ENVIRONMENTAL

APPRAISAL
Trends & Techniques
CONCEPT OF ENVIRONMENT
• The aggregate of all conditions, events
& influences that surround and affect
an organisation
• Environment is Complex – all the above
factors interact and their sum total is
difficult to understand in totality
• Environment is Dynamic- constantly
changing
 CONCEPT (CONTD)
• Environment is Multi-faceted- a
particular factor being seen
differently by different persons
• Environment has Far-reaching
impact- some factor may last long
into the future and continue to
influence the rest of the environment
 SIX MEGA TRENDS
India’s Future
• The trend of acquiring scale- in 2000
the no of cars was half a million and in
2010a single company may be
producing that number
• Trend of increase in connectivity and
awareness- Indian telecom market
was 5 million barely seven or eight
years ago now about 180 million- 12
times more TV sets
 MEGA TRENDS (CONTD)
• Trend of growth of middle class- in
2001 there were 61 million Indians
came from families wth income than 2
Lakhs a year, in 2005 it was 100
million and in 2010 likely to be 173
million
• Trend of problems of growth-
ecological degradation, rising energy
demand, income disparities
 MEGA TRENDS (CONTD)
• Trend of increasing openness to the
world- foreign trade component of
GDP is 55%, foreign investors in
Indian share market about 25%
• Demographically nearly half of India
is below 25 and culturally very
different from the older generation
 GENERAL VS RELEVANT
ENVIRONMENT
• The General Environment is vast and is far
flung – not all factors are relevant for the
business of the organisation
• The immediate factors and concerns of any
organisation is confined to a part of the
environment- relevant environment
• What is needed is an appraisal of the factors in
the relevant environment and building them
into the corporate planning process
 ENVIRONMENTAL
SECTORS
• Economic
• Political
• Socio-cultural
• Technological
• Regulatory
• International
• Market
• Supplier
 ECONOMIC
ENVIRONMENT
• The current economic stage of the country
• Economic structure- capitalistic, socialistic or mixed
• Economic policies- industrial, monetary and fiscal
• Economic Planning- annual budgets, 5 year plans etc.
• General Economic Indices- like National Income, GDP & its
growth rate, per capita income etc.
• Infrastructural Factors like banks, transportation,
communication facilities
 SOME
FACTS/PROJECTIONS
• India now is the fourth largest economy in
purchasing power parity(PPP)
• By 2025 India will have an economy 60% of the
US Economy
• By 2035 US, China & India will be three poles of
the global economy in that order
• Japan & EU both will be surpassed in PPP
• But there will be bottlenecks
SOME FACTS/PROJECTIONS
(CONTD)
• Despite progress of the economy –
poverty rate according to one calculation
has fallen to 22% in 2004-5 from 50% in
1977-78-200 million have joined
middleclass yet 300 million live in
extreme poverty
• Economic slowdowns means lesser
spending but the reverse is not true in
India- Indian consumers are discerning
spenders and relatively less swayed by
brand images
 SOME FACTS/PROJECTIONS
(CONTD)
• Economic Growth in India has been propelled
by domestic savings rather hand by foreign
investment
• Families create support systems for education,
old age and health factors through savings in
fixed assets, gold etc.
