Question:
Describe about the PESTEL Analysis of Indian Agricultural Industry?
This report involved the performance of critical analysis of the external environment as applicable in respect to Indian agriculture industry with a view to assess the expansion of Nu-Farm within such markets. The performance of analysis has been carried out through the application of PESTLE analytical tool and based on the analysis, it has been evaluated that the political conditions as prevalent in Indian markets are highly supportive in respect to the crop protection initiatives as undertaken by firms. The economic factors have indicated that there is a requirement for crop protection measures in India so that Indian farmers can be positively benefitted. This has been a positive factor from the point of view of supporting the growth and performance of Nu-Farm in Indian markets. The analysis has also indicated that the socio cultural condition as prevalent within Indian farmers is that they do not consider the usage of chemicals in treating their agricultural produce and there are legal laws that are applicable to the performance of the crop and seed protection in India. The overall condition is identified as supportive in respect to Indian markets and this led to the recommendation that Nu-Farm should perform expansion of its business processes in Indian markets.
Businesses perform the expansion of their business activities into international markets with a view to achieve higher level of growth and expansion. However, in performing such expansion into international markets, they are required to consider large number of factors as prevalent within such international markets so that they can achieve higher level of growth and success in it. A complete environmental analysis is important from the point of view of achieving higher level of success in such international markets. The analysis of the external environment conditions can be performed through the application of strategic analytical tools such as PESTLE analysis (Hill and Jones, 2009). This has been an important tool that allows for analysing large range of areas such as political conditions, economic conditions, socio cultural and technological environment including the legal and ecological environment that affects the performance of business. These are important areas and an analysis of these areas is crucial from the point of view of achieving efficient expansion of business processes into international markets.
Scope of the Report: This report is focused towards performing an analysis of Nu-Farm with respect to its expansion into the markets of India. This report proposes the expansion of Nu-Farm into the Indian markets and the analysis specifically focused towards performing an analysis of the external environment conditions of Indian markets. This has been performed through the consideration of PESTEL analytical tool to analyse the ways in which Nu-Farm is affected by different environmental conditions. The company is looking to achieve higher level of growth in the Asian markets, and as such, this report focuses towards expansion of Nu-Farm in the Indian markets.
Company Background: The Company as selected for the purpose of analysis is Nu-Farm. An analysis of Nu-Farm indicates that it is an Australian manufacturing company that accounts for the production of products that are designed in order to ensure protection of agricultural products. It is based in Australia and the company is operating since 50 years, and it has continuously engaged in the production of wide range of crop protection products over the years. There is large range of extensive teams of agricultural and horticultural specialists that helps Australian farmers in performing the agricultural production in a sustainable manner. It is known as a largest manufacturer with an extensive distribution network of regional service centres. The company operates not only at the local level, but there has been extensive level of network of the company that is expanded worldwide (Nu-Farm, 2015).
Research Methodologies Used: The research methodology that has been utilised in collecting data about the environmental analysis facing the agricultural industry in India is secondary research method whereby a critical analysis of scholarly articles, books and online sources is performed. The quality of data as utilised in this report is academically sound because they are collected from the academic sources such as journals and books.
Since Nu-Farm is considering its expansion into the Indian agricultural industry, it is quite essential to perform a market environment analysis so that the decision of expanding into the Indian markets would be undertaken in an efficient manner. This section of analysis therefore analyses the various important ways in which different environmental situation could affect the performance of Nu-Farm in the market so as to ensure the development of appropriate strategies in minimising the adverse effect of such environmental situations. An analysis of different such factors that have the potential to affect Nu-Farm in such Indian markets is performed as follows:
Political Conditions: The political condition of an economy has a direct level of impact over the performance of entire industry/sector in particular. Such political conditions mainly imply the persistence of government control over the performance of the industry, or governmental decisions affecting the performance of the entire sector. An analysis of the case of Nu-Farm indicates that it provides crop protection products and this implies that the company caters to the need and requirement of agricultural industry. The case analysis of Indian economy with respect to agricultural industry performance indicates that there has been significant control of Indian government over the performance of such agricultural industry in particular. There are several kinds of acts and legislations that monitor and regulate the performance of the industry. As for instance, there is an act known as “Destructive Insects and Pests Act 1914” that is operational in India and the main purpose of this act has been to prevent the introduction of any kinds of insect, fungus or other kinds of pest that may impact the performance of crops (Department of Agriculture and Cooperation, 2014).
It is not only the above indicated act, but the Indian government is positively engaged in the protection of crops in a positive manner. There are a large number of schemes that have been introduced by the Indian government aimed at protecting the crops across the country. An analysis indicates that there has been the introduction of International Plant Protection Convention (IPPC) 1951 being performed and this scheme positively supports the protection of crops across India. The primary objective of the scheme has been to prevent the introduction and spread of exotic pests that are destructive to crops and it also aims at facilitating the safe global trade of crops by way of assisting the producers and exporters. There are various important activities that are carried out as a part of ensuring protection of crops within this scheme and these include inspection of imported agricultural commodities in preventing the introduction of exotic pests (Department of Agriculture and Cooperation, 2014).
