BUSINESS ENVIRONMENT

As the new millennium unfolds itself, environment of

business is going to be much more turbulent. Borders
of countries are crumbling. The present decade has
ushered in several structural changes in our economy,
thus minimizing the impact of certain environmental
factors on business and bringing some, hitherto less
significant forces, to certain stage.
Business, it is said, is a product of environment. The
nature of business, location of a business enterprise,
the product to be manufactured or services to be
rendered, size and volume of operation, the price to be
fixed and other related factors relating to the business
unit are determined by the environment within which
the business operates. Business may be understood as
the organized efforts of enterprises to supply
consumers with goods and services for a profit.
Though business is a creation of its environment, the
influence of the former on its external forces is equally
significant. The purpose of business goes beyond
earning profit. It is an important institution in society.
Society cannot do without business. It needs no
emphasis that business needs society as much.
Business is the product of the technological, politicallegal, economic, socio cultural, global and natural
factors amidst which it functions. Three features are
common to this web of relationship between business
and its environment. First, there is symbiotic
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relationship between business and its environment

and among the environmental factors. Business is
influenced by its environment and in turn, to a certain
degree, it will influence the external forces.
The second feature is that these environmental
factors are dynamic. They keep on changing as years
roll by, so does business.
The third feature is that a particular business firm,
by itself, may not be in a position to change its
environment. But along with other firms, business will
be in a position to mould the environment in its favour,
to a large extent.
In simple terms environment means things
surrounding the living being. Everything on this earth,
whether living or non-living is surrounded by an
environment and so is business. The environment of
business is a sum total of natural, economic, social,
and political and other forces, which constitute the
surrounding of business.
A study of business environment is very useful to
anticipate opportunities and to plan resources to
exploit these opportunities successfully. It can also be
used as an early warning system to prevent threats or
to turn obstacles into opportunities
The total environment of business, for our
purposes, include six factors, viz., political legal,

economic, socio cultural, technological, global and

natural.

PROFILE
A long time ago, when the British ruled India, a small
factory was set up in the suburbs of Mumbai city, to
manufacture sweets and toffees. The year was 1929
and the market was dominated by famous
international brands that were imported freely. Despite
the odds and unequal competition, this company
called Parle Products, survived and succeeded, by

adhering to high quality and improvising from time to

time.
A decade later, in 1939, Parle Products began
manufacturing biscuits, in addition to sweets and
toffees. Having already established a reputation for
quality, the Parle brand name grew in strength with
this diversification. Parle Glucose and Parle Monaco
were the first brands of biscuits to be introduced,
which later went on to become leading names for great
taste and quality. It was called Parle Gluco Biscuits
mainly to cue that it was a glucose biscuit. It was
manufactured at the Mumbai factory, Vile Parle and
sold in units of half and quarter pound packs.

Parle-G has been a strong household name across

India. The great taste, high nutrition, and the
international quality, makes Parle-G a winner. No
wonder, it's the undisputed leader in the biscuit
category for decades. Parle-G is consumed by people of
all ages, from the rich to the poor, living in cities & in
villages. While some have it for breakfast, for others it
is a complete wholesome meal. For some it's the best
accompaniment for chai, while for some it's a way of
getting charged whenever they are low on energy.
Because of this, Parle-G is the world's largest selling
brand of biscuits.

HISTORY
Biscuits were very much a luxury food in India, when
Parle began production in 1939. Apart from Glucose
and Monaco biscuits, Parle did offer a wide variety of
brands.
However, during the Second World War, all domestic
biscuit production was diverted to assist the Indian
soldiers in India and the Far East. Apart from this, the
shortage of wheat in those days, made Parle decide to
concentrate on the more popular brands, so that
people
could
enjoy
the
price
benefits.
The incredible demand led Parle to introduce the
brand in special branded packs and in larger festive tin

