Macro and Micro environmental analysis

Political Factors that Impact ONGC

The political factors that may impact the profitability or chances of survival of the company are quite
diverse. The political risks vary from sudden changes in existing political regimes to civil unrest to
major decisions taken by the government. In cases of possible multinationals, one may also include
political factors that take place/ affect not only the host country but also all countries that contain
business operations, or that may engage in trade with ONGC

To properly appraise the extent of the overall systematic political risk that ONGC may be exposed to,
the following factors should be considered before taking part in any investments:

The level of political stability that the country has in recent years.

The integrity of the politicians and their likelihood to take part in acts of corruption, as the resulting
repercussions may lead to possible impeachments or resignations of high level government
employees.

The laws that the country enforces, especially with regards to business, such as contract law, as they
dictate what ONGC is and is not allowed to do. Some countries, for example, prohibit alcohol or have
certain conditions that must be fulfilled, while some government systems have inefficient amounts
of red tape that discourage business.

Whether or not a company’s intellectual property (IP) is protected. For example, a country that has
no policies for IP protection would mean that entrepreneurs may find it too risky to invest in ONGC

The trade barriers that the host country has would protect ONGC; however, trade barriers that
countries with potential trade partners would harm companies by preventing potential exports.

A high level of taxation would demotivate companies like ONGC from maximizing their profits.

The risk of military invasion by hostile countries may cause divestment from ventures.

A low minimum wage would mean higher profits and, thus, higher chances of survival for ONGC

Economic Factors that Impact ONGC

Economic factors are all those that pertain to the economy of the country that ONGC, such as
changes in the inflation rate, the foreign exchange rate, the interest rate, the gross domestic
product, and the current stage of the economic cycle. These factors, and their resulting impact on
aggregate demand, aggregate investment and the business climate, in general, have the potential to
make a company highly profitable, or extremely likely to incur a loss. The economic factors in the
PESTEL analysis are macroeconomic.
The economic factors that ONGC may be sensitive to, and in turn should consider before investing
may include the following:

The economic system that is currently operational in the sector in question- whether it is a
monopoly, an oligopoly, or something similar to a perfect competition economic system.

The rate of GDP growth in the country will affect how fast ONGC is expected to grow in the near
future.

The interest rates in the country would affect how much individuals are willing to borrow and invest.
Higher rates would result in greater investments that would mean more growth for ONGC

However efficiently the financial markets operate also impact how well ONGC can raise capital at a
fair price, keeping in mind the demand and supply.

The exchange rate of the country ONGC operates in would impact the profitability of ONGC,
particularly if ONGC engages in international trade. The stability of the currency is also important- an
unstable currency discourages international investors.

A high level of unemployment in the country would mean there is a greater supply of jobs than
demand, meaning people would be willing to work for a lower wage, which would lower the costs of
ONGC

Social Factors that Impact ONGC

The social factors that impact ONGC are a direct reflection of the society that ONGC operates in, and
encompasses culture, belief, attitudes and values that the majority of the population may hold as a
community. The impact of social factors is not only important for the operational aspect of ONGC,
but also on the marketing aspect of the organization. A thorough understanding of the customers,
their lifestyle, level of education and beliefs in a society, or segment of society, would help design
both the products and marketing messages that would lead to a venture becoming a success.

The social factors that affect ONGC and should be included in the social aspect of the PESTEL analysis
include the following:

The demographics of the population, meaning their respective ages and genders, vastly impact
whether or not a certain product may be marketed to them. Makeup is mostly catered to women, so
targeting a majority male population would be less population than targeting a population that is
mostly female.

The class distribution among the population is of paramount importance: ONGC would be unable to
promote a premium product to the general public if the majority of the population was a lower
class; rather, they would have to rely on very niche marketing.
To some extent, the differences in educational background between the marketers and the target
market may make it difficult to relate to and draw in the target market effectively. ONGC should be
very careful not to lose the connection to the target market's interests and priorities.

ONGC needs to be fully aware of what level of health standards, reactions to harassment claims and
importance of environmental protection prevail in the industry as a whole, and thus are expected
from any company as they are seen as the norm.

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Technological Factors that Impact ONGC

Technology can rapidly dismantle the price structure and competitive landscape of an industry in a
very short amount of time. It thus becomes extremely important to constantly and consistently
innovate, not only for the sake of maximizing possible profits and becoming a market leader, but
also to prevent obsolescence in the near future. There are multiple instances of innovative products
completely redesigning the norm for an entire industry: Uber and Lyft dominate the taxi cab
industry; smartphones have left other phones an unviable option for most et cetera.

The technological factors that may influence ONGC may include the following:

The recent technological developments and breakthroughs made by competitors, as mentioned

above. If ONGC encounters a new technology that is gaining popularity in the industry in question, it
is important to monitor the level of popularity and how quickly it is growing and disrupting its
competitors’ revenues. This would translate to the level of urgency required to adequately respond
to the innovation, either by matching the technology or finding an innovative alternative.