The scheme also looks back towards different important areas in ensuring that the complete level of protection of crops is being ensured. It mainly includes detection of exotic pests and diseases that are already introduced through the application of domestic quarantine regulations, performing pest risk analysis (PRA) in order to finalise the import of plant/material etc. These initiatives by the Indian government in the form of various such schemes are aimed at ensuring the complete level of protection of crops so that agricultural productivity can be enhanced. Seed is the basic and most crucial input from the point of view of sustaining agricultural performance and its protection is therefore essential from the point of view of promoting entire agricultural performance. The Indian government has performed a major restructuring of the seed industry by way of introducing measures that are aimed at protecting the crops and ultimately the agricultural industry as a whole (Indian Seed Sector, 2014).
Thus, the analysis of the political conditions as prevalent across India with respect to governing the crops indicates that there has been higher level of governmental interference in the process. This suggests that Nu-Farm has to comply with the necessary legislations in order to perform the introduction of its business in Indian markets. There are tighter regulations aimed at preserving the agricultural environment and its performance across India and it is therefore essential that these conditions should be adequately addressed for the purpose of efficiently doing business in the Indian markets. There are regulations aimed at governing the import of seeds and other crop materials and since Nu-Farm is aimed at providing materials that ensure protection of agricultural crops from being affected by insects, there is good potential that Nu-Farm is positively allowed in doing its business because the main purpose of the offerings of Nu-Farm complies with that of the requirements for Indian government in importing seeds (Plant Protection, 2014).
As Nu-Farm provides products that are aimed at protecting the agricultural crops, the analysis of the main purpose of Indian government behind framing the above indicated policies is to ensure that crops are being protected and agricultural productivity is improved. This can be positively accomplished by the Indian farmers by way of considering the usage of large number of products that are provided by Nu-Farms in ensuring the protection of seeds. This higher level of compatibility of the offerings of Nu-Farm with that of the political conditions that are prevalent across India suggests that there has been higher opportunities available to it in achieving higher level of success and growth in its performance. Overall, the assessment of the political conditions across Indian markets implies that the market has been supportive from the point of view of Nu-Farm expanding its operations and there would be higher level of compatibility that it would witness with that of Indian government policies in importing crop related items (Natural Disasters and Crop Protection, 2014).
Economical Conditions: Apart from the political conditions, the role of economic conditions is also crucial as it directly impacts the performance of an industry. The economic factor indicates about the growth of the entire industry and since Nu-Farm is focused towards providing products that is aimed at protecting the agricultural crops in the industry. An analysis with respect to the economic performance of the Indian crop protection industry indicates that the prediction as made by FICCI implies that the industry will grow at 12%. From the point of view of performance of Indian economy in terms of crop protection, it has been analysed that the industry has not been effective in assuring the protection of crops. As for instance, the Indian Journal of Ecology Report indicates that crop losses because of non usage of pesticides were about 17.5% in India in 2011. The loss as a result of this has been identified as Rs 90000 crores which has been a massive loss faced by the industry (Indian crop protection industry will grow at 12%, predicts FICCI, 2015).
This particular economic condition in respect to the economic performance of Indian economy with respect to crop protection industry suggests that there has been ample of opportunities left in the industry for the crop protection solution provider to achieve better performance in respect to Indian farmers and thereby accounting for both the economy’s growth and the company’s growth. The prediction as made in respect to the growth of Indian crop protection industry suggests that the compound annual growth rate of 12% is expected by the financial year 2019 to reach a figure of $7.5 billion. However, the current performance as estimated was around $4.25 billion in financial year 2014. The Indian crop protection industry has been identified as extensively huge as it is considered as second largest in Asia with a size of above Rs 26000 crores. The percapita consumption of crop protection products in India is identified as lowest in the world, and this has affected the performance of agriculture in a adverse way (Indian crop protection industry will grow at 12%, predicts FICCI, 2015).
The main issue that has been noted in respect to the Indian farmers is that they are uneducated which restricts them from adapting appropriate measures aimed at ensuring efficient level of attainment of productivity in their performance. It is therefore essential that there should be appropriate measures that should be considered by the Indian government along with the manufacturers in educating Indian farmers. This could be by way of working positively with the farmers by these manufacturers in educating them so that they can undertake appropriate measures aimed at enhancing the overall productivity level of agricultural sector in the economy which would account for overall economy’s growth and development. The large scale usage of pesticides is essential for the purpose of ensuring the protection of crops which has been a major issue identified in respect to the performance of the Indian economy. The products supporting crop protection as sold by Nu-Farm should therefore aimed at educating the Indian farmers so that they can efficiently address the adverse performance condition as faced by Indian farmers with respect to their agricultural performance (Indian crop protection industry will grow at 12%, predicts FICCI, 2015).
