The Impact And Influence Of The External Environment

Published Date: 02 Nov 2017

Ans ) Business of any kind is definitely affected by its internal factors as well as external factors. Whenever a business has to establish its strategies and does planning regarding different issues it must take external factors under consideration too for successful results. The Asian Paints also is affected greatly by the external factors. In the last three years of recession the industry boasts with the unorganized sector which is growing very rapidly and affecting the share of every organized sector company including Asian Paints too so this is one cause of its declining market share. Furthermore the increase in the inflation rates causing the prices of the products high and also the excise duties put by government on paint products make it difficult for the company to sell those products at lower rates because that will in turn cut their profits. So Asian Paints than has to raise the prices of its products which are creating an automatic decrease in the demand of products.

A big challenge for the company is that the unorganized sector is selling its products at lower rates thus creating a huge difference in the prices of both the sectors thus causing a problem for the organized sector which cannot possibly reduce its prices to their level. Hence all these external factors influencing Asian Paints business strategies and planning and making it to diversify in other sectors too in order to progress so that if the market share of one product is decreasing the other would be on safe grounds and give company profit.

In order to launch the new project of ceramic tiles of Asian Paints, the company do not have the technological competence so in order to be technologically competitive the company then planned to go for international ventures to adopt their technology such as Asian Paints has made a collaboration with PPG industries for getting access to cathode electro deposition primer( CED) and the company also joint ventured with Nippon Paints to get the original equipments of paint products and also the company joined the sigma coatings of Holland to get access to the technology of corrosion coating. So all these business venture strategies and planning’s are affected because of no technological competence in the industry in which it has to flourish and here the external factor of technology is impacting companies business planning’s greatly.

Q.2. Explain the characteristics of Strategic Business Management and Planning in Asian Paints (India) Limited.

Ans ) Strategic business management is defined as the investigation of the factors that can in any way affect the customers of the business and also the competitors and moreover the factors that have the impact on the organization itself as the analysis of all these factors provide a good basis for business to establish its strategies and plans. The Asian paints like other companies is also dealing with several internal and external factors and these factors are impacting its strategies and planning.

Firstly the company has the potential to increase its production capacity which is an internal strength for the company and help the company in expanding its business. And with the help of increased production capacity the company is also planning to go for expansion in the current product line and also planning to add some niche products to its range. The company is also planning to provide its products to the lower income segment too with the help of line stretching downwards so that its target market will increase giving it a bigger market share in industry.

Moreover the company has enough capital and skilled management staff so that it can keep on modernizes itself and make it technologically competitive in the era of high completion on the basis of technology. Company has the potential and capital to go for diversification also. The Asian paints is planning to diversify itself in the areas of ceramic tiles which is an unrelated diversification but synergic. Furthermore the company has the best distribution system with the help of which it can even target the rural areas clients and able to sell the ceramic tiles with the help of same distribution channels. Because the company has a very loyal customer base for paints products the same people can also be asked to buy the company’s new product which is ceramic tiles. The location for new project is also an advantage to the company because raw material is near to grab and easy distribution to market is there. So it is a major factor in deciding for the company’s strategic business management and planning.

Q.3. Evaluate the Classic and Contemporary models used in developing Business strategies and plans by Asian Paints (India) ?

Ans ) There are two major types of models that can be used in order to make the strategic planning more effective. These models named as the classical models and the contemporary models. These models include transformational, incremental, muddling through strategy and strategic drift. According to transformational change the entire business is to be start from the scratch. It means changing the entire mission visions goals and strategies of the business. The transformational change is complex in nature and do not contains step by step change. Rather it is a complete change altogether. In transformational change a company has to change the complete organizational structure. The four key areas where change is must include people process organization and change in services. The second type of model is incremental change which is a step by step change and company does not need to alter the entire business system and organizational culture. And whenever a company wants to reverse the change and want to back to the old ways it can do it. The third type of model is muddling through strategy according to which company’s large business strategy has failed badly or was useless to incur. For example the business leader is very successful in launching some new technology competitive product but on the other hand his followers may get failed to use the same approach for them usually because lack of capital. Another approach to bring change is strategy drift. Strategy drift means a very slow and gradual change which is unnoticeable for a long time such change can cause problems for the company because it can be against the firm’s management rules.

APIL Company has used the incremental change approach to develop its business strategies and plans. Hence the company has brought the step by step change into its already established strategies and plans. Firstly the company planned to do expansion of its products by doing line extension and range extension to improve its target market and increase its market share. Further the company has thought of diversification in order to reduce the risk of putting all eggs in one basket. One more step the company has taken by doing joint ventures and collaborations to enhance and upgrade its technological assets. Also steps have been taken by APIL to improve its basic business (paint section) which is a reason for its success so it has added several brands in this section too such as UTSAV which is for the lower income households and affordable in price. Other products in this section are the powder paints that can be used by automobiles and also a product named touch wood is launched which is used for furnishings of furniture. Also the company has taken steps to improve its presence in different countries other than India.

Q.6. Explain how Asian Paints (India) should forecast change in order to shape strategic options?

