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SWOT ANALYSIS OF INDIAN BUSINESS ENVIRONMENT

Submitted by:
Ankush Goyal MBA-GEN SEC-A Roll No: 6

This report provides an analysis of key environments of business in India which is one of the fastest growing economies in the world. Those ke y environments include political, economic, socio -cultural, technological and ecological environment. Analysis of these influential environments has been used to identify strengths and opportunities in business along with major weaknesses and threats in the country.

Strengths: Huge pool of labour force:


India is currently the second most populous country in the world. Its huge population is a threat but at same time it enriches the country with a huge pool of skilled and cheap labour force.

Huge English speaking population: India has got second highest population of English speaking people behind only US.

Extensive higher education system: India currently has got third largest reservoir of engineers and world class technological institutes like IITs and management institutes like IIMs.

High growth rate of economy: Currently Indian economy is the 12th largest economy in the world. Moreover it is the second fastest growing economy behind only china.

Rapid growth of IT and BPO sector bringing valuable foreign exchange: In little over a decade, the Indian software industry has astounded its skeptics and emerged from obscurity into an important force in the global software industry. Measured by the age of many industries, the computer or information technology (IT) software industry in India is still in its infancy. Yet, its growth and d evelopment has caught the attention of the world market so much so that India is now being identified as the major

power house for incremental development of computer software.

Stable economy, does not get affected by external changes. Abundance of natural resources. High percentage of cultivable land. Diversified nature of the economy.

Weakness:
Over Indulgence in agriculture: Very high percentage i.e around 60% of workforce is still involved in agriculture which contributes only 23% of GDP.

Poor infrastructural facilities: Most of the IT companies in India are situated in the cities of Bangalore, Hyderabad, Pune, Gurgaon, Mumbai and Chennai. However with more and more companies setting up offices in these cities, its infrastructure has begun to get overloaded. Infrastructure within these cities has deteriorated leading to many problems. Internet and Web infrastructure in most of these cities are not capable of taking any further load. Lack of enough electricity is another major problem in almost all the metropolitan cities

Potential shortage of skilled human force: The outsourcing contracts coming to the country is expected to increase significantly. However country may face shortage of people with the right kind of talent to execute these contracts. This is a real possibility in the case of high end s o f t w a r e s e r v i c e s .

Around a quarter of population still lives below the poverty line. High unemployment rate. Stark inequality in prevailin g socio economic conditions.

Low productivity. Huge population leading to scarcity of resources. Low literacy rate. Unequal distribution of wealth. Rural urban divide, leading to inequality in living standards.

Opportunity:
Scope for entry of private firms in various sectors for business: Indian political parties have realized that socialism or socialist economic policies have hampered the economic growth in the past. The results of liberalization are visible with the growth in economy and standard of living. It is unlikely that the current ideology would change. This gives a great opportunity to private sector for business growth and expansion.

Reducing Instability: Indian government is slowl y becoming stable. Since its independence in 1947, political scenario has improved slowly to take the present shape. Political parties have become more responsible and as a result, governments have become more stable than in the past. This is a great confidence booster for domestic as well as foreign investors.

Inflow of foreign direct investment is likely to increase in many sectors: Liberalization policies of government are also a great contributing fact or since it has added to the confidence of foreign investors in this industry. The government of India has allowed foreign direct investment up to 100% through the automatic route in the drugs and pharmaceuticals industry o f the country, on the condition, that the activity should not fall into the categories that require licensing

Huge foreign exchange earning prospect in IT and ITES sector: With the growth of IT industry and by virtue of cheap and quality services

available, India has emerged as major outsourcing hub for various MNCs bringing in a lot of foreign exchange.

Huge population of Indian Diaspora in foreign countries (NRIs). Area of infrastructure. Huge domestic market: Opportunity for MNCs for sales. Huge natural gas deposits found in India, natural gas as a fuel has tremendous opportunities. Vast forest area and diverse wildlife. Huge agricultural resources, fishing, plantation crops, livestock.

Threats: Global economy recession/slowdown.


High fiscal deficit. Threat of government intervention in some states: India is a combination of states with policies still existing at the local level. This has distorted uniformity. India is a big country which holds different caste, religion, cultures and values. This adds more value to uniformity. For example, we can take the case of shifting manufacturing plant of TATAs nano car. Such differences can create problems for business in the future too.

Shortage of skill in manufacturing: India is seen as a vast pool of talent with great diversity and with a demographic advantage. However, the industrial sector faces acute shortage of skills. The swiftness with which this skill deficit is bridged will be critical in determining whether India can move up the value chain in manufacturing.

Depleting Resources: The growth in many industries is constrained by the acute scarcity/depleting reserves of important raw materials like coal, irons ore,

natural gas and forestry resources. This is a threat to ind ustry operating on a base of such resources.

Social Factors: Growing conflict over different religion groups such as between Hind us and Muslims. The traditional beliefs still surpass any new ideologies in rural areas. Most of the population is in rural areas, which is still under developed. Large unequal income distribution leads to wide product categories.

Technical Factors:

Too much of industries and use of technology have led to ecological imbalance and environmental degradation. Technology centred only in major cities such as Mumbai, Delhi, and Bangalore. Due to concentration in few cities, these cities are being crowded, leading to growing urbanization. Rapid population increase, dramatic changes in production and consumption patterns and massive rural-to-urban migration in India have transformed the way environment india and natural resources are used. Ultimately, we are heading towards the collapse of ecological system which can be greatest hurdle to growth and civilization in India.

Environmental degradation is now all pervasive, accelerating and largely unabated. This is manifested in polluted air, depleted biodiversity, degraded lands, exhausted aquifers and polluted aquatic and marine ecosystems, as well as increasing exposure to hazardous and toxic wastes.

Peoples health and longevity have suffered, natural resource based livelihood has been compromised, and ecosystem services and resources that underpin long term economic development are at risk.

Volatility in crude oil prices ac ross the world. Population explosion, rate of growth of population still high. Agriculture excessively dependent on monsoons.