Socio-Cultural Conditions: Apart from the economic conditions and the political conditions affecting the crop protection industry in India, this section of analysis is now focused towards analysing the impact of socio-cultural conditions impacting the performance of such industry. The socio-cultural trend mainly implies the societal values as shared by individuals in the industry. The main customers for the crop protection products are usually the farmers, and it is therefore essential that appropriate strategies should be considered aimed at targeting the farmers. However, an analysis of the socio cultural trend as prevalent in respect to the Indian farmers with respect to the usage of crop protection measures indicate that the Indian farmers are positively acceptable to important measures that ensures the protection of their agriculture, but with respect to the usage of chemicals, it has been assessed that the socio cultural trend as prevalent within Indian farmer implies that they are less attractive with respect to the usage of chemicals (Jha, 2012).
An analysis of farmers in India suggests that Indian farmers have started to supplement their agro needs with bio-options and in some cases, they have completely replaced the use of chemical pesticides with biocides. There has been the application of bio product by almost all the farmers in order to give strength to the growth of the plant. This suggests that the Indian farmers have become highly aware of the impact of chemicals in the productivity of their agricultural produce. This leads to their low level of attraction of Indian farmers with respect to the usage of chemicals in their production process. The farmers are becoming smart entrepreneurs in India and they are focused towards using smart and modern methods of farming. There has also been the usage of capital intensive water management solutions that are being utilised by Indian farmers (Jha, 2012).
The socio cultural trend therefore indicates that there has been higher level of response rates for the bio efficient products within Indian farmers. This indicates that the attainment of higher level of success can be possible to the organisation such as Nu-Farm by way of focusing extensively towards providing crop protective products that are bio friendly, and does not involve any kinds of chemicals in it. This is mainly because the socio-cultural trend within Indian farmers implies that they do not prefer the usage of chemicals in their agricultural produce. This suggests that Nu-Farm needs to make it sure that the products as offered by it are free from chemicals usage in it. It needs to provide products that can work in ensuring crop safety even when the pesticides become ineffective. The acceptability of farmers with respect to the crop protection products increases when they see that the products are working at their own farm (Jha, 2012).
Overall, the socio cultural trends as prevalent within Indian farmers have been quite crucial to Nu-Farm in framing strategies that are aimed at targeting them with its crop protection products.
Technological Factor: The implication of technology is evident in respect to every major sector, and its role and importance is also evident in respect to the agricultural industry in particular. The agricultural industry in particular makes use of technology for the purpose of achieving efficient protection of the agricultural produce. There has been the application of cutting edge technology that has been utilised by Indian farmers in order to ensure protection of their agricultural produce from insect, weed or any other issues. There are certain companies in India that accounts for providing high quality and cutting edge technology in ensuring that the Indian farmers are completely benefitted in the process of manufacturing agricultural produce (Reddy, 2012).
The role of technology is crucial in agricultural industry of India, and the companies providing efficient technological solutions therefore have the better chances of achieving success in the Indian markets. Nu-Farm specialises in providing crop protective products to farmers, and by way of considering the advanced technological systems to support such crop produce across the country, it could be possible to achieve higher level of growth to the firm in the Indian markets. The acceptability within Indian farmers also suggests that they are acceptable to latest technologies in performing the management of their agricultural produce and this has therefore been a positive factor to Nu-Farm from the point of view of targeting its customers in such Indian markets. Technology has been crucial in every major industry and its significance is also evident in respect to Indian agricultural industry with the positive acceptability as identified within Indian farmers for the same (Crop Protection India, 2015).
Legal: The legal framework implies about the legal rules and implications that are applicable in respect to the performance of an industry. In respect to the agricultural industry, it is also affected by certain main rules and policies that govern the performance of industry players within such industry. The application of legal implication in respect to the performance of agricultural industry in Indian economy is identified from the fact that there are specific legal legislations that have been developed and they are primarily aimed at guiding the performance of the entire agricultural industry in particular. As for instance, the legal policies and legislations as applicable to the performance of seed and crop protection in India includes the Indian Seed Act and Patent Act that have been passed in 2004. These acts are aimed at regulating the performance of the Indian agricultural industry especially with respect to the protection of crops (Shiva, 2005).
