Page 21 - DMGT401Business Environment

Business Environment

Notes
Example: Coca Cola and Pepsi will be considered a strategic group because both have
similar products and both follow similar strategies. P&G, HLL and NIRMA can also be considered
to be the same strategic group.
This sort of grouping in order to analyse and understand competition is very useful. It also
helps in tracing close competitors and in formatting counter strategies.
4. Critical Success Factors (CSFs): Many industries have small but extremely important set
of factors that are essential for successfully gaining and maintaining a competitive
advantage. Critical success factors are those areas in which good results will help ensure
an organization's success against competition and where poor results usually lead to
declining performance.
CSFs which are relevant to any company are determined by a variety of environmental
and firm-specific considerations. During environmental analysis one should find out what
are the critical factors for the firm.

Example: For an FMCG, distribution network is a critical success factor, for
pharmaceutical companies, R&D is a factor, and for a generic product company like steel or
aluminum manufacturing firms, cost is a CSF. For a food chain organization like McDonalds,
logistics and supply chain management is a CSF.
5. Driving Force: Behind every change in environment there is some driving force and these
driving forces lead to a sequential change in environment. To understand and forecast
future trends it essential to understand the driving force behind them. In fact, sometimes
changes in segment A can be the result of changes in segment B and on the other hand, to
influence B one has to influence A.
For instance, if there is a sudden rise in the sale of a certain product of an organization, it
may presume this to be a result of the hard work of its sales force, whereas it may actually
because its competitor's product is in short supply.

1.2 Recent Developments in Political, Economic and
Social Environment

Political Environment

Decade of 1990 saw the rise of many political parties in India at regional level which not only
flourished but also become they force to reckon with. The BJP Govt. was a Coalition Govt. By the
year 2000 many regional political parties become so strong in their specific regions that they
share power at the centre. We can define this era as a Coalition era. The political Mantra of this
era was to associate with strong Regional Parties. So the two National Political Parties that is
Congress and BJP associate themselves with regional parties. A look at the results of the last five
General Elections reveals that there is a decline in the performance of the National Parties taken
together both in terms of total number of seats won as well as their vote share. State Parties and
Other Registered Parties gained at the cost of National Parties during this period. This is one of
the factors that had contributed to federal coalition governments in the recent past. While the
National Parties got a total of 470 seats in the 543 member Lok Sabha in 1989 elections with a
share of 79.34 percent of total votes polled, in the next elections, two years later, they got 465
seats although the vote share rose to 80.91 per cent. But their vote share declined to 69.08 percent
and 67.98 percent in 1996 and 1998 General Elections respectively. Correspondingly during
1996, they got a total of 403 seats which further declined to 387 in 1998 and 369 in 1999.

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