It is often quoted that "the agility and ability of a firm to adapt to its external environmental variables is the strategy key to its long term and sustained success". Critically evaluate this specific line of reasons reflecting on the role of external environment of the performance of the under mentioned firms.
Mahindra and Mahindra
ITC
A business converts inputs into output to make profit. It depends on the capacity and resource of the company. No organisation can exist in a vacuum. The business exists within external environment depending on the country and region. The following external environment factors effects the business strategy and sustainability of the firm.
Economic Environment - It impact the type and nature of the project. Aspects like availability of power, land for factory, trained manpower, unemployment level, inflation, interest rate, disposable income.
Government/Political Environment - Rules and regulations, industrial policy taxes, incentives for development of certain region and political stability.
Technological Environment - Available technology, future technological development keeping in mind new trends and environment issues.
Social Cultural Environment - Emerging trends in life style, fashion and culture. Local or regional trends.
Stakeholder Environment - The people and organisation who are directly concerned with the organisation and its performance.
Ecosystem Environment - Natural systems and its resources.
Competitors - It affects the firm ability to make profit. Competitors always want to take advantage by launching new products or providing better services to customers.
Mahindra and Mahindra
Mahindra and Mahindra was established in 1945 as Mahindra and Mohammed in Ludhiana. After independence in 1948, it changed the name to Mahindra and Mahindra.
Initially it started with the assembling of 'Willys' Jeep. Later on they started manufacturing of Jeep and 'LCV' light commercial vehicle.
During 1970 - 1990, Indian automobile industry was highly regulated by the Government and the productions of private companies were controlled. The Government policy model was social and the main aim was labour protection. Automobile manufacturers faced lot of problems for getting licences for expansion and manufacturing of new range of automotives. Special permissions were required for technology transfer from abroad. Most of the time permissions were not accorded.
The growth of the firm was limited due to the Government control on production and licence raj. The firm was unable to get licence€ to set up factory for car or truck manufacturing. Even the Jeep production was not allowed to increase as it was meant for army. The company remained stagnant for quite a long time. It was the management vision that for the growth they had to diversify into other business.
To expand the business Mahindra and Mahindra started manufacturing of tractors in 1982. It was very successful venture for them as within one year they became market leader. They also diversified into information, technology business in 1986.
The Indian government started reforms for opening of the market in 1991. Though the reforms were very slow but it gave the opportunity to Mahindra & Mahindra to have joint venture with Ford, USA in 1996. During mid 90's they invested in new technologies to upgrade their existing product namely tractor. As they were successful in rural area with tractor and farm equipment supplies, they utilized this strength for launching of new Commander range of vehicles for the rural and semi urban markets. To dominate the Indian market in 2000 they set up the new tractor satellite plant in Rudrapur.
Mahindra & Mahindra came into prominence in 2002 with a launch of Scorpio a new generation world class utility vehicle (SUV). The SUV was designed in house by their R&D team keeping in mind urban class market, esteemed factor and latest trend. Scorpio gave a good competition to Tata safari, which was then the most popular Indian SUV.
In 2002 the Indian government formulated an auto policy that aimed at promoting integrated, phased, enduring and self sustained growth of Indian automotive industry. It allowed 100% FDI, formulating fuel policy to meet emission norms and harmonizing the regulatory standards with the rest of world (ROW).
As Mahindra and Mahindra dominated the Indian tractor market and remained No. 1 brand since 1983. The company utilized this strength to export tractors to other countries. To enter the world market they acquired the tractor manufacturing plants in USA, UK and China. Today they are one of the leading tractor brands in the world. The company had been quite successful with the tractor division and is the largest manufacturer of tractors in India.
To increase their market share and growth, the company also expanded in new automobile segments and other businesses. Keeping in mind the competition in car segment in 2006 they formed the joint venture with Renault, France to make the passengers cars named Logan. They also entered joint venture with International truck and Engine Corporation, USA to launch Navistar trucks in India. Last year they bought the troubled IT services company Satyam to expand its presence in Information Technology business. Presently the company is buying South Korea's Ssangyong, an SUV manufacturer. It will give them asses to world technology for SUV's.
Today the company is manufacturing most of the automobile segment namely two-wheelers, Commercial vehicles (CV), Utility vehicles and Sedan. They are also involved in Infrastructure, Hospitality, Financial services and Defence systems.
It was the company's ability, belief, vision, ethics and the culture that they survived various constraints, regulations, competition and tough environment to succeed. From a Willy's assembly line in 1945 they are today global company with multi product.
Mahindra and Mahindra follow principles of good governance, accountability and transparency and acts to fulfill environment and social responsibility for long term sustainability.
Three year back the company set out on a sustainable journey to alternative thinking as guiding principles. It helped them to create environment of business growth with being sensitive to environment and communities. The company is serious about climate change and constraint on natural resources and is looking for alternative sources and design. The company is spending lot of money in R&D and new technologies. It is almost spending 100 million dollars in MRV (Mahindra Research Valley) for fuel efficiency and other alternative fuel technologies.
To pursue alternate technology mission the company had taken over the Reva electric. Reva is a small electric car being made in India. It will help the company to go in for the designing and developing of new sustainable electric car in future. The company is planning to launch new car model and SUV's in response to market competition.
Corporate social responsibility (CSR) is actively pursued by the company. The company is spending 1% of the profit for social obligation. They are spending the money on education, health and disaster relief. The company is seriously involved in education for girl child and promoting higher education. The company's trust is supporting education for 51,000 underprivileged girls. They operate several vocational institutes.
The company endeavors to achieve the best performance within the prevalent economic environment to secure maximum benefit for stakeholders. The company stakeholders take active part during the Annual general meetings. The stakeholders are satisfied with company's performance and future prospects. The company had paid regular dividends to its shareholders.
The firm is ranked top 10 Indian companies in "Global 200" by US based Reputation Institute. The group turnover is Rs. 31,568.54 crores (US $ 7.17 Billion) in FY 2010 and employs around 100,000 people worldwide.
Conclusion.
Mahindra and Mahindra had survived the Government policies and environment constraints due to their foresight, agility and ability to adapt to the circumstances and dedication to grow following high ethical standards. The company follows principles of good governance, accountability and transparency to achieve their aim. The company meets its social and environment responsibility with sincerity. Their vision to diversify in early days led to growth of the company and various independent businesses. By investing in new technologies, improving design and launching of new products they had maintained the superiority of the products, domination and sustainability in the market. The relationship with the stakeholders is healthy as the company had been performing well and meeting their expectation. The future of the company looks bright and progressive.
Mahindra and Mahindra are one of the most admired and reputed company in India.