packs. By the year 1949, Parle Gluco biscuits were

available not just in Mumbai but also across the state.
It was also sold in parts of North India. By the early
50s, over 150 tonnes of biscuits were produced in the
Mumbai factory. Looking at the success of Parle-G, a
lot of other me-too brands were introduced in the
market. And these brands had names that were
similar to Parle Gluco Biscuits so that if not by
anything else, the consumer would err in picking the
brand. This forced Parle to change the name from Parle
Gluco
Biscuits
to
Parle-G.
Parle-G was the only biscuit brand that was always in
short supply. It was heading towards becoming an alltime great brand of biscuit. Parle-G started being
advertised in the 80's. It was advertised mainly
through press ads. The communication spoke about
the basic benefits of energy and nutrition. In 1989,
Parle-G released its Dadaji commercial, which went on
to become one of the most popular commercials for
Parle-G. The commercial was run for a period of 6
years.
Parle-G grew bigger by the minute. Be it the packs
sold, the areas covered or the number of consumers. It
became a part of the daily lives of many Indians. It
wasn't a biscuit any more. It had become an icon. The
next level of communication associated the brand with
the positive values of life like honesty, sharing and
caring.
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Thankfully today, there's no dearth of ingredients and

the demand for more premium brands is on the rise.
That's why, we now have a wide range of biscuits and
mouthwatering confectionaries to offer.

GLOBAL ENVIRONMENT
Going international is yet another trend followed by
modern business houses. Internationalization and
globalization is fast becoming imperative for modern
business due to technological innovations, crumbling
trade barriers, global flow of capital and technology,
information explosion, intensity of market competition,
changing life styles and the demand for new products.
Production facilities are being set up in different
countries and products are being sold through a global
network. Gradually, business houses are exposed to
global competition which augurs well for consumers.
Internationalization of business is a means of
sustaining a strong domestic base in terms of
technology, product, market and the capital over a
longer period.
At the company level, globalization means two things:
(a) The company commits itself heavily with several
manufacturing locations around the world and
offers products in several diversified industries.

(b)

It also means the ability to complete in domestic

markets with foreign competitors. In the popular
sense, globalization refers mainly to multi-plant
operations.

According to Parle-G, the term GLOBALISATION does

not merely mean imports and exports, but letting your
presence felt all over the world. Expansion and
recognition are the main factors of going global. The
immense popularity of Parle products in India was
always a challenge to their production capacity. Now,
using more modern techniques for capacity expansion,
they have begun spreading their wings and are going
global.
Parle biscuits and confectionaries are fast gaining
acceptance in international markets, such as, Abu
Dhabi, Africa, Dubai, South America and Sri Lanka.
Even the more sophisticated markets like USA &
Australia,
now
relish
Parle
products.
Parle-G continues to climb the stairs of success. Take
a look at the global market where it is being exported.
First came the Middle East then USA followed by
Africa and then Australia. An Indian brand, that's
exported to almost all parts of the world. After all
that's what you would expect from the Parle-G World's
Largest Selling Biscuit.

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Other international companies choose India as a

global market because labour in other countries is
costly as compared to in India. In India things are
quite easier. Government has become more liberal for
MNCs to enter Indian market which results in high
competition with the in-house companies. For
example: China has a huge impact on the Indian
market. Cameras from Japan and China are of hi-tech
technologies which are available at the cheapest rates.
There is a huge gap between the prices of Indian
products and such other imported products. Another
example is of Intel-II. They have now started
manufacturing chips in India which further resulted
as a tough competition to other Indian companies.
Another international biscuit making company is ITC
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which winded up its business within a year due to

tough competition laid by Parle-G.
Parle-G has a strong base in India since 1939. it has
now become the largest biscuit selling company in
entire India and is also proved to be three times more
then the US based biscuit manufacturing companies.
Parle-G has 40 factories working all over the country
including 6 mother units. These mother units are
located at Mumbai, Rajasthan, Haryana, Bangladesh,
Bhuj and Uttaranchal.
Raymond Vernon had introduced a product-cycle
theory in late 1960s, but this theory is still relevant till
today. This theory explains that how companies go
global. Initially, small scale companies produce
attractive products and sell them in their home
markets. Sooner or later, foreigners come to know
about these products. As the popularity of these
products increases they start exporting them abroad.
As the foreign demand grows, the economies of foreign
production changes. Eventually, the company starts
setting up their own plants globally. In this manner
various companies go global.
But Parle-G doesnt agree with this theory laid by
Vernon. According to them there are four stages that
the company should follow for going global. They are:
infancy, growth, maturity and decline. Parle-G is yet at
the growth stage of the theory for going global.

