Business and Its

Environment: An
Introduction
Dhaarna Rathore

Learning Objectives
The nature and scope of business
Shortlist characteristics of contemporary business
Define vision, mission and goals of business
Describe criticisms of business
Understand the nature of environment
Understand the process of environmental analysis
Suggest a suitable organisational arrangement for scanning the
environment.

Nature and Scope of Business

-

Business may be understood as the organized efforts of enterprise to earn profit. Business
may be small of big but all of them aim at making profit.
The scope of business is vast. The various activities that bring raw material to the factory
and the end product from the end product from there to the market constitute business.

Characteristics of Indian Business

Competetion
Competetion:
- Defines new ways of doing business
- Help build new capabilities
- Build new customer satisfaction standard, and
- Makes business leaders become positive.

Commodity Czars
Company Product Annual Capacity Rank
Mittal Steel Steel
70 million tonnes 1
Birla Viscose Viscose fibre 251,850 tonnes 1
Basell (Chatterjee/Access)*
Polypropylene
8 million tonnes
Reliance Industries
Polyester
1.8 million tonnes 1
Hero Cycles Cycles 5.2 million units 1
Essel Propack
Laminated Packaging 4 billion units 1
Bharat Forge Forgings 102,900 tonnes 2
Moser Baer Optical media storage 2.5 billion units 3
Hero Honda Two-wheelers
2.6 million units 1
Jubilant Organosys Pyridine 22,500 tonnes
2
Orchid Chemicals Cephalosporin
1,100 tonnes 5
*Deal yet to be concluded

Business Objectives

Business Critics

Environment
Environment refers to all external forces which have a bearing on the functioning of business.
Such forces include political, legal, technological, cultural, economical and physical.

Environment of Business

Linkages among the Stages for

environmental analysis

Limitation of Environmental Analysis

Environmental Analysis does not foretell the future, nor does it eliminates uncertainty for
any organization.
Environmental analysis on and off itself, is not a sufficient guarantor of organizational
effectiveness. It is only one of the inputs in strategy development and testing.
The potential of environmental analysis is often not realized because of how it is a
practiced. It is sometimes used as a crutch for post-hoc reflections. At times, managers
place uncritical faith in the data without thinking about the datas verifiability or
occurrences.
Too much reliance is often placed on the information collected through environmental
scanning.

Globalisation Strategies

International Attacks by Region (1995-2000)

Africa 10 11
Asia16 11 21
Eurasia 5 24
Latin America
Middle East 45
N.America
0
Western Europe

1995
11 21
49 72
42 14
92 84
45 37
0 13
272

1996
1997
1998
53 55
98
35 31
128
111
121
31 25 16
0 2 0
121 52 48 85 30

1999

193

2000

International Terrorist Attacks (1981-2000)

1981
1985
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000

489
635
437
565
363
435
322
440
226
303
274
392
423

Political Risk-Scores
2006
Hungery
S.Korea
Poland
Bulgaria
Mexico
China
Brazil64
Turkey
Argentina
S.Africa
Russia
India 62
Thailand
Egypt58
Algeria
S.Arabia
Indonesia
Colombia
Ukraine
Philippines
Iran 49
Venezuela
Nigeria
Pakistan

77
75
72
69
67
61
66
64
66
65
61
62
60
60
59
57
55
55
57
56
51
52
47
50

78
76
74
70
67
66
65
65
64
63
61
59
57
57
56
56
55
50
48
45

2007

Ways of Managing
Political Risk

Entry Strategies

Types of Environment

Strategic Management Process

Thank You

Seminar Question for Group Discussion

1. Do you think Tata Steelss acquisition of

Corus and Tata Motors take over of Jaguar
and Land Rover are right decisions?
2. Why has Strategic Alliance between Bharti
and Wal- Mart failed?

Tata to Corus
1.
.
.
.
.
.
2.
.
.
.
.
.

Reasons;
To tap European mature market.
Cost of acquisition is lower than setting up of green field plant and marketing and distribution channel.
TATA manufactures low value, long and flat steel products while Corus produced high value stripped
products.
Helped to feature in top 10 players in the world.
Technology benefit. CORUS holds number of patents and R&D facilities.
Reason for corus to be sold
A chance to bail out of debt and financial crisis. Total debt of CORUS was 1.6bn GBP.
Access to cheap high quality iron ore from India.
Corus facilities were relatively old with high cost of production.
Corus needed supply of raw material at lower cost.
Though Corus has revenues of $18.06bn, its profit was just $626mn (Tatas revenue was $4.84 bn &
profit $ 824mn).

TATA steel acquisition of CORUS was a bold and smart move.

Complementarities in scale, market geography, financials, technology and
raw materials offered a strong rationale for the deal.
The acquisition of CORUS has been timely done. Given the rising
momentum of consolidation in the industry and rising valuations of steel
companies, had TATA steel not acted when it did, the opportunity could
have been lost forever.

TATAS IMPLEMENTATION OF THE DEAL

Big boost to the Indian economy, as TATA was acquiring a
company 3 times its size
The R&D Unit of Corus complements that of TATAs
Links low cost Indian production and raw materials and
growth markets to high margin markets and high technology in
the West
Help from financing institutions as $8 billion was raised
through debt

Tata and Jaguar

Why was Ford selling?
The US auto major put the two marquees on the market in 2007 after
posting losses of $12.6billion in 2006 - the heaviest in its 103-year
history
Jaguar was not able to provide any profit for ford because of the high
manufacturing costs provided in the United Kingdom.
The strong boy Land Rover's profit, on the other hand, was driven by
the record sale of 2.26 lakh vehicles, an 18% YoY growth in 2007.
Ford was combining both the brands since the products and
manufacturing of vehicles for Land Rover and Jaguar was so
intertwined.

Benefits
Tata wanted to make a global impact and it thinks that buying these
brands at a lower rate now, will give better value later on.
This acquisition also eases the entry of Tata in European market which
it has been eyeing for long. A previous JV with FIAT took place, this
will further help them penetrate EU market.
Reduce the company dependence on the Indian market which accounted
for 90% of its sales
Increase sales in emerging markets

Bharti vs Walmart
The partnership between Bharti Enterprises and Walmart has been dissolved. Formed in 2007,
the joint ventures purpose was to build and operate cash and carry superstores in India under
the name Best Price Modern Wholesale