More often than not, these forces are beyond the control of an organization and its managers. Accordingly, the factors of the environment will need to be considered as inputs in the planning and forecasting models developed by an organization.
It is quite possible that some large organizations themselves constitute a greater part of the business environment – e.g. Public Sector Oil Companies in India.
An organization operates within the larger framework of the external environment that shapes opportunities and poses threats to the organization. The external environment is a set of complex, rapidly changing and significant interacting institutions and forces that affect the organization's ability to serve its customers. External forces are not controlled by an organization, but they may be influenced or affected by that organization. It is necessary for organizations to understand the environmental conditions because they interact with strategy decisions. The external environment has a major impact on the determination of marketing decisions. Successful organizations scan their external environment so that they can respond profitably to unmet needs and trends in the targeted markets.
The Organization as a System
Internally, an organization can be viewed as a resource conversion machine that takes inputs (labor, money, materials and equipment) from the external environment (i.e., the world outside the boundaries of the organization), converts them into useful products, goods, and services, and makes them available to customers as outputs. The organization must continuously monitor and adapt to the environment if it is to survive and prosper. Disturbances in the environment may spell profound threats or new opportunities. The successful organization will identify, appraise, and respond to the various opportunities and threats in its environment.
External Macro environment
The external macro environment consists of all the outside institutions and forces that have an actual or potential interest or impact on the organization's ability to achieve its objectives: competitive, economic, technological, political, legal, demographic, cultural, and ecosystem. Though noncontrollable, these forces require a response in order to keep positive actions with the targeted markets. An organization with an environmental management perspective takes aggressive actions to affect the forces in its marketing environment rather than simply watching and reacting to it.
1. Economic Environment
The economic environment consists of factors that affect consumer purchasing power and spending patterns. Economic factors include business cycles, inflation, unemployment, interest rates, and income. Changes in major economic variables have a significant impact on the marketplace. For example, income affects consumer spending which affects sales for organizations. According to Engel's Laws, as income rises, the percentage of income spent on food decreases, while the percentage spent on housing remains constant.
2. Technological Environment
The technological environment refers to new technologies, which create new product and market opportunities. Technological developments are the most manageable uncontrollable force faced by marketers. Organizations need to be aware of new technologies in order to turn these advances into opportunities and a competitive edge. Technology has a tremendous effect on life-styles, consumption patterns, and the economy. Advances in technology can start new industries, radically alter or destroy existing industries, and stimulate entirely separate markets. The rapid rate at which technology changes has forced organizations to quickly adapt in terms of how they develop, price, distribute, and promote their products.
3. Political and Legal Environment
Organizations must operate within a framework of governmental regulation and legislation. Government relationships with organizations encompass subsidies, tariffs, import quotas, and deregulation of industries.
The political environment includes governmental and special interest groups that influence and limit various organizations and individuals in a given society. Organizations hire lobbyists to influence legislation and run advocacy ads that state their point of view on public issues. Special interest groups have grown in number and power over the last three decades, putting more constraints on marketers. The public expects organizations to be ethical and responsible. An example of response by marketers to special interests is green marketing, the use of recyclable or biodegradable packing materials as part of marketing strategy.
The major purposes of business legislation include protection of companies from unfair competition, protection of consumers from unfair business practices and protection of the interests of society from unbridled business behavior. The legal environment becomes more complicated as organizations expand globally and face governmental structures quite different from those within the United States.
4. Demographic Environment
Demographics tell marketers who current and potential customers are; where they are; and how many are likely to buy what the marketer is selling. Demography is the study of human populations in terms of size, density, location, age, sex, race, occupation, and other statistics. Changes in the demographic environment can result in significant opportunities and threats presenting themselves to the organization. Major trends for marketers in the demographic environment include worldwide explosive population growth; a changing age, ethnic and educational mix; new types of households; and geographical shifts in population.
5. Social / Cultural Environment
Social/cultural forces are the most difficult uncontrollable variables to predict. It is important for marketers to understand and appreciate the cultural values of the environment in which they operate. The cultural environment is made up of forces that affect society's basic values, perceptions, preferences, and behaviors. U.S. values and beliefs include equality, achievement, youthfulness, efficiency, practicality, self-actualization, freedom, humanitarianism, mastery over the environment, patriotism, individualism, religious and moral orientation, progress, materialism, social interaction, conformity, courage, and acceptance of responsibility. Changes in social/cultural environment affect customer behavior, which affects sales of products. Trends in the cultural environment include individuals changing their views of themselves, others, and the world around them and movement toward self-fulfillment, immediate gratification, and secularism.