12

Going global for any company involves risk. Hence,

Parle-G recruits a special team for market surveys
called a market research team. This team keenly
studies the culture, market situation, fashions,
preferences, habits and taste of the consumers of the
country they are going to enter. As Parle-G is meant for
poor class of population, other variety in biscuits made
by Parle-G are for middle and upper class people, they
need to study all levels of society to launch the product
similar to their conclusions. Supplying or launching a
new product requires sample testing before the same.
According to Parle-G, company should behave in the
same manner and culture as of its host country. They
need to follow their laid rules and regulations and
their local laws.
Parle-G will continue in its host countries the same
performance appraisal methods as in its home
country. Because they follow the norm which says that
the employees are of same capabilities and talents
everywhere even though the working conditions are
not the same. Hence, they would appraise the
performance of their employees based on caliber and
not based on the impression of the host countries.
Managerial practice adopted by Parle-G:
Japanese organization
1) Life time employment
2) Slow evaluation and promotion
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3) Non-specialized career paths

4) Collective decision making
5) Collective responsibility
The exports of Parle-G are hardly 3% of its total
production.But for boosting their exports their target
is to reach 5% of its total production. Their main
aim is to first fulfill the needs of domestic market
and then boosting their exports.

POLITICAL ENVIRONMENT
Two basic political philosophies are in existence all
over the world viz., democracy and totalitarianism.
Parle-G follows totalitarianism as its basic philosophy.
Totalitarianism is also called as authoritarianism,
individual freedom is completely subordinated to the
power of authority of the company and concentrated in
the hands of one person or in a small group which is
not constitutionally accountable to the employees. In
this method, final decision is taken by the head only
but after negotiating with everyone by conducting
several meetings.
Parle-G biscuit is basically aimed for poor category of
people as its price is only Rs.4 since last 10 years
which is affordable to any class of the population.

14

Therefore government should see that such companies

which provide economic help to the country should not
be disturbed in any sense. Infact government should
help in such a way that such companies grow even
more which can further improve the economic
conditions of their domestic countries. But in India the
situation is totally opposite. Parle-G pays excise duty
which if it doesnt pay can reduce its MRP even lesser
while other products such as cheese, jam, butter
which are consumed by middle or upper class people
are exempted from paying excise duty. In this way
government in spite of many requests is not giving its
helping hand to Parle-G.
Constitution has put several road blocks which have
checked the pace of the companys economic
development.
Parle-G is totally in favour of the above statement as
they say new rules and policies depend on government
to government. They adopt various laws for their own
mutual benefits.

ECONOMIC ENVIRONMENT
Economic environment refers to all those economic
factors which have a bearing on the functioning of a
business unit. Any business firm depends on the
economic environment for all the inputs needed and
also to sell their finished goods. Thus, it can be said
15

that business depends on economy and economy does

not depend on the business.
As part of the efforts towards a larger share of the
global market, Parle has initiated the process of getting
ISO 9000 certification. Parle-G had laid down its first
factory in late 1929. This factory used to manufacture
only sweets and candies. But later by 1989 they also
started producing biscuits.

Producers exploit consumers by various tactics.

Therefore, Parle-G had started conducting consumer
awareness so as to protect their consumers from
getting fooled. In these awareness campaigns they
suggested various means for identification of original
Parle products. Following are some indications that
will differentiate original from the duplicate ones.
There are errors in the spelling which can
exploit people. GLUCO biscuits are the original
name but the duplicate name is GLUCOSE
biscuit.
On all the Parle-G products we find a Parle logo
but in duplicates there is no such logo found.

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The total work strength of Parle-G in its Mumbai

factory is 730 blue color workers out of which 70
are female workers. Other than its labour staff
there are 200 more administrative staff.
For maintaining cordial relationships between
management staff and labour staff there is one
labour union at present. Earlier there were two
labour unions which divided the labourers into
two sections. This increased competition which
gave good productivity initially but later proved to
be the cause of industrial dispute in Parle-G. The
two unions started internal disputes which forced
the company to reunite both the unions into one
union. This was the last case of industrial
dispute occurred in Parle-G. Since then there is
no5 such case of industrial dispute.

SWOT ANALYSIS

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What is a SWOT Analysis?