The companies that are dealing in India, and supports the protection of crops are therefore required to make sure that they comply with the above indicated laws and legal implications that are applicable. They can ensure the successful performance of their business processes by making it sure that they comply with the norms and policies as indicated within these acts (Rao and Guru, 2010). Apart from the above legal acts that have been introduced recently in India, an analysis indicates that there are various other acts that are applicable from the past, and they have been quite significant from the point of view of regulating the performance of the entire industry. As for instance, the Destructive Insect and Pest Act were passed in 1914 and they were supplemented by other provisions. This suggests that there has been significant level of legal implication over the performance of agriculture industry in India, and the firms operating in the country are therefore required to make it sure that they complies with them in a positive way. As in respect to Nu-Farm, it is required to achieve compliance with these applicable legal implications (Rangaswami and Mahadevan, 1998).
Foreign Direct Investment: The foreign direct investment scenario is also crucial to examine before performing the expansion into a particular country. It is mainly the government of an economy that affects the foreign direct investment scenario within the economy as it has specific roles and regulations that governs the flow of foreign direct investment within the economy. In many cases, there has been the consideration of tighter rules and regulations by the Indian government that are aimed at protecting the domestic producers from international players. As in respect to the performance of crop protection industry, it has been analysed that there is no such regulations being imposed by the Indian government with respect to the performance of foreign direct investment by the international companies. FDI in India is permitted to the extent of 100% which suggests that foreign companies such as Nu-Farm can easily perform the expansion of its business process in Indian markets (FDI in agriculture sector is permitted up to 100% under the automatic route, subject to certain conditions mentioned in Consolidated FDI Policy, 2013).
The foreign direct investment scenario especially in respect to crop protection sector is identified as open in India as the international companies can positively support their business activities and processes. This is evident from the case example of DuPont which has been a US based company that supports the performance of agriculture in the Indian industry. DuPont Agriculture brings innovative science and solutions aimed at meeting out the challenges faced by farmers today. DuPont provides complete protection with respect to growing crops from any kinds of weeds, insects etc and it has massive level of presence in the Indian economy which suggests that there are no such FDI regulations affecting the performance of foreign companies in India (DuPont, 2015).
Financial: The role of financial condition is also crucial in undertaking decisions aimed at expanding the operations of a business. As in the given case, Nu-Farm is considering its expansion in the Indian markets, and this requires an assessment of the financing infrastructure that has been supported across Indian economy. The financing infrastructure is essential so that international businesses can perform the expansion of their business processes and activities in a highly efficient manner. An analysis of the case of Indian economy in particular suggests that the financing infrastructure has been highly supportive as there are various such financing firms that support the businesses undertaken by foreign firms in India. There are financing agencies including micro finance companies that support the performance of international companies in a positive way (Financing Agencies Providing Custom Services To Farmers, 2014).
Overall, the analysis above has indicated about the external environment conditions that Nu-Farm is likely to face and it has been assessed that the situation is positive from the point of view of Nu-Farm expanding into Indian markets.
Conclusion and Recommendations
This part of the report has analysed the external environment conditions as prevalent in India in respect to the decision of Nu-Farm in expanding into the Indian markets. The analysis of the external environment conditions through the important elements of PESTLE analytical tool has indicated that there has been higher level of support that is likely to witness by Nu-Farm from expanding into the Indian markets. The analysis of political, legal and technological environment including the FDI situation has resulted into the identification that these environmental factors positively supports the growth and expansion of Nu-Farm in the Indian markets.
Recommendations: Based on the entire analysis as carried out in respect to the external environment affecting the crop protection industry in India, there is certain major recommendations that are considered essential in respect to Nu-Farm in achieving success in its expansion decision to India. These recommendations are indicated as follows:
Based on the implementation of these recommendations, the future scenario of Nu-Farm in India by 2018 would be the efficient performance in the industry in terms of occupying a larger market share in it.
References
Crop Protection India, (2015) [Online]. Available at: https://www.dupont.co.in/products-and-services/crop-protection.html [Accessed: 08 February 2015].
DuPont, (2015) [Online]. Available at: https://www.dupont.co.in/industries/agriculture.html [Accessed: 08 February 2015].
Department of Agriculture and Cooperation, (2014) [Online]. Available at: https://agricoop.nic.in/dacdivision/plantprotec02.htm [Accessed: 08 February 2014].
FDI in agriculture sector is permitted up to 100% under the automatic route, subject to certain conditions mentioned in Consolidated FDI Policy, (2013) [Online]. Available at: https://www.business-standard.com/article/news-cm/fdi-in-agriculture-sector-is-permitted-up-to-100-under-the-automatic-route-subject-to-certain-conditions-mentioned-in-consolidated-fdi-policy-113081400245_1.html [Accessed: 08 February 2015].
Financing Agencies Providing Custom Services To Farmers, (2014) [Online]. Available at: https://www.bankofbaroda.co.in/rur/customerservice_farmers.asp [Accessed: 08 February 2015].
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Rao, M.B. and Guru, M. (2010), ‘Patent Law in India’, Kluwer Law International.
Reddy, P.P. (2012), ‘Recent advances in crop protection’, Springer Science & Business Media.
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