The purpose of this assignment is to understand the business strategy formulation process for companies against the backdrop of a chosen industry by undertaking a situational analysis for the same.
In this assignment, the environmental and organizational information has been analyzed using various analytical approaches and the SFAS matrix technique. Strategic options have been generated using the TOWS matrix and business strategies have been suggested for the corporations of the industry.
The industry chosen for this assignment is the Fertilizer industry in the context of Indian scenario.
KEY SUCCESS FACTORS
Based on the detailed understanding and analysis of the industry, the following key success factors were identified:
Agriculture demand and prices
Raw material – availability and prices
Investment for capacity expansion
Government subsidies and other regulations
PORTER’S 5 FORCES ANALYSIS
A Porter’s 5 forces analysis was also conducted to further scan the environment and the following was obtained:
Threat of New Entrants: LOW:
High capital investment with high cost and low returns
Difficult to acquire govt. approval for gas allocation
Shortage of natural gas in India
Production of DAP costly; 65% of requirement is imported
Delays in subsidy payments leads to troubles in management of funds
Bargaining Power of Suppliers: HIGH:
Fertilizers industry is a captive market in India
Very limited number of suppliers
High prices of inputs and less diversity of inputs
Raw materials are scarce being natural resources
Heavy dependence on imports for meeting requirements of inputs / intermediaries / products
Bargaining Power of Buyers: LOW:
High demand for agriculture products leads to high requirements for fertilizer products
Nutrients level deplete in soil with each harvest of crop; forcing demand for fertilizers, else deficiency of nutrients reduces crop yield
High demand of fertilizers with relatively low productivity per unit of fertilizer consumed; leading to higher demand
Low productivity of substitutes
Lack of product differentiation
Threat of Substitutes: MEDIUM:
Bio fertilizers, organic fertilizers, manures, vermi-compost may serve as substitutes
Natural fertilizers are not as effective as chemical fertilizers
Animal manure is not suitable for commercial production
It is a highly government regulated industry
Pricing subsidies provided by government
Private players are trying to improve supply chain through retail network
Industry is witnessing already high capacity utilization; players are not suffering from under-utilized capacities, hence rivalry is low
Uniform prices across industry leads to indirect mutual co-operation
The fertilizers industry operates in public, private and co-operative sectors with major urea production capacity owned by public and co-operative units, and phosphatic production capacity owned by private players.
In the public sector, National Fertilizers Limited (NFL) is the largest player with 3.2 MTPA production capacity of urea fertilizers. In the private sector, Coromandel Fertilizers Limited (CFL) is the largest player with 3.3 MTPA production capacity of phosphatic fertilizers. Indian Farmers Fertiliser Cooperative Limited (IFFCO) is the largest co-operative player with 3.7 MTPA of urea and 2.7 of phosphatic production capacity.
For the purpose of developing the SFAS and TOWS matrix and analysing the companies of the fertilizers industry, National Fertilizers Limited (NFL) and Coromandel Fertilizers Limited (CFL) have been selected, one from the public sector and private sector each. GENERATING A STRATEGIC FACTORS ANALYSIS SUMMARY MATRIX
The SFAS matrix will be constructed by creating an EFAS and IFAS matrix using the opportunities and threats for the external factors and the...
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