A SWOT (Strengths, Weaknesses, Opportunities, and
Threats) is a tool used to provide a general or detailed
snapshot of a company's health.
Why use a SWOT Analysis?
In any business, it is imperative that the business be
its own worst critic. A SWOT analysis forces an
objective analysis of a company's position vis a vis its
competitors and the marketplace. Simultaneously, an
effective SWOT analysis will help determine in which
areas a company is succeeding, allowing it to allocate
resources in such a way as to maintain any dominant
positions it may have.

Positive points of Parle-G:

Over the years, Parle has grown to become a multimillion US Dollar company. Many of the Parle products
- biscuits or confectionaries, are market leaders in
their category and have won acclaim at the Monde
Selection, since 1971.
Today, Parle enjoys a 40% share of the total biscuit
market and a 15% share of the total confectionary
market, in India. The Parle Biscuit brands, such as,
Parle-G, Monaco and Krackjack and confectionery
brands, such as, Melody, Poppins, Mangobite and
Kismi, enjoy a strong imagery and appeal amongst
18

consumers.
Be it a big city or a remote village of India, the Parle
name symbolizes quality, health and great taste! And
yet, we know that this reputation has been built, by
constantly innovating and catering to new tastes. This
can be seen by the success of new brands, such as,
Hide & Seek, or the single twist wrapping of Mango
bite.
In this way, by concentrating on consumer tastes and
preferences and emphasizing Research & Development,
the Parle brand grows from strength to strength.

Negative points of Parle-G:

HLL and ITCs entry into biscuits will affect Parle
After testing the waters with niche offerings
in untapped segments of the biscuit market,
heavyweights Hindustan Lever and ITC have now
forayed into the mass biscuit market. While ITC
has launched its glucose brand, Sunfeast, HLL
has decided to differentiate its product, Modern
Energy Biscuits, by using wheat and soya as
ingredients. Importantly, both ITCs and HLLs
new offerings are priced at Rs 4 for a 100 gram
pack, the same level as Parle G and Britannias
Tiger glucose biscuits.
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Given HLLs and ITCs massive distribution

reach, this new development would clearly have a
significant impact on the market shares of both
Parle and Britannia. In case the taste of the new
products do not go down very well with
consumers, the already established players may
get some breathing space, but it will be only a
matter of time before that gets corrected and the
pressure will soon be back on. Structurally, the
entry of players such as HLL and ITC in the mass
biscuit market is bound to affect the dominance of
Britannia in the biscuits market. Whats more,
competition from regional players such as Surya
Foods, known for its Priya Gold range of biscuits,
has also increased. It certainly doesnt help that
the company has just had a change in leadership.
Further, since the company has hived-off its
dairy division, overall growth rates would clearly
be lower than what investors have been used to for
a while. As far as profitability goes, much depends
on the companys ability to further reduce costs,
unless there is a further reduction in excise rates.
Given the increase in competition, taking price
hikes may still be some time away. In such a
scenario, Britannias long-term growth rate would
turn out to be much lower than earlier estimates.
Its no wonder then that the stock has
underperformed the market and peers in the
FMCG sector by a huge margin during the current
20

rally. The stock still gets a discounting of around

14 times FY04 earnings, which, considering that
growth rates will drop, gives the feeling that the
stocks underperformance will continue.
ITC Ltd has posted a 21.8% rise in net profits
to Rs 323.51 crore for the October-December 2002
quarter (Q3) compared to the corresponding
period of the previous fiscal. Net sales during the
quarter was reported at Rs 1,647.60 crore, up
12.2% over the corresponding of the previous
period.
In the nine months ended December 2002,
ITCs net profits were up 16% to Rs 1,047.93
crore.
ITC said: "The companys corporate strategy
aims at creating multiple drivers of growth
anchored on its core competencies."
Its current focus is nearly exclusively on four
business groups: FMCG, hotels, paperboards,
paper & packaging and agri-business. ITC

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BIBLIOGRAPHY
www.parleproducts.com

22

INDEX
SR.NO

TOPICS

PAGE NOS.

01

Business
environment

2-4

02

Profile

5-6

03

History

7-8

04

Global
environment

9-13

23

05

Political
environment

14-15

06

Economic
environment

16-18

07

Swot analysis

19-22

08

Bibliography

23

24