6. Ecosystem Environment
The ecosystem refers to natural systems and its resources that are needed as inputs by marketers or that are affected by marketing activities. Green marketing or environmental concern about the physical environment has intensified in recent years. To avoid shortages in raw materials, organizations can use renewable resources (such as forests) and alternatives (such as solar and wind energy) for nonrenewable resources (such as oil and coal). Organizations can limit their energy usage by increasing efficiency. Goodwill can be built by voluntarily engaging in pollution prevention activities and natural resource.
External Microenvironment
The external microenvironment consists of forces that are part of an organization's marketing process but are external to the organization. These micro environmental forces include the organization's market, its producer-suppliers, and its marketing intermediaries. While these are external, the organization is capable of exerting more influence over these than forces in the macro environment.
1. The Market
Organizations closely monitor their customer markets in order to adjust to changing tastes and preferences. A market is people or organizations with wants to satisfy, money to spend, and the willingness to spend it. Each target market has distinct needs, which need to be monitored. It is imperative for an organization to know their customers, how to reach them and when customers' needs change in order to adjust its marketing efforts accordingly. The market is the focal point for all marketing decisions in an organization.
2. Suppliers
Suppliers are organizations and individuals that provide the resources needed to produce goods and services. They are critical to an organization's marketing success and an important link in its value delivery system.
3. Marketing Intermediaries
Like suppliers, marketing intermediaries are an important part of the system used to deliver value to customers. Marketing intermediaries are independent organizations that aid in the flow of products from the marketing organization to its markets. The intermediaries between an organization and its markets constitute a channel of distribution. These include middlemen (wholesalers and retailers who buy and resell merchandise). Physical distribution firms help the organization to stock and move products from their points of origin to their destinations. Warehouses store and protect the goods before they move to the next destination. Marketing service agencies help the organization target and promote its products and include marketing research firms, advertising agencies, and media firms. Financial intermediaries help finance transactions and insure against risks and include banks, credit unions, and insurance companies.
Importance of understanding the environment
The manager’s job cannot be accomplished in a vacuum within the organization. There are a number of factors both internal as well as external which jointly affect managerial decision-making. It is therefore very important for the manager to understand and evaluate the impact of the business environment due to the following reasons :
a) Businesses may be doomed to be non starters due to restrictive business environment which may take the form of rigid government laws ( no polluting industry can ever be located in around 50 Km radius of the Taj) , state of competition ( Car manufacturing capacity presently in the country is far in excess of demand) etc.
b) The present and future viability of an enterprise is impacted by the environment – For eg no TV manufacturer can be expected to survive by making only B&W television sets when consumer preference has clearly shifted to colour television sets.
c) The cost of capital and the cost of borrowing - two key financial drivers of any enterprise are impacted by the external environment . For eg the ability of a business to fund its expansion plan by raising money from the stock markets depends on the prevalent public mood towards investment in stock markets.
d) The availability of all key inputs like skilled labour , trained managers , raw materials , electricity , transportation , fuel etc are a factor of the business environment.
e) Increasing public awareness of the negative aspects of certain industries like hand woven carpets ( use of child labour ) , pesticides (damage to environment in the form of chemical residues in groundwater), plastic bags (choking of sewer lines) have resulted in the slow decline of some industries.
f) Finally , the environment offers the opportunities for growth and profits . For eg when the insurance and aviation industry was thrown open to the private sector , the new entrant could easily build on the expectations of the public.
Changing profile of Indian economic environment
India gained independence in 1947 paving the way for national leaders of the Indian Government to build an economically independent new India. Policies between 1950-70 were implemented with a sincere belief in the efficacy of the socialist philosophy and political democracy. Heavy investment by government in Steel plants, atomic energy, hydroelectric power and irrigation projects laid the foundation of a strong industrial edifice. The non-aligned movement at a time when the world was divided into two power blocks with cold war between the Super-powers, prevented India from becoming a satellite of any other nation and enabled it to protect Its economy and the Indian Population.
Indian economy has made great strides in the years since independence. In 1947 the country was poor and shattered by the violence and economic and physical disruption involved in the partition from Pakistan. The economy had stagnated since the late nineteenth century, and industrial development had been restrained to preserve the area as a market for British manufacturers. In fiscal year (FY) 1950, agriculture, forestry, and fishing accounted for 58.9 percent of the gross domestic product (GDP) and for a much larger proportion of employment. Manufacturing, which was dominated by the jute and cotton textile industries, accounted for only 10.3 percent of GDP at that time.
