The Understandings Of The Business Environments Commerce Essay

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In 1977 it entered into textile industry. In year 1979, it started with the production of Paperboards. In1986 it started ITC Hotels which became huge brand and huge revenue earners for the company ITC Welcome group today have become fast growing hotel chains consisting of more than 70 hotels all over India out of which some are super deluxe and five star hotels, some are heritage palaces some havelis and resorts and also some are full service budget hotels. In the year 2000 ITC started Packaging & Printing- 'Expressions' and went on to Lifestyle Retailing business division in the year 2000. By 2001 it became the leader in cigarette industry with popular brands like Gold Flake, Scissors, Wills etc.

So the diversification of ITC has been into business of Cigarettes, Paperboards & Specialty Papers, Packaging business, Agri-Business, Packaged Foods & Confectioneries, Branded Apparel products Personal Care products, Stationery items, Safety match stick products. It is also making its presence felt in the field of computer software. ITC is the leader as far as Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, etc is concerned and it is also gaining popularity, hence the market share in the business of Packaged Foods & Confectionery, Branded Apparel, Personal Care products and Stationery. As far as the agri business is concerned, it is one of India's largest exporters of agricultural products.

ITC is one of the country's biggest foreign exchange earners which is why it acts as a huge beneficiary for India in terms of economic upliftment. Apart from earning huge foreign exchange it also started with 'e-Choupal' initiative which is aimed at enabling Indian agriculture to significantly enhance its competitiveness by empowering Indian farmers through the usage of Internet. As a matter of fact this strategy by ITC has become the subject matter of a case study at Harvard Business School enhancing the Company's marketing reach.

ITC's production facilities and hotels have won numerous national and international awards for the consistent provision of quality, increased productivity and also the environment management strategies. ITC Infotech India Ltd is responsible for providing IT services and solutions to leading global customers. ITC is successful because of strong distribution reach, superior brand-building, effective supply chain management and acknowledged service skills in hotel business

EMPLOYABILITY: ITC employs over 26,000 people and has consistently rewarded more than 3, 96,000 shareholders.

SUPPLIERS: Increase in raw material prices always affects strategy of a company as Prices may increase so a company needs to have closer supplier relations to ensure quality products which ITC has.

PRODUCTS

FMCG PRODUCTS:

Foods: (Kitchens of India; Ashirvaad, Minto, Sunfeast,  Candyman; Bingo brands in Ready to Eat, Staples, Biscuits, Confectionery and Snack Foods);

Cigarettes: W. D. HYPERLINK "http://en.wikipedia.org/wiki/W._D._&_H._O._Wills"&HYPERLINK "http://en.wikipedia.org/wiki/W._D._&_H._O._Wills" H. O. Wills, Gold Flake, Navy Cut, Insignia, India Kings, Classic, SilkCut Scissors, Capstan etc.

Cigarettes are the main revenue earner product for the company i.e. 85% as compared to other businesses which earn 15% for company

Apparel: (Wills Lifestyle & John Players )

Personal care: (Fiama di Wills, Vivel, Superia,  etc) 

Stationery: (Classmate & Paperkraft)

Safety Matches and Agarbattis: (Ship , Mangaldeep etc)

HOTELS

ITC's hotels (Welcome hotels) have become India's second largest hotel chain with over 80 hotels throughout the country

INFORMATION TECHNOLOGY:

ITC Infotech India Ltd is responsible for providing IT services and solutions to leading global customers

EXTERNAL ENVIRONMENT

PESTLE ANALYSIS: It is the combination of political, economical, social, technological, legal and environmental factors which affect a business

POLITICAL:

FMCG SECTOR:

Huge burden of Vat but this will help companies like ITC to cut costs and become more competitive in the long run. Luxury tax is also present in some of the states increasing the expense of ITC at those particular places

100% FDI is allowed in this sector which has led to increase in competition

Uplifting agriculture will also lead to rural India's development hence may increase usage of FMCG products. Individual tax benefits too are a positive for the sector.

There are restrictions in import policies also.

HOSPITALITY SECTOR

Since ITC has ITC Welcome hotels so they have to follow some rules set by the government for the betterment of facilities and for the benefit of its employees hence for betterment of the company

The Factory Act 1948: It is to ensure health and safety measures to the employees working in a company, compulsory licensing of the company, working hours, and annual leave provision for accidents and rights of employees.

Minimum Wages Act 1948 : This act was made to provide minimum wages to the employees

The Employees Provident Fund Act 1952 : It is to make provisions for the future of the employee after he retires or there is an accidental death and provision of Provident fund, family pension and insurance

IT SECTOR: Political instability in India, poses no risk to foreign direct investors because no policy framed by a past government has been reversed by any successive government so far. So if the govt. changes, there is little effect on the industry that is why the IT sector of ITC is growing at a faster pace

AGRICULTURE SECTOR

Rashtriya Krishi Vikas Yojana (RKVY): It allows public investment in Agriculture and helps to maximize returns to the farmers in Agriculture and allied sectors and also to bring positive changes in the production and productivity of various components of Agriculture .This also has helped ITC as it is able to export the agriculture products more as the agriculture products produced are of good quality because of use of technology

ECONOMICAL

GDP rate

India's economy increased to 8.8% due to high agricultural output with development in the Industrial and Mining sector which has helped to uplift the Indian economy.

