1.

Discuss internal, domestic and global environments of

business revealed by this case?

Internal / Domestic environments

 The business decision making process in Indian govt.

sector is pretty slow which leads to unnecessary loss of time and money. In
this case, the slow process lead the to loss of opportunity to buy a firm (premier

Oil)

 There are much more than required levels of clearances that

needs to be taken to acquire a company abroad. Application is reviewed by
members of special committee of RBI, Finance and commerce ministries.
Since three organizations are involved in the clearance process, it increases the
time to take a concrete
decision. It would have been better if there was a single window from where all

required clearances could be taken.

 Indian opened its market in 1991 and by 1998 it should

have such a policy already in place to avoid unnecessary delay. This is an
example of inability to predict the future business opportunities

Various issues relating to internal environment

 Bureaucracy management

 Lack of commercial sensitivity

 Lack of business sensibility

 Compulsion to refer matters o the government

 Lack of business urgency

Domestic environment
  Demand is more than the supply

 Seventy percent of the oil is imported

 Monopoly of suppliers over demand

 Government control over the prices and distribution

Global Environment

30% of hindrance is due to domestic environment

 The global environment is very much competitive. There are

companies which will take away the chance in just a blink of an eye.

 The policies are company friendly and it allows companies

to acquire other companies abroad seamlessly.

 They had better government regulation and faster process

which resulted in their getting govt. clearance quickly and take away the deal
from IOC.

 Rising demand for energy

 Restricted supply situation

 Large share of price negotiated for long term

 2. Discuss whether it is the domestic or global environment that hinders the
globalization of Indian business

Answer: 70% It is the domestic environment which hinders the globalization of

Indianbusiness.

The policies were not in place at the time the markets were opened to foreign players.
It’s a misconception that in India policies cannot work. India should learn from
countries like Korea which initially strengthened its internal industries
before opening its economy to the world but India failed to strengthen the
companies, especially the govt. sector. Main reason for this was the faulty
policies and failure to implement some good policies. Even though we make very
good policies on paper, we fail to implement it effectively. Most of the
companies in the govt. sector today are not making much profit as private
sectors. The govt. must look into this aspect as govt. sector companies are as
important
as private s sector companies.

So the basic flaws were

 Lack of effective policy

 Lack of political stability

 Lack of foresight in decision making and timeless in action

 Lack of effective coordination between the government and business

30% of hindrance is due global environment

 Overseas trade laws

 Dollar function in the open market

 Arranging of funds

 Product movement restriction

 Technology transfers
 3. Even if Elf had not acquired Premier Oil, what would have been the impact of
the delay in the clearance on IOC?

Answer: Sincethe oil prices rose to $24 from $11 in the meanwhile the cost of
acquiringthe company would have more than doubled. It would have also showed
poor business image in the world business the 4 mil Mt will now cost higher than the
actual price thus will reduce the saving oppurtunity

4. What would have been the significance of the foreign acquisition to IOC?

Answer: Supply of oil to India: – this would have eased off much
pressure off the Bombay high refinery which is currently producing 80% of
domestic crude oil.

 Forex reserved: IOCL would have earned foreign exchange

reserves for India by selling the product in the world market.

 Better protection from oil shocks: - India would have

been better insulated from fluctuating oil prices in the world market if it’s
domestic companies can produce most of the oil needed for India.

5. What are the lessons of this case?

Answer: forecasting of opportunities: the company should be able to predict the future
business opportunities and make preparations in advance t avoid any unnecessary
delay in implementing it. This will give the advantage of tapping the business
opportunities and give the first mover advantage which results in faster decision
making process or if you don’t you might loose the opportunity to the competitors
and I would also suggest that the Finance/ reserve bank committee should be
empowered to make the all the decisions , effective policy making and a proper co
ordination between the government and businesses