India's new leaders sought to use the power of the state to direct economic growth and reduce widespread poverty. The public sector came to dominate heavy industry, transportation, and telecommunications. The private sector produced most consumer goods but was controlled directly by a variety of government regulations and financial institutions that provided major financing for large private-sector projects. Government emphasized self-sufficiency rather than foreign trade and imposed strict controls on imports and exports. In the 1950s, there was steady economic growth, but results in the 1960s and 1970s were less encouraging.
Beginning in the late 1970s, successive Indian governments sought to reduce state control of the economy. Progress toward that goal was slow but steady, and many analysts attributed the stronger growth of the 1980s to those efforts. In the late 1980s, however, India relied on foreign borrowing to finance development plans to a greater extent than before. As a result, when the price of oil rose sharply in August 1990, the nation faced a balance of payments crisis. The need for emergency loans led the government to make a greater commitment to economic liberalization than it had up to this time. In the early 1990s, India's post-independence development pattern of strong centralized planning, regulation and control of private enterprise, state ownership of many large units of production, trade protectionism, and strict limits on foreign capital was increasingly questioned not only by policy makers but also by most of the intelligentsia.
But too much of protection from the Government had its own disadvantages. Our quality standards were not in tune with international competition. It had produced more traders than industrialists. It was high time that Indian economy became more open and entered the international market.
India embarked on a series of economic reforms in 1991 in reaction to a severe foreign exchange crisis. Those reforms have included liberalized foreign investment and exchange regimes, significant reductions in tariffs and other trade barriers, reform and modernization of the financial sector, and significant adjustments in government monetary and fiscal policies.
The reform process has had some very beneficial effects on the Indian economy, including higher growth rates, lower inflation, and significant increases in foreign investment. Foreign portfolio and direct investment flows have risen significantly since reforms began in 1991 and have contributed to healthy foreign currency reserves ($32 billion in February 2000) and a moderate current account deficit of about 1% (1998-99). India's economic growth is constrained, however, by inadequate infrastructure, cumbersome bureaucratic procedures, and high real interest rates. India will have to address these constraints in formulating its economic policies and by pursuing the second generation reforms to maintain recent trends in economic growth.
India's trade has increased significantly since reforms began in 1991, largely as a result of staged tariff reductions and elimination of non-tariff barriers. The outlook for further trade liberalization is mixed. India has agreed to eliminate quantitative restrictions on imports of about 1,420 consumer goods by April 2001 to meet its WTO commitments. On the other hand, the government has imposed "additional" import duties of 5% on most products plus a surcharge of 10% over the past 2 years. The U.S. is India's largest trading partner; bilateral trade in 1998-99 was about $10.9 billion. Principal U.S. exports to India are aircraft and parts, advanced machinery, fertilizers, ferrous waste and scrap metal, and computer hardware. Major U.S. imports from India include textiles and ready-made garments, agricultural and related products, gems and jewelry, leather products, and chemicals.
Significant liberalization of its investment regime since 1991 has made India an attractive place for foreign direct and portfolio investment. The U.S. is India's largest investment partner, with total inflow of U.S. direct investment estimated at $2 billion (market value) in 1999. U.S. investors also have provided an estimated 11% of the $18 billion of foreign portfolio investment that has entered India since 1992. Proposals for direct foreign investment are considered by the Foreign Investment Promotion Board and generally receive government approval. Automatic approvals are available for investments involving up to 100% foreign equity, depending on the kind of industry. Foreign investment is particularly sought after in power generation, telecommunications, ports, roads, petroleum exploration and processing, and mining.
As India moved into the mid-1990s, the economic outlook was mixed. Most analysts believed that economic liberalization would continue, although there was disagreement about the speed and scale of the measures that would be implemented. It seemed likely that India would come close to or equal the relatively impressive rate of economic growth attained in the 1980s, but that the poorest sections of the population might not benefit.
In the recent past, India has witnessed changes in several critical factors strengthening its economy. With globalisation becoming the key word of the 90's, it seems to have paved the way for India's entry in world markets. Economic reforms have been initiated to facilitate stabilisation and structural -adjustments essential for the growth of the economy. The more significant reforms are reflected in the following economic policies-
(i) Fiscal policy
(ii) Monetary Policy
(iii) Trade and Exchange rate Policy.
(iv) Industrial Policy.
(v) International trade and related issues.