INFLATION RATE: The inflation rate in India is9 %. Although inflation rate has increased but it has not affected much of hospitality industry as the number of rich people and people who want international standards of living have increased

HOTEL INDUSTRY: The hotel industry works when people have enough money to spend, since India has different levels of money earning people so the hotels of ITC are from budget hotels to luxury hotels

IT INDUSTRY: India economic attraction has helped in convincing investors due to low cost advantage which in turn has also helped ITC

AGRICULTURE: Agriculture is the main economy uplifter and there are various hybrid seeds and technology used for the better yield of crops which has increased the export opportunities for ITC

SOCIAL

ITC is becoming a status symbol whether it is cigarettes or hotels

W.H.O. has issued some guidelines against the use of cigarettes and other tobacco products affecting the company as 85% revenue is attained by these

Changing attitudes of people towards tobacco as they are becoming aware of the consequences of using tobacco products and other chemical products like shampoos and are now going for herbal products

TECHNOLOGICAL

All ITC softwares are ISO certified and they follow quality standard as well as six sigma is followed for proper working of the company

Technology has been simplified and available in the industry.

Presence of Foreign players has and is helping in high technological development which is actually benefitting the company on the other hand has increased the competition for ITC.

LEGAL

Indian Copyright Act: It came into effect from 10 May 1995 It saves the the rights of a copyright holder and also imposed heavy punishment and fines for infringement of copyright of software so because of this act nobody can copy ITC products

Software Technology Parks of India (STPI): It is a society set up by the Department of Communication & Information Technology which is by the Government Of India in the year 1991. It was made by the government for encouragement & promotion of the Software Exports from India of which ITC is a part

A special purpose tea fund has been launched for re-plantation and rejuvenation of tea. Government soon plans to put in place similar financial mechanism for coffee, rubber, spices, cashew and coconut hence affecting FMCG sector in big way

Rs. 100 crores have been allocated to new Rain fed Area Development Programme, set up for coordinating all schemes for watershed development

The hotels need approval from the government. In hospitality 100% FDI is allowed which means more competition for the company

ENVIRONMENT

Since environment saving is becoming huge topic world over so every industry has to take some steps to save the environment and ITC is also doing the same

Water (Prevention and Control of Pollution) Act, 1974: The Act prohibits the discharge of pollutants into water bodies beyond a given standard, and lays down penalties for non-compliance . ITC as a company which is judiciously following these norms.

Air (Prevention and Control of Pollution) Act, 1981: It helps to control air pollution by prohibiting the use of polluting fuels and substances. The NAAQS (National Ambient Air Quality Standards) prescribe specific standards for industrial, residential, rural and other sensitive areas and any industry which goes beyond those standards is liable for action and ITC is trying to control the air pollution emitted from its factories

 MICHAEL E. PORTER FIVE FORCES MODEL

The Five Competitive Forces was developed by Michael E. Porter and it has become really important for analyzing an organization strategically hence knowing the wrongs and rights of the company or organization or industry as a whole

Porter's five forces model is based on the fact that a corporate should be able to utilize the opportunities and should be able to face the threats which emerge from the environment due to tough competition from other organizations. Michael E. Porter formed five competitive forces that shape hence helps every industry present in any and every market. These forces are useful in determining the amount of competition which is there and hence how much profit a company can extract from a certain business and hence how much attractiveness is there of an industry. The corporate strategies should be modified according to these forces in such a way that these competitive forces in a way that improves the performance of the organization by extraction of more profit from the market.. Based on the information derived from the application of these forces , the management decides how to improve particular areas of their industry.

Bargaining Power of Suppliers: Suppliers are responsible for provision of inputs that are needed in order to provide goods or services to the customers .It is low in this case the bargaining power of the supplier is low because there are many players other than ITC in the market and there are many substitutes for the inputs so the companies can easily choose some other suppliers for attaining the inputs or raw materials for the further production of their products.

Bargaining Power of Customers: It is high because there are number of other companies other than ITC which are selling apparels, shampoos, soaps, food products etc so they can go for the product which suits them in terms of quantity as well as the most important factor, the price

Threat of New Entrants: The entry is not very easy for the new players because of the presence of big companies like ITC which have strong hold in market and for the new entrant it becomes difficult to make trust of customers when there is competition from other big companies and even the smaller ones

Threat of Substitutes: It is high because there are so may other companies selling products like apparel, IT software, food products etc and also have brand value and most importantly some of them are selling these products at lower prices as compared to ITC so threat of substitutes is definitely present

Competitive Rivalry between Existing Players: Competition is high because there is not much differentiation between the products of ITC and other companies like Britannia, L'Oreal etc which may or may not be big as ITC but still give tough competition

CONCLUSION

ITC has coped up with all the changes in the Business Environment and as a result it has emerged as a very profitable company for the people working for it and for India as it has been the highest foreign exchange earner for the country leading to development of the Country as a whole .It has happened because they have been changing with the environment for the betterment which is showing results now.

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