2.0 Liberalization and the context of business strategy
2.1 What is liberalization?
Liberalization refers to the relaxing of rules and regulations or policies of a government in a country. According to the scenario, in 1991, the Indian economy has been opened as a result of liberalization.
2.1.1 How did it affect the Indian automobile industry?
The Indian government continued to have a closed economy until 1991. By then Maruti Suzuki was the market leader of the automobile industry acquiring a market share of nearly 83.1%. But however the government decision of opening the economy in 1991 had significant affects on Indian automobile companies such as Maruti Suzuki. The main affect was the entrance of foreign competitors that made the industry very competitive and the situation made it difficult for domestic companies such as Maruti to retain its market share, which is clearly reflected by the drop of market share from 83.1% to 60.8%. This will lead to decline in the growth of India’s automobile industry. However there will be certain advantages on the Indian automobile industry such as the entering of resources from foreign countries which are cheaper than the resources in India. More access to technology will be another advantage to the Indian automobile companies from liberalization.
2.2 Defining the context of business strategy
The prime aim of a business strategy is to provide superior value, differentiation, and core competencies for an organization. (http://jobfunctions.bnet.com/abstract.aspx?docid=90501). Business strategy is a long term plan which adds value, differentiates and identifies key capabilities and capacities of an organization to make the best use of them.
2.3 Importance of Business Strategy
• The strategy shows a direction to the organization to reach company’s vision. • Gives an understanding about rapidly changing environment.
• Helps in overcoming problems.
3.0 Significance of stakeholder analysis
Any organization operating in the real world influences the environment or the people related and unrelated to it. Also certain individuals or groups of people also might have impacts on the organization. The individuals or groups of people who are interested or are influenced by an organization’s activities is called as stake holders. The stakeholders can be categorized as internal and external. According to the case study, Maruti Suzuki has started losing its market share after the liberalization. Therefore it is necessary for Maruti to carryout an analysis on different interests and impacts on interests of its stakeholders.
An analysis of stakeholders, their stakes and impacts of liberalization on each of these stake holders are shown below: 3.1 The stakeholder analysis of Maruti Suzuki
Interest: tax, sovereignty and prosperity
The government decision to liberalizatio0n led competitors to enter the market and this will lead to a loss in sovereignty and prosperity of country. The government intention to collect tax would be affected as Maruti’s profits might now come down due to increase in competition. • Competitors
Interest: effective competition, gaining dominant power
The competitor organizations which were seeking for competing opportunities were effected favorably from the government action of liberalization. They made it an opportunity to enter the Indian automobile industry and compete effectively. This strategy of competitors was successful as they were able to capture Maruti’s market share by attracting most of its customers. • Customers
Interest: quality, variation, low prices, customer care
The buyers, as they always look into new variations that are low priced and last for a long time have well preferred the foreign cars leading to a great fall in Maruti’s market share. (i.e. by 83.1% to 60.8%).
Interest: salary and...
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