Fiscal Policy
The major sources of revenue for the Central and State governments have been Income Tax, Excise duty and Customs duty. in order to keep fiscal deficits under control, direct tax rates have been moderated, indirect tax base has been widened to permit easy flow of goods & services across the country, and tax administration has been geared up for greater effectiveness in tax collection.
Monetary Policy
The monetary policy during the eighties was mainly confined to the financing, of fiscal deficit of the Government at controlled interest rates. This led to mounting fiscal deficits leading to inflationary pressures. Moreover, with increasing government borrowings at, low interest rates, banks charged high rates for advances made to the commercial sectors. Even then the banks suffered from low profitability while trade and industry were subjected to increasing financial costs. As a result, much of the household savings flowed into the corporate sector which offered better returns than the public sector banks and public financial institutions.
Liberalisation of operations in the financial sector has now made government securities competitive form of investment in the capital market subject to same market discipline as other users of funds. Thus financial institutions including banks are no longer required to invest heavily in government borrowings. With increased availability of funds, they are in a better position to invest in the Commercial sector and other priority sector's of the economy.
The banking system has also been made more competitive with fresh guidelines regarding entry of private sector banks in the system.
For a healthy growth of the capital market and investor protection the Securities Exchange Board of India (SEBI) has been reconstituted as a corporate body.
On April 29, Dr. Bimal Jalan, Governor of the Reserve Bank of India, announced India's Monetary & Credit Policy for the fiscal year 2003-04. In the past year, reserves were built at a low effective cost without adding to external debt. Low interest rates and strong forex position prompted prepayment of external debt. RBI projected the annual growth rate for 2003-04 at 6.0% (During the mid-term review in November, 2003 it was revised to 6.5 - 7.0%.)
Salient measures relevant to international business are as follows:
1. Cash Reserve Ratio (CRR) cut by 0.25%.
2. Transparent system to determine prime lending rate (PLR) of banks.
3. Flexibility allowed to overseas investors for flow of FDI (Foreign Direct Investment). Those making long term investments permitted to hedge forex exposures in India by entering into forward sale contracts with banks in India.
4. Indian corporates and resident individuals permitted to invest in rated bonds/fixed income securities of listed eligible companies abroad.
Trade and Exchange Rate Policy
The thrust of the new economic policy is directed towards creating a more competitive environment in the economy as a means of improving the productivity and efficiency of the system and Liberalised Exchange Rate Management System (LERMS) has been introduced for the purpose. LERMS has been responsible for revising the licensing system of import control and creating more favourable exchange rates for exports. With the delicensing of many import items, smuggling has reduced thereby moderating diversion of foreign exchange into illegal channel. This has led to greater competition in the domestic market and improved competitiveness of Indian producers in the international market.
Besides, the definition of trade has been widened to include exchange of services, intellectual property rights, and investment. The underlying concept implies dismantling of all barriers to assist free flow of goods, services and money.
Another major policy decision is the move towards full convertibility of the rupee in the international market.
Industrial Policy
A number of structural reforms have been introduced in the industrial sector, such as
(i) Abolition of industrial licensing except for a short list;
(ii) promotion of foreign investment by granting permission to reputed Indian companies to float equity, abroad.
(iii) Inviting foreign investment in high priority industries.
With a view to creating a competitive environment in the economy to improve the productive efficiency of Industries, the roles of the public and private sectors have been redefined. Public enterprises will be mainly responsible for development of physical and social infrastructure, to initiate and administer programmes for the poor and disadvantaged.
Manufacture of telecommunication equipments, mining and quarrying of minerals, oil and coal has been opened up to the private sector. Power generation is another sphere in which private sector investment is now permitted so as to supplement public sector efforts. As there is a move to foster greater competitiveness in the economy, steps are being taken to develop social safety nets so that workers do not suffer on account of the sickness of enterprises or their closing down. A National Renewal Fund has been operationalised in 1992-93 for compensating workers of public sector enterprises and providing technical and financial assistance for restructuring or modernising them.
India has had robust economic growth since 1991 when the government reversed its socialist-inspired policy of a large public sector with extensive controls on the private sector and began to liberalize the economy. Liberalization has proceeded in fits and starts since then, mainly due to political pressures, but the economy has responded well by posting strong growth in many sectors. A 2003 report by Goldman Sachs predicts that India's economy would be the third largest by 2050.
With a GDP of $515 billion ($2.695 trillion at PPP) India has the world's 11th largest economy (and the 4th largest when adjusted for PPP). However, the large population means that per capita income is quite low. In 2002 the World Bank ranked India 145th in PPP per capita income and 159th in real terms, among 208 countries.
