Factors Influencing Business Environment In India: A PESTLE Analysis

Political Factors

Discuss about the various factors that influence the business environment of the country which plays major role in effecting entry plan of the company.

In the modern times where there are larger number of multinational companies are coming up. It has become essential for the firms to understand the environment that is present within the country so as to make sure that smoothness in their working system can be ensured (Carpenter & Dunung, 2018). There several factors that influences the external environment of the firm. All of these need to be addressed in a proper way so that there is no negative impact on the performance of the firm.  Apart from this it is also essential for the firms to understand their strength or competencies that it will use for entering into a new market (Douglas & Samuel Craig, 2011). It will help the company in making sure that no threats can hamper the strategic planning of the company. HICOM-Teck see is one such SME that deals in the business of making parts of the car and supplies them to the big manufacturers. This company wants to enter into the market of India where many other auto part manufacturers are already present. This report highlights various factors that influence the business environment of the country which plays major role in effecting entry plan of the company. It also showcases ways in which strength and weakness of the firm influences strategy of the firm to enter into new market.

 It is essential for the firm to understand its external environment and factors that influences it. Apart from this it also helps to analyse the suitability of the environment to enter into this market (IzenBridge, 2018). It also helps company in making sure that appropriate measure it can take before it reaches to this new market (Fong, Lee & Du, 2014). It also ensures that there will be no such policy or strategy failure as necessary changes in them can be made before hand. PESTLE is one such tool that helps in this regard. PESTLE analysis of Indonesian market is provided below:

Political: There are larger numbers of policy changes that has been done by the government in terms of doing business inside India. These political changes have influenced the operations of the company. Changes can be seen in terms of interference of government in the internal affairs of the firms. More restriction on the practices of the firms has been put by the government. Apart from this there are larger amount helps that is also being given to the manufacturing sector so that new companies can come into the nation (Ghoshal, 2014). This is one of the positive points that can be utilised by HICOM-teck see for entering into the market. There have been tax rate changes that need to be properly studied by the company so that it does not face any disruption in their business. Along with this government is promoting new set up inside the company and many kinds of benefits is provided to the firm that sets up manufacturing unit within the country as it helps government in providing jobs to many people (Hilmersson & Jansson, 2012). Government has invested considerably in the in the infrastructure development that helps manufacturing sector especially in the communication and transport which is a primary requirement for any industry. There are many kinds of research and development facilities that are being provided by the government that will help company in their future operations. There are many kinds of MOU’s that has been signed between Malaysian and Indian government which will facilitate company in establishing in India from its parent nation Malaysia.

Economic Factors

Economical: There is larger number of economical hiccups that has been noticed in many parts of the word which has also effected the growth of Indian market (Impullitti, Irarrazabal & Opromolla, 2013). After that also it is one of the fastest growing economies of the whole world and hence can act as one of the best market for the expansion of HICOM-Teck see. It will help company in making sure that there will be growth of the company in future. Apart from this there is a long range of economically capable people that is present within the nation that can help cited firm in terms of investment for its future projects. GDP of the nations has crossed many of the developed nations such as Britain along with such a larger market for any industry. A larger amount of money that is coming in the market of India especially in the manufacturing sector which is a positive sign for nation’s manufacturing industry (Kale, 2017) . Economic policy changes has been very faster in last few year which has boosted automobile industry and hence can be utilised by the cited firm for expanding its business into the nation.

Social: It is one of the most densely populated nations of the world and hence acts a big market for the consumers of auto mobile which is an excellent chance for HICOM-Teck see. This country has the society that has people of different class and hence various kinds of auto mobile products are successful (Kingsley, Bergh & Bonardi, 2012). By 2025 it is estimated to be one of the largest markets for auto mobile industry since people trends have changed considerably in the past few years. Apart from this employees are available at lower cost which reduces the overall cost of operations of any nation (Know how non-profit, 2018). Most of the population comprises of youngsters who are highly attracted towards the innovative designs and since HICOM-Teck see has been successful in their innovative car parts and hence it can be an excellent supplier for many of the big manufacturers in the country.

Technological: India has invested a lot in terms of technology and is now of the best country in terms of research facilities. Several kinds of technological advancements have been done inside the nation which can help cited company in establishing its new plant inside the nation. There has been large number of automation projects that has been carried out inside the country which ensures that company achieves higher productivity (Leoissac, 2018). In this industry also there are larger numbers of technological changes that has been going on and hence cited company needs to continuously upgrade their technology so as to fight in the competitive environment inside India.

Social Factors

Legal: Many legal changes have done within the nation that is directly affecting the business of various industries (Luthra, Garg & Haleem, 2015). These legal changes have been in some field like Taxation, employment legislations, consumer related grievances, environment and many others. All these legislations need to be complied with, so that company do not face any legal compliance in the operations. Legalities have become strict over the issue of any kinds of frauds. But it is one of those countries where consumer related laws are weaker.

