Business environment(PEST) importance with reference of TATA for better organization of business

Business environment - Tata motors

Business Environment - Tata Motors

Any and every business needs to analyze and study macro  environmental factors, in order to enter a new market. These macro-environmental factors are:, political, economical and social and technological factors (PEST). These contribute to the smooth functioning of both internal and external operations of the company.. As an entrepreneur, one has to keep in mind all these factors, before entering into a new country. PEST analysis is used to fundamentally evaluate all these environmental factors. 

Now, let us analyze these macro environmental factors, with respect to Tata Motors.

Tata Motors 

Introducing Tata Motors Limited(TML), a $42 billion organization; is India's largest automobile company. It is also a global leader in manufacturing cars, utility vehicles, buses, trucks and defense vehicles. Incorporated in the year 1945, Tata Motors is part of the over $100billion Tata empire, founded by Jamsetji Tata, in 1868. It is recognized for its quality, originality and design excellence.Over the years, it has managed to win the trust of millions of Indians and people, the world across.

With a large global footprint, the company has consolidated its position as the Tata Motors group through mergers and acquisitions. It has a network of 76 subsidiaries in India and internationally, which provide a host of engineering and automotive solutions.

Tata Motors has experienced a long journey of being in India and expanding into several countries; even in the face of tremendous competition. 

Let us now look into “PEST” with respect to Tata Motors, in greater detail.

Factors of macro environment

1. Political 

As we know Tata Motors has a huge basement of operations in many countries in the world. In conducting these activities it was very important to Tata Motors to analyze the political factors to ensure the smooth functioning of the company. When it entered the UK, the options of entering the USA and Russia were also available. But Tata Motors preferred the UK over the USA and Russia, due to political favorability. With the UK, India has good diplomatic relations and lesser tariff and non-tariff barriers. Neither was language a problem in the UK.

The US prefers extremely high-quality products and has many non-tariff barriers,  making it difficult for a new company to enter its market. 

Russia was counted out due to its consistent dealership network. Other challenges included high entry barriers and language problems, making communication difficult. Finally, there was the uncertainty of the future economical state. 

So Tata Motors, entering the UK and refusing the USA and Russia is acceptable.

2. Economic 

This is one of the most significant determinants that need to be analyzed as it includes factors such as Market growth, Pricing of products, ROI(return on investment) and various sub factors that can affect the revenues of a company . From 2004, Tata Motors started its global expansion process. It has made its operations work in five countries worldwide, through acquisitions and joint ventures. Over the years, there have been many changes in the country’s economy. But Tata Motors has been adapting to these changes successfully and moving their operations smoothly. For instance, if there is a hike in the price of aluminum in the UK, Tata Motors have the option of falling back on suppliers in Europe and Asia. 

They keep a keen eye over the changes in the currency rates over the world. The company has to flexibly adapt to the change in the currency of dollars against the sterling pound. Operating in different countries, one has to be vigilant about such changes and formulate business strategy accordingly.

3. Social 

Another aspect that should be taken on a serious note is, the social factors of the country, a company is venturing into. It includes lifestyle, consumers’ taste and preferences, family values etc. Tata Motors aims to provide service to every category of the society. It launched two new cars when there was a hike in the price of petrol: Tata safari and Tata sumo Grande. Not all can afford these vehicles,  but people who can afford, do not mind the hike in petrol price. These cars promise better style, comfort and luxury, thus, coming with hefty price tags. To target the middle-class, Tata Motors launched Tata Indica; low budget cars to ensure it caters to every segment in the market. The chairman of Tata Motors, Ratan Tata launched the world's cheapest car, Tata Nano which failed miserably as it was positioned as the “cheapest car”. This was contradictory to the Indian society’s idea of a car being a luxury item.

4. Technological 

Technology has updated the world in leaps and bounds, over the last two decades. A company depends upon technology for almost all its activities. Tata Motors have currently employed 1400 scientists and engineers in its R&D team. This proves that they have been preparing for tough competition against the rival companies, using cutting-edge technology as their strongest weapon. 

In the last 10 years, technology has advanced rapidly. Foreign car brands like Hyundai, Toyota etc have set up operations in India.

They built their cars with new dimensions, Power Steering, Central Locking, Automatic Transmission on gears etc., which people started patronizing. This ignited huge competition in the car industry. 

But Tata Motors never lagged behind. They adapted to these new changes as quickly as possible and survived in the international competition. They again caught up with their position as the leader of the Indian automobile sector, by analyzing their rival companies' strategies and constantly improving themselves.

In this way, a company can adapt to the required environmental changes, at every stage of expansion. For a long survival in the market, it has to understand the factors constituting the business environment, analyze those, improve and work towards growth through adaptation.

“If you want to walk fast, walk alone. But if you want to walk far, walk together” 

                      - Ratan Tata.

Source ; .ukessays