About 60% of the population depends directly on agriculture. Industry and services sectors are growing in importance and account for 25% and 50% of GDP, respectively, while agriculture contributes about 25.6% of GDP. More than 25% of the population live below the poverty line, but a large and growing middle class of 300 million has disposable income for consumer goods.
India embarked on a series of economic reforms in 1991 in reaction to a severe foreign exchange crisis. Those reforms have included liberalized foreign investment and exchange regimes, significant reductions in tariffs and other trade barriers, reform and modernization of the financial sector, and significant adjustments in government monetary and fiscal policies.
The reform process has had some very beneficial effects on the Indian economy, including higher growth rates, lower inflation, and significant increases in foreign investment. Real GDP growth was 4.3% in 2002-03, mainly due to a severe drought. Growth in 2003-2004 is expected to be above 6%. Foreign portfolio and direct investment flows have risen significantly since reforms began in 1991 and have contributed to healthy foreign currency reserves ($85 billion in August 2003) and a moderate current account deficit of about 1% (2002-03). India's economic growth is constrained, however, by inadequate infrastructure, cumbersome bureaucratic procedures, and high real interest rates. India will have to address these constraints in formulating its economic policies and by pursuing the second generation reforms to maintain recent trends in economic growth.
Liberalization
India's trade has increased significantly since economic liberalization began in 1991, largely as a result of staged tariff reductions and elimination of nontariff barriers. The outlook for further trade liberalization is mixed. India has agreed to eliminate quantitative restrictions on imports of about 1,420 consumer goods by April 2001 to meet its WTO commitments. On the other hand, the government has imposed "additional" import duties of 5% on most products plus a surcharge of 10% over the past 2 years. The U.S. is India's largest trading partner; bilateral trade in 1998-99 was about $10.9 billion. Principal U.S. exports to India are aircraft and parts, advanced machinery, fertilizers, ferrous waste and scrap metal, and computer hardware. Major U.S. imports from India include textiles and ready-made garments, agricultural and related products, gems and jewelry, leather products, and chemicals.
Significant liberalization of its investment regime since 1991 has made India an attractive place for foreign direct and portfolio investment. The U.S. is India's largest investment partner, with total inflow of U.S. direct investment estimated at $2 billion (market value) in 1999. U.S. investors also have provided an estimated 11% of the $18 billion of foreign portfolio investment that has entered India since 1992. Proposals for direct foreign investment are considered by the Foreign Investment Promotion Board and generally receive government approval. Automatic approvals are available for investments involving up to 100% foreign equity, depending on the kind of industry. Foreign investment is particularly sought after in power generation, telecommunications, ports, roads, petroleum exploration and processing, and mining.
India's external debt was up to $98 billion in March 1999, compared to $94 billion in March 1998. The country's debt service ratio has fallen to about 20%. Bilateral assistance has been about $1 billion annually in recent years, with the U.S. providing about $150 million in development assistance in Fiscal Year 1999. The World Bank had approved loans worth about $1.05 billion for India in 1999.
But in recent years India has gone from strength to strength. It has recorded a growth rate of above 5% even during the global recession. India has gradually developed a software sector that is leading the economy in growth. Indian firms handle outsourced work from US and Europe and provide high quality service at low costs thus keeping company expenditure low for organisations like GE, BA, etc. Indian firms like Infosys and Wipro implement products and give services comparable to the best in the world. This is why India has become an IT hotspot. Its foreign reserves are up to a record high and India has started repaying its loans at a higher pace as compared to earlier predictions. Indian GDP is 4th in terms of ppp and India is steadfast on the road to development.
India's economy grew at an unexpectedly robust 8.4 percent in the year through the third quarter, making it one of the fastest growing in the world, with analysts seeing stronger expansion in the coming quarters. Aided by the best monsoon in a decade, the farm sector emerged as the main growth engine for Asia's third-largest economy, rising 7.4 percent between the July-September quarters of 2002 and 2003.
India's Export-Import Policy for the period 2002-2007:
On March 31, 2002, India's Minister of Commerce & Industry Mr. Murasoli Maran presented India's Export-Import Policy for the next 5-years. The preceding two 5-year ExIm Policies that directed most of India’s economic reforms resulted into a compounded annual growth rate of 11% in exports. The government has now offered tax concessions and export incentives at the cost of annual revenue of US$ 200 mn. Salient points that might be of interest to the international business community are as follows:
- Quantitative Restrictions on imports are removed from all but those items that are not permitted by international conventions. Unrestricted imports are now allowed for gold and silver jewellery, medical bandages, postage stamps, poppy seeds, nutmeg, maize and drugs for homeopathic treatment.