Environmental: There are many kinds of environment related norms that has come up inside the country which restricts companies from putting burden on environment (Mangla, Kumar & Barua, 2015). This nation has signed Paris environment treaty and hence is becoming strict over environmental concerns. Apart from this it has taken various serious steps for conserving its natural resources and hence company needs to obey all these. Government inside the country has been very strict over the use plastics that are not destroyable hence company needs to make a proper waste management plan before planning for expanding inside the nation.

Apart from this it is also essential for the firms to understand their own competencies that will help firm in tackling any kind of problems that arise due to above mentioned factors. Without understanding of opportunities it is never possible for the firm to make optimum utilisation of resources for entering into the new nation.

• Company has higher scope of expansion in the car parts manufacturing industry which is expanding every day inside the nation. There are larger local and external firms that are in the business of cars (Mehta, 2012). Cited firm can become an excellent supplier to them.
• Cited company itself come into car industry with the help of some local investor or using some kind of merger with any firm. Since there are larger numbers of people who belongs to youngsters hence it can be an excellent target market for the firm (Moeller, Harvey, Griffith & Richey, 2013). It will be easier for it since it is already making many parts of the car parts.
• Company can expand its reach to the local plastic industry which is a multibillion industry.
• Cited firm has larger scope in the aeronautics industry as there is a considerable use of plastics in this industry.
• There are larger amount of infrastructure development that is going on inside India which can be an excellent opportunity and hence India can become an excellent market place.

• Larger amount of competitors are present inside the country which can seriously affect the business of HICOM-Teck see. Some of them have the capacity to change plastic industry.
• Bureaucracy inside India is slow which will reduce the chances of the company to expand its reach in the market or industry.
• There have been effect of economic slowdown in the entire world on the economics of India also and hence it is a threat for the company in its plan of expansion (Moser, Kern, Wohlfarth, & Hartmann, 2011).
• Apart from this there are some firms in this industry which was not successful inside the country and hence HICOM-Teck see has to learn from all of them so that it does not have to face such challenges.
• It is a country where people love to have products at lower price range. This will force company to go in intense price wars which can be dangerous for the profit margins of the firm.
• Huge political changes happen inside the nation from time to time which is extremely difficult for the firms to handle.

There are some other factors that company needs to think over before entering inside the nation and are highly affecting the external environment of the nation.

• Competition: There is larger competition in the market as this country has attracted many investors from all around the world apart from the local investors from within the country. In spite of such dense population competition has become cut throat which is dangerous for the future business of the firm. Many of the firms have made their brand name in the industry and hence they can give tough competition.
• Suppliers: There are larger numbers of suppliers that supplies low cost raw materials to the company which helps them in increasing their profit margins (Ripollés, Blesa & Monferrer, 2012). Strong bond with these suppliers can help company in bringing smoothness to their work process.
• Distributors: There are many distributors that are present in India which can help company in expanding its business to new horizon as they can easily penetrate in the market. They require both kind of distributors one that sells directly to the consumers, other that sells indirectly i.e. to some other company as their raw materials. In India there are lost cost distributors who can help company in ensuring higher profit margins.
• Substitute products: There are very lesser products that can replace plastics. Most of the products are heavy and cannot be easily moulded. These plastics have larger life and are typically damage free due to reacting with airs. Apart from this there are smaller amount of products that can replace the materials that are required for manufacturing of plants.
• Buyer’s capacity: India is a country where per capita income is on the lower side and larger section of the society lies in the middle class range. But the purchasing power of the consumers in India is not less; this is due to the fact that people love to buy things but at slightly lesser cost. Plastics are generally product that is required in very vast fields i.e. from household products to raw materials for bigger companies (Sharma & Raina, 2013).
• Consumption: This Country has a very dense population which has increased the consumption capacity. Consumption capacity of the people is higher and they believe in buying new products for various day to day living operations. In the coming years country is expected to become one of the largest markets of car and other plastic products and hence company has to make sure that it comes to this country at the right time so that it gets time to settle itself in the market and become a brand name in the market.
• Skilled employee: India has one of the best workforces all around the world where there are large numbers of graduates who are highly skilled and are ready to work at low wages. This can help HICOM-Teck see to flourish in tier business as it is the most important resource that any company requires for working in a country. Apart from this India is having labour force that can work on the lower cost. All this also helps in reducing the overall cost of operations. There are highly trained employees who have an experience of working in this same field.
• Set up: It is easier for the company to set up its unit in India as the cost of setting plant in the country is less but there is some issues related with the land acquisition laws which needs to be properly taken care off so that there is no future conflicts and smoothness in the process can be ensured.

Conclusion

From the above based report it can be concluded that HICOM-Teck see can easily come inside India as the environment for business is highly friendly. India has worked harder for making its infrastructure and communication systems effective so that company can easily be set up. External environment in the country is good for plastic industry as well as future of car industry is expected to be brighter which can be an excellent market for the cited firm. Highly skilled as well as low cost labour makes it an excellent place where production can become higher. Apart from this there is larger population that can become an excellent market for HICOM-Teck see.

References

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