• Till 1980s the mistrust of private investment led
to savings in banks, post offices- during that
decade there have been shifts to stock markets
and company deposits
 INTERNATIONAL
ENVIRONMENT
• Globalisation- is process, content and
direction
• Global economic forces, organisations,
blocks and forums
• Global trade, its process & trends
• Global financial system, sources of
financing and accounting standards
• Geopolitics
 INTERNATIONAL
ENVIRONMENT (CONTD)
• Global demographic patterns & shifts
• Global Human Resource: institutions,
availability, nature and quality of skills
and expertise, mobility of labour
• Global Information System,
communication networks and media
• Global technological and quality systems
and standards
• Global legal system, arbitration and
adjudication
 FOUR INTERNATIONAL
FACTORS
• China No 1 and India No 2- China’s GDP is
more than double that of India- China has
grown at 9-10% as compared to 7-8% for
India- yet India has pockets of excellence
where the Chinese cannot match-
Ranbaxy and Dr Reddy’s sell widely in
Europe, US, Africa, South America even
production facilities- Tatas acquisitions,
AV Birla Group
 FOUR INTERNATIONAL
FACTORS (CONTD)
• Increasing labor mobility despite better
technology needing less labour because of
falling population growth in EU, Japan &
Singapore require influx of skilled people
• Historically India has been a supplier of labour
previously unskilled and now educated- brain
drain- reverse brain drain
• Equity markets, banks & financial institutions
have fuelled Indian businesses – now ADRs,
GDRs, foreign currency convertible bonds,
cheap loans from foreign financial institutions
 FOUR INTERNATIONAL
FACTORS (CONTD)
• WTO successor to GATT
• Its functions are administering WTO trade
agreements, form for trade negotiations,
handling trade disputes, monitoring national
trade policies, technical assistance and training
to developing
• Allegations: failure to set labour standards, check
environmental impact of trade, being a tool of
multinationals in dictating to sovereign nations
• WTO has within its purview patenting,
outsourcing, food safety and processed food
exports dismantling quotas for garments and
textiles
 MARKET ENVIRONMENT
• Growing international trade, massive investment in
infrastructure, increasing levels of disposable
income, strong manufacturing and retail sectors
have made companies responsive to customers-
these have Indian market very dynamic- inviting
investments
• Automobile industry in India has become more
customer-focused because of competition
• Growing preference for natural, eco-friendly products
• Indians are showing attention to personal grooming
friendly products
• Indian market is enigmatic, heterogeneous
 POLITICAL
ENVIRONMENT
• Indian industrialists take keen and healthy
interest in politics- governments still wield
tremendous regulatory powers, political
funding of elections is widespread among
industrialists. Some openly back some parties
and some join them
• The complex mosaic of Indian politics, leftists,
rightists on both sides of parliament- weak and
hesitant decision making- Vote Bank driven
politics
• Violent politics on the fringe under the name
of Maoists, Naxalites, ultra-leftists
 REGULATORY
ENVIRONMENT
• India is an over-regulated and under-
governed country- there are 2500 central
laws and 30000 state laws- some of them
inconsistent with the demands of a modern
economy
• Judicial delays, judicial review and judicial
activism in the same breath- politicians
resent the judicial activism of the Supreme
Court
• The regulations regarding FDI have been
progressively liberalized
 SOCIO-CULTURAL
ENVIRONMENT
• India's population of 1.1 billion hides several trends-
growth rate has declined to 1.5%- illiteracy rates among
women are dropping- yet gender violence, gender and
reproductive rights, men’s les involvement in child care
are open issues in the society
• India with its young population can yield demographic
dividend r cause a demographic disaster- growth toward
superpower status and yet Naxalites in a chain from Nepal
borders to Chhatisgarh and Andhra Pradesh
• India has a vast & heterogeneous population with caste
playing a major political and economic role
SUPPLIER ENVIRONMENT
• Weak Infrastructure like water scarcity- Chennai the
automobile capital of India has acute water shortage
• Power shortage- it affects energy intensive industries
like Aluminium, cement, petrochemicals, fertilizers,
pulp & paper, steel etc.- 15% of costs on power
• Road Transport with bad roads remain a costly
infrastructure
 SUPPLIER ENVIRONMENT
(CONTD)
• There are an estimated 500 million workers in
India out of which only 7% are in the organised
sector, officially the unemployment rate is 10%
but unofficially 20%- the influx of engineers o IT
industries has led to a shortage of engineers in
the manufacturing and construction industries
• Paradox of Indian labour market- while many
young men are desperate bout jobs many
employers are equally desperate for the right
type skilled manpower
 TECHNOLOGICAL
ENVIRONMENT
• Knowledge-based industries with their need for
intellectual capital- more attention needs to be
paid to technologies which underlie the products
and markets
• Internet has led to CRM leading to greater
customisation
• Technology Transfer is now connected to FDI –
no longer India has to buy know-how for a price