- The developers of Special Economic Zones (SEZ) and the units located therein are provided income tax concessions.
- Banks located in SEZs would now get all the benefits of Offshore/Overseas Banking Units (OBUs) and exempted from 5.5% Cash Reserve Ratio (CRR) and 25% Statutory Liquidity Ratio (SLR). Besides making low interest finance available to exporting units, it is expected to prompt international banks to open new trading bases in India.
- Exporters can now retain their earnings in foreign currency for 360 days instead of 180 days, providing them greater flexibility against exchange rate fluctuation. Maximum benefits are likely to be reaped by garment and textile exporters.
- Export restrictions are lifted from all agriculture produce except onion, jute and niger seed.
- Small producers and craftsmen contribute more than half of India’s total exports of manufactured goods. According to a UNIDO study, they are concentrated in 354 industrial clusters. 34 of such clusters each having an annual turnover of about US$ 200 mn. Benefits are extended to common service providers of 3 such clusters, viz., Ludhiana that exports 95% of its woollen knit-ware production, Tirupur that exports 80% of its knitted hosiery production, and Panipat that exports 75% of its woollen blanket production.
- Rebate would be given on fuel costs as per Standard Input Output Norms. Maximum benefits are likely to be reaped by manufacturer-exporters of forged automobile components.
Directorate General of Foreign Trade (DGFT) in India has further simplified Import and Export procedures, e.g. the physical examination of export consignments are reduced to a random sample of 10%. In fact it has applied for ISO: 9000 certification, which is rare to do for a government department in India
Privatisation
Politics is also dictating the fate of privatization. Prior to 1991, socialist-inspired economic development in India meant that vast swathes of industries were under government control. After 1991, however, there was a paradigm shift, which opened the economy to market forces and to the influence of the private sector as an engine of growth. This process entailed the gradual withdrawal of the government from the commanding heights of the economy. Efforts were begun to privatize state-owned public sector undertakings (PSUs), a legacy of government-sponsored industrialization since the 1950s.
Privatization is now most likely to be slow as the process enters a contested political terrain. A case in point involves two oil sector PSU majors, Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Ltd. (BPCL), whose privatization plans face stiff opposition from interest groups. For example, unions vociferously oppose these sell-offs fearing widespread job losses. This type of political pressure signaled the end of a push for strategic sales of the PSUs, evident in a hiatus regarding HPCL and BPCL. The fate of these two companies exemplifies the challenges of big-ticket privatization.
Managerial responses to changes in business environment
1. Acquisitions and mergers: There have been many instances of mergers and acquisitions in India in recent times. This has led to a sea of changes in the economic growth of the country. Examples of mergers and acquisitions are: Coke buying Parle, Lever buying Kwality, ACC- Gujarat Ambuja merger, SRF acquiring Ceat’s Rayon Tyre Cord etc.
2. Brand building: All major companies have undertaken heavy promotional tactics to build and promote their brands. The competition in all fronts for establishment as numero uno and to obtain major market share has been cut throat. Korean brands like Hyundai, LG etc have gone the same way to become established.
3. Compensation levels With increase in number of professionals as well as competition, the pay scales have also gone up. It has led to a very high degree of professionalism in work areas.
4. Customer focus Gone are the days of ‘Seller is the king’. It is the satisfaction of customer needs that is of paramount importance in any organisatin and the very crux of survival. Customer focused production and marketing are the ‘moolmantras’ of the day.
5. Capital structures Organizations have realized the advantages of trading on equity and are willing to take exposures. As a result debt financing is gaining popularity. Investors are also interested and ready to take risks in the secondary market as a result of which primary issues do not really take off unless the firm itself is very strong.
6. Spurt in diversification Organizations have started to diversify in areas as different and diverse as possible. A classic example of such an undertaking is the Reliance Group which has a ‘finger in many pies’, figuratively speaking.
7. Distribution and selling techniques A number of organizations have started with direct selling techniques instead of going the traditional middlemen way. Examples of such organizations are Amway, Tupperware, etc.
8. Labour relations Organizations today have understood the importance of labour and of maintaining cordial relations with them. And the labour in turn by their cooperation and support of new methodologies have benefited from the same.
9. Production capacity Organizations have been able to benefit from technological advances. The relaxation in excise duties, import duties etc and licensing etc in addition to modifications in MRTP Act, FEMA etc have fostered industrial growth and increased production.