Ans) Within an organization there are multiple types of forecasts. The company has to face ambiguous decisions every day for which there is no complete information to base the decision so in such conditions forecasting needs to be done. Basically the company has to look into the historical patterns and find out the expected expenses, income, changes in industry and events. Forecasting helps the organizations to predict any future event and undo or reduce the impact of negative consequences that can occur in future. Forecasting needs to be done before starting a new business regarding the analysis of the target market and to better understand the needs, demands and wants of people and to forecast the spending power of consumers. Also forecasting is required when there is a need to bring change in the company such as what expected capital is needed to do the expansion and what will it bring in return and also to anticipate the interest rates and exchange rates and taxation. Also the use of labor and capital needs to be analyzed. A complete forecasting of the market is required before bringing the change.

Forecasting is important for a business as it helps a business earn good profits and prevent itself from losses based on relevant information. Forecasting is also helpful in analyzing the success of new product line to be launched so in case the new product line is not profitable it must not be launched.

Since APIL is currently working on bringing change into its organization effective forecasting is required in order to better make its plans and choose appropriate strategies for dealing with the change. APIL can forecast change by taking into full consideration all the internal and external factors that can affect the organization in any way. APIL must anticipate if any new technology is coming into the industry so it can take advantage of that opportunity and trained its staff to make use of that technology. Furthermore a proper research and development department must be there in order to continuously analyze the changing preferences likes and interests of people so that the company’s can bring new and innovating brands in the market and not let their target market switch to their competitive brands. In order to select the best strategies for the company APIL must also consider the changing government and legal restrictions regarding foreign subsidiaries and the changing interest rates and exchange rates must also take into consideration.

Q.5. Evaluate the influence of organizational governance requirements on Asian Paints (India’s) business management and planning strategies?

Ans) Organizational governance is defined as the set of all the policies rules regulations customs traditions procedures that in any way have an impact on the organization. It can also be explained as the relationships among the company’s management, the board of directors and its shareholders and stakeholders. Organizational governance also contains the individual roles of these people. All the customers, communities, suppliers, debt holders come in the category of stakeholders. There are certain principles of corporate governance which must be followed such as the company must respect the rights of shareholders and they must be treated fairly. Moreover the organization must remember that it has certain duties towards their employees, investors, communities, customers. Also the board of directors must have enough ability in order to judge the right and wrong deeds of management. The organization must make all its responsibilities and duties known to its members of corporate governance in order to take them in trust.

Whenever a company has to make a strategic plan the organizational governance requirements must be taken into consideration since until the strategies don’t match with the organizational governance of the company its planning strategies and business management will fail.

The organizational governance requirements of APIL have a great influence over it. Considering the words of managing director of Asian Paints regarding harnessing the full potential shows the organizational culture is very professional and staff is very skilled which makes it easy to implement the desired and appropriate strategies at the time because if employees of any company are not ready to accept the change the strategies and plans made by the top management will be failed because there will be no implementation of those plans. Also the target customers of the future products of APIL have a great influence over the strategies. If the customer’s needs and wants are not been fulfilled effectively and their demands will not met on time then there is no use of any strategy or plan or any implementation of it so customer must be happy. In case of APIL it has a strong customer base for paint products so the company’s strategy of selling the future product to the same customers is influenced by this.

TASK 2

Q.1. Analyze means by which Asian Paints (India) should position itself to outperform its competitors ?

Ans) Positioning is defined as the process of creating a unique and favorable image of the company’s product in the eyes of consumers. It can also be defined as creating an image of company’s brand or organization. A company can position itself on a variety of basis. Firstly a company can position itself on the basis of the characteristics of the product for example a car can be positioned as reliable or on the basis of speed. Also positioning can be done on the basis of customer benefits such as L’Oreal as non ammonia hair color. Moreover companies can also used their pricing as a positioning strategy if they are producing very efficiently and have much lower prices as compared to competitors. Positioning on the basis of price is more appropriate for those types of products where quality doesn’t matter to customers.

Also positioning can be done on the basis of the use of product. It means positioning on how we apply the product such as fair n lovely cream has positioned itself to make girls fair so it has positioned on the basis of application. Positioning can also be done on the basis of competition here the company can positioned itself same as the competitors did. A good example for this is Colgate and Pepsodent both have positioned them on the basis of protection from germs.

Positioning is done in order to counter the competition in market. Positioning is not to play with product characteristics but to play with the minds of consumers. The current positioning of Asian Paints is the largest paint company in India. It can continue with this positioning since Asian Paints is the market leader or it can position itself on the basis of its best distribution system which is providing its products not just to the urban areas but also to the rural areas too. Because of its excellent distribution system it has increased its market share too. So it can be the best positioning for APIL. Asian Paints can also position itself on the basis of application of its products such as the Asian Paints is giving you colorful walls or clean and decorative walls. And it might position itself on the basis of quality of its paint products to counter the competition in paint industry. The company is focusing very much on the up gradation and modernization of technological assets so it can also position itself as one of the innovative and technologically competitive company. Since APIL is launching itself overseas also and it is one of the few paint industries which have foreign subsidiaries so it can be good basis for APIL to position itself in the market.

Q.3.Assess the impact of risk factors on strategic business management activities for Asian Paints (India)?

A business is affected by both internal and external factors. The internal strengths and weaknesses are under the control of the company but the external opportunities and threats are uncertain. They cannot be controlled by the business so they are the risk factors which can greatly impact a business in either a negative or a positive way.