How easy, and thus quickly, will the technology be diffused to other firms in the industry, leading to
other firms copying the technological processes/ features of ONGC

How much an improvement of technology would improve/ transform what the product initially
offers. If this improvement is drastic, then other firms in the industry suffer more heavily.

The impact of the technology on the costs that most companies in the industry are subject to have
the potential to increase or reduce the resulting profits greatly. If these profits are great in number,
they may be reinvested into the research and development department, where future technological
innovations would further raise the level of profits, and so on, ensuring sustainable profits over a
long period of time.

Environmental Factors that Impact ONGC

Different industries hold different standards of environmental protection in their head as the norm.
This norm then dictates what every company should aim for, in the least, to prevent becoming the
target of pressure groups and boycotts due to a lack of environmental conscientiousness. A company
in the textile industry, for example, is not expected to incur the same level of pollution and
environmental degradation as an oil company. The new consumer, armed with the interest and the
knowledge it carries, prefers to give its business to companies it views as more ethical, particularly
about the environment in the wake of global warming.

The environmental factors that may significantly impact ONGC include:

The current weather conditions may significantly impact the ability of ONGC to manage the
transportation of both the resources and the finished product. This, in turn, would affect the delivery
dates of the final product in the case of, say, an unexpected monsoon.

Climate change would also render some products useless. For example, in the case of textiles, in
countries where the winter has become very mild due to Global Warming, warm winter clothes have
much less of a market.

Those companies that produce extremely large amounts of waste may be required by law to manage
their environmental habits. This may include pollution fines and quotas, which may place a financial
strain on ONGC

If ONGC should (knowingly or unknowingly) contribute to the further endangerment of an already

endangered species may face not only the consequences from the law but also face a backlash from
the general public who may then boycott ONGC in retaliation.

While relying, in any percentage, on renewable energy may be expensive, it often receives support
not only from the government but also from its customer base, who may be willing to pay a
premium price for the products that ONGC may produce.

Legal Factors that Impact ONGC

The government institutions and frameworks in a country, while technically also political and thus
subject to whichever political party holds the majority in a government body, are also legal and thus
should be considered in a PESTEL analysis. Often ONGC policies on their own are not enough to
efficiently protect ONGC and its workers, making ONGC appear an undesirable place of employment
that may repel skilled, talented workers.

The legal factors that deserve consideration include the following:

Intellectual property laws and other data protection laws are, as mentioned earlier, in place to
protect the ideas and patents of companies who are only profiting because of that information. If
there is a likelihood that the data is stolen, then ONGC will lose its competitive edge and have a high
chance of failure.
Discrimination laws are placed by the government to protect the employees and ensure that
everyone in ONGC is treated fairly and given the same opportunities, regardless of gender, age,
disability, ethnicity, religion or sexual orientation.

Health and safety laws were created after witnessing the horrible conditions that employees were
forced to work in during and directly after the industrial revolution. Implementing the proper
regulations may be expensive, but ONGC has to engage in it, not only due to the law but also out of
ONGC's personal feeling of ethical and social responsibility to other human beings.

Laws are also placed to ensure a certain level of quality or reasonable price for certain products to
keep the customer safe and prevent them for being provided. The industries this applies to find
often their costs elevated.

Value Chain

Value Chain Analysis

company value chain

i) Primary Activities

Ø Supply Chain Management: VAS, raw materials, inventory management

Ø Operations: assembly, package

Ø Distribution: Distributor, retailer delivery, network, hot line, USD dials.

Ø Sales and Marketing: advertising, market research and planning, dealer

Ø Service: GPRS installation, VAS, Hotline, complaints, care centers.

ii) Support Activities

Ø Product R&D, Technology and Systems development: equipment design, software,

telecommunication

Ø Human Resource Management: recruiting, hiring, training

Ø General Administration: general management, finance, legal and regulatory affairs, safety &
security, overhead functions

Competitor analysis:

Competitor Analysis is an important part of the strategic planning process. In strategic management
Competitor analysis is an assessment of the strengths and weaknesses of current and potential
competitors. This analysis provides both an offensive and defensive strategic context to identify
opportunities and threats.

Company

Current Price

Change (%Chg)

TODAY
Low / High

EPS

PE

Oil And Natural Gas Corporation Ltd.

319.60

0.25 (0.08%)

318.75 / 321.90

13.07

24.46

Cairn India Ltd.

361.00

2.55 (0.71%)

358.65 / 362.00

4.68

77.17

GAIL (India) Ltd.

369.75

2.15 (0.58%)

367.40 / 371.10

11.66

31.71

Hindustan Oil Exploration Company Ltd.

51.30

-0.20 (-0.39%)

51.10 / 51.50

-1.22

-42.21

Jindal Drilling & Industries Ltd.

204.00

-3.30 (-1.59%)

204.00 / 205.00
8.98

22.71

Oil India Ltd.

482.75

0.85 (0.18%)

480.00 / 483.00

8.08

59.71