhand for the first time.
Logan was the highest selling sedan and Scorpio the highest selling UV in July 2007
Mahindra was ranked 22nd in Business India's annual survey of the country top companies - Super 100.
India's most popular SUV Mahindra Scorpio, took another step towards stardom with the launch of a premium, special edition `Scorpio Coffee Table Book'. Film actor Ajay Devgan - the Scorpio's first customer, and Anand Mahindra, Vice-Chairman and Managing Director of the Mahindra Group, took special pride in unveiling the book, which chronicles the journey of India's best loved SUV.
PESTEL stands for - Political, Economic, Sociocultural, Technological, Environmental and Legal.
It is in effect an audit of an organisation's environmental influences with the purpose of using this information to guide strategic decision-making. This analysis is a useful for understanding the environment in which an organisation is operating.
â€¢ Political: It is what happens politically in the environment you operate, including areas such as tax policies, employment laws, trade restrictions, tariffs and political stability.
â€¢ Economic: It is what happens within the economy, such as economic growth economic decline, interest rates, exchange rates and inflation rate, wage rates, unemployment, credit availability, cost of living, etc.
â€¢ Socio-cultural: It is what occurs socially in the markets in which you are operating or about to operate, cultural expectations, health awareness, population growth rate, age distribution, career attitudes, importance of safety and global warming.
â€¢ Technological: It is what happens technologically which can impact what you are doing, technology is leaping every two years, how will this impact your products or services, things that were not possible five years ago are now mainstream like mobile phone technology, social networking websites etc. Everyday new technologies are being developed and the rate of change itself is increasing. There are also changes to obstacles to entry in given markets, and changes to financial decisions.
â€¢ Environmental: It is what happens with regard to ecological and environmental aspects. Most of these factors are economic or social in nature.
â€¢ Legal: It is what happens due to changes to legislation. This may affect employment, access to materials, resources, imports/ exports, taxation etc.
The political factors which are currently affecting the company is that participation of its employees in political parties that is the company does not allow itself in the involvement of any political party but it allows them to freely participate which is an incorrect process as it affects the image of the company because the employer represents the company.
However to some extent its also due to the time in which it came up that is post independence that it could indulge itself in businesses such as steel.
2.Economical factors:- Different causes affecting the economic stability of the company, increasing cost of raw materials is perhaps one of the major threat and the regulatory norms imposed to protect the environment, efficiency in fuel consumption, less use of smoke emitting vehicles, volatility in financial market, improvement of raw material market, effect of the supply chain in the market.
The company gives 1% of the after tax profit to the CSR (cooperate social responsibility) group which is the group created by the Mahindra and Mahindra company to help the people around them and to boost up the economy.
They created another group called ECOPS that is a group of employers social responsibility group in which the employee is benefitted, that is the employer's family and kids are made to get educated and given work to do and their children are send to schools where they study and are made to things they like to do .The CSR group also helps the people to give them financial support and also provide shelter. They came up with organisations to save girl child and provide mid day meals in schools to promote the brand of the company and help the country socially and economically.
4. Technological factors:-
New technology and new innovations can do wonders in the market. Same is the case with this company. It also helps in reducing the cost of the product and helps in getting new products launched in the market, to increase the market share as well as to become the leader. The factors affecting the production due to new technology is renewable energy development.
5. Environmental factors:-
Mahindra and Mahindra uses the the environment friendly or 'go green' policy that is less use of carbon emitting products so that it does not create a negative impact on the social and economic environment of the place. They always work on the products produced by the company which are made in such a way that the environment stays safe and less emission of carbon monoxide. Thus they produce such products for the consumer that does not harm the consumer.
6. Legal factors:-
The company is present globally and works in different countries so legal changes taking place in the world affects the company. There are certain legal changes which have happened in recent years in the global economy. The legal systems affect the cost of the product and also the production of the product produced by the company . It can also affect the demand of the product produced by the company. To avoid such problems the company has accepted factors in legal systems such as collaboration with government in various policies like agriculture and banks.
Thus after looking into all the external factors that is affecting this company we may say that Mahindra and Mahindra is a strong company which has fixed strategies for expansion but still lacks somewhere in its own current policies and implementations, which it might work upon.