As domestic markets saturate and internal environments turn more competitive business organizations are increasingly looking at new markets overseas to increase both profitability and market share. India one of the world’s most populous nations promises a huge market share for overseas investors. Most major business players have either entered the Indian market in recent years or are planning a foray in the near future. These include American stalwarts such as Walmart and McDonalds. (Jain, Trehan &Trehan 2012)
However globalization is a route which can turn out to be quite tricky if it is not planned properly. When entering a new international market it is very important to understand and analyze external factors which might affect the business organization’s operations in that market. There are certain factors in the markets external environment which are beyond the company’s control and impact its overall performance and growth in the overseas market. To plan for these uncertain macro-economic forces business organizations often use a tool called the PEST analysis. (Griffin and Pustay, 2006)
The acronym PEST stands for political, Economic, Social and Technological factors. It essentially involves scanning the macro-external environment, in which a business wants to operate and assessing the forces which impact it the most. A PEST analysis is usually conducted by:
(i) a company launching a new product and wishing to analyze its market;
(ii) a company looking at a potential acquisition or partnership and trying to examine the impact of the venture
(iii) a company looking at a new investment opportunity in the market. (Gibson, 2003)
It is important for 3m to undertake a PEST analysis in order to understand how the prevailing external environment can effect or influence business potential in either a positive or negative way. The PEST analysis that it undertakes should evaluate external environment factors from the perspective of the business ergonomics industry. Even though essentially a keyboard is a technological product 3m’s adjustable keyboard tray increases the comfort level of the workstation and is therefore concerned more with ergonomics than technology. In recent years private business and globalization in India has been undergoing significant growth. However, there are other several factors in the external environment which have impacted the current growth scenario in both the technology and ergonomics industry. These include:
Political Factors: India is one of the largest democracies in the world. In comparison to the other countries in the region it has been relatively politically stable. There has never been a military coupe or army dictatorship in India. Over the past decade or so the government has followed an initiative focusing on de-regulation, privatization, liberalization and globalization in the economy. The government has in particular focused and encouraged the development of the Information Technology sector in India, Chennai and Bangalore are two cities in particular that are known as the Silicon Valley of India (Jain, Trehan &Trehan 2012). These cities house a large number of Information Technology firms and also outsourcing companies which have flourished in recent years due to government impetus. In fact the evolution of Bangalore as a technology hub was made possible because of government support and encouragement. 3m should take advantage of government impetus to launch its new product in the country.
In the future greater government initiative for opening up Foreign Direct Investment to more industries, is expected to offer growth opportunities. The upcoming elections scheduled in 2013-2014 is one threat to economic reforms and political stability. (Jain, Trehan &Trehan 2012) If there are any surprises in the elections it could halter economic reforms and impetus for global investment.
Economic. India has been witnessing a steady growth rate of 8% during the last five years. The country’s economy is expected to continue this rate of growth over the next five years. However inflation and unemployment rates, are expected to be high and this presents a major challenges for Indian economy. (Jain, Trehan &Trehan 2012)
The global economic recession has effected India as well as the rest of the world. It has increased the propensity to reduce expenditure on overheads and this includes office equipment. Firms may not be willing to invest in new office equipment at a time when most businesses are downsizing reducing staff and cutting overheads to stay profitable. This trend could have an effect on the new product launch.
Social. Employers are now beginning to realize the importance of ergonomics and how better workplace equipment can contribute to increasing employee health and productivity. In India there is no system of workers compensation and medical insurance coverage varies from region to region(Jain, Trehan &Trehan 2011). To lower absenteeism, increase productivity and reduce employee turnover employers are increasingly looking to make the workplace more employee friendly. This trend is still in its beginning phases but is gaining momentum. 3m’s product launch of the adjustable keyboard would benefit from this trend.
Another social trend is the rise of the middle class in India (Shaikh, 2006). These form the majority of the country’s workforce and would be the end users of the product that 3m hopes to launch in the market. The middle class working population have a remarkable work ethic and a penchant for hard work which has driven the country’s remarkable economic success.
Technological. The country has a very strong technological infrastructure especially with regards to computer technology. There is strong emphasis on software as well as hardware development in the Indian computer industry (Uppal and Mishra 2009). Therefore a product based around accommodating computer technology would find a strong market in the country especially in cities such as Hyderabad, Chennai and Bangalore which are information technology centers in the country.
I feel that 3m should target the IT companies in Hyderabad Chennai and Bangalore for its new adjustable keyboard tray. IT companies have to portray the image that they have a modern office environment utilizing the latest technology and they would be an ideal target market for 3m in India. Also since 3m is a technology company in itself it probably already has most of the IT companies in its list of clientele and can probably cross sell this new product to them. I feel this would be a good strategy to gain market share for the new product launch.
Based on the above analysis it looks like the external business environment presents a favorable climate for the launch of 3M’s adjustable Keyboard tray. There are certain key factors that the company must consider in its product launch. The first is that this is an election year in India and there is risk that the new government would bring in policies not conducive to global investment. Therefore the launch should be done either before the election happens or be delayed till after the election once the new government’s policies regarding foreign investment become clear.
The second important element in planning the product launch is the selection of the target market. From the analysis we discovered that the largest target market for this product in terms of demographic is India’s growing middle class workforce. It is this particular demographics who would be the end users of this product. Since they are the end users it would make sense to target them in advertising and marketing campaigns since they would have a say in the way their workstation is designed
The third important factor is to identify a particular industry in the marketing campaign. Our target population is hired by a variety of industries including the IT industry which is the fastest growing industry in the country. Therefore it would make sense to target the IT industry especially when the brand 3m is a well-recognized one in this industry and already enjoys a good reputation among potential customers.
If 3m considers the three above factors identified through the PEST analysis and incorporates them in the product launch strategy the company will achieve success in the Indian market. If it chooses to ignore these factors it stands the risk of losing potential customers and not benefiting fully from external environmental forces.
Griffin, R. W. and Pustay, M. W. International Business: A Managerial Perspective. London:2006. Prentice Hall.
R.K Uppal, Bishnupriya Mishra. Business Environment in India: Some Aspects. 2009 New Century Publications
Shaikh .Business Environment, 2006 Pearson Education India.
TR Jain, Mukesh Trehan, Ranju Trehan .Indian Business Environment. 2012 New Delhi, FK Publications
TR Jain, Mukesh Trehan, Ranju Trehan Indian Economy and Business Environment 2011 New Delhi, FK Publications