Amul (Anand Milk Union Limited) is a dairy cooperative based in the Indian state of Gujarat. It was founded in 1946 and has since grown to become one of the largest dairy cooperatives in the world, with over 3.6 million milk producer members. The cooperative is famous for its brand of dairy products, which includes milk, butter, cheese, ice cream, and a variety of other food items.
Amul was founded with the goal of providing dairy farmers in the region with a stable market for their milk, as well as access to modern dairy technology and practices. Today, Amul is considered a model for dairy cooperatives around the world and has helped to transform the dairy industry in India.
PESTKE Analysis of Amul
This is the detailed PESTLE Analysis of Amul to better understand the external environment in which they operate and make informed decisions to mitigate risks and capitalize on opportunities.
Political Factors
India has been facing numerous issues that threaten the political stability of the country, including terrorist activities, and caste and religious based conflicts. For businesses, political instability is a barrier in smooth operations and it also causes disruption in the efficiency. Frequent protests and rising religious nationalism are also areas of concern for organizations.
Rampant corruption is a critical area that has negatively affected the businesses from flourishing (Mukherjee, 2020). Even large scale organizations at times engage in fraudulent activities. Amul has become a part of the business controversy after corruption of Rs 450-crore fraud came into notice.
There is an ongoing conflict between BJP and Congress political parties in India. Amul inadvertently became a part of the conflict as the board of directors comprises of members from both political affiliations. A member of BJP was accused of engaging in business transactions that were damaging the company’s profitability, such as offering low cost to private buyers (Rajshekhar, 2017).
The political issues are having a negative effect on the Indian dairy sector as the political conflict causes disrupted supply chain and broken alliances. The dairy segment of Gujarat is specifically being influenced due to the ongoing political issues and the lack of alignment between the directors belonging to different political backgrounds.
Economic Factors
Economic growth and prosperity of a region becomes a major factor that attracts local and foreign businesses. India is included among the developing economies owing to the GDP growth and improving economic indicators. COVID became a major setback for the Indian economy as poverty and unemployment rate increased.
During COVID it has experienced economic downfall and many industries were adversely impacted. However, Amul was able to expand the business operations and introduced a greater diversity of product portfolio to the market. While other organizations were struggling to survive, Amul achieved a turnover growth of 2% during the COVID (Umarji, 2022).
Indian economy is still struggling to overcome to impact of COVID and dealing with high unemployment and comparatively slower GDP growth is expected in 2023-202. Positive economic trends are expected in the coming years which are likely to benefit the company. It can further diversify the product range and be a notable competitor in the dairy and FMCG segment.
Social Factors
Amul has gained benefit from the growing population of the country, which is estimated to be among the countries with high population growth rate. A higher population growth rate indicates a greater market that would be the potential consumers of the dairy products. Since dairy items are a part of almost every household, this trend is beneficial for the company.
The company has successfully established significant brand recognition in India. The image of Amul girl has enabled the company to establish strong ties with the public, making the company a success in the country. The mascot is used to advertise as well as give one line message about the current events happening in the country (Sambamurthy, 2021).
The pandemic brought changes in the buying preferences of the public. During pandemic the purchase of fresh milk was negatively affected as people were avoiding the purchase of milk from suppliers that were offering home to home delivery. The fear of COVID resulted in a lower demand of home to home milk suppliers.
The consumer trends are changing with time as people are becoming more inclined towards vegan and plant based diet. The rising concern about the animal mistreatment from People for the Ethical Treatment of Animals (PETA) has been building pressure on the company to re-consider its business model and product range and shift to vegan products.
Technological Factors
Technology plays a vital role in the development of organizations in an industry. Since the IT sector is rapidly developing in India, the dairy sector also benefits from the upgrade in technological domain. Amul has created a successful market presence through the use of technology in creating efficiency of its operations.
The availability of technology has helped the company to improve its tracking of the milk supply, testing the quality and managing the data through cloud. The strong IT infrastructure adopted by Amul was made possible due to the technological advancements available for the dairy industry in India (Singal, 2020).
Legal Factors
The business regulations such as employment laws, labor rights and human rights guide the business practices of organizations in the dairy industry. Essential Commodities Act, 1955 also guides dairy companies in operating within the legal framework. Amul has implemented equal employment opportunity as females are encouraged to join the workforce.
Amul is a cooperative, and the dairy cooperatives have their own set of business dynamics. Moreover, the district dairy unions guide the corporate behavior of the company. Business policy changes and reforms have made it easier to manage collection and distribution of milk, and carry on the company business model.
Environmental Factors
Indian government has shown emphasis on the sustainable business practices and encourages organizations to become eco- friendly. Ministry of Environment and Forests (MoEF) has developed regulations pertaining to the sustainable business behavior. The Environmental Protection Act 1986 also offers guidelines to organizations operating in India.
Following the environmental protection laws and guidelines, Amul is investing in sustainable business practices such as energy conservation and waste management. The company is also focusing on the use of renewable energy as a means to lower environmental impact and become green.
Vision 2030 has highlighted the environmental goals that the company aims to achieve. Some of the goals specified are reduction of carbon emission up to 35% and lowering 20% of chemical consumption (Amul, 2022). One way the carbon emission is being controlled in through increased tanker capacity which would lower number of trips required for supplying milk.
Conclusion
Amul has maintained a strong position in the market despite adverse impact due to pandemic and political turbulence. Overall, the company has positive future outlook as the growing economy and consumer demand supports its development.
References
Amul (2022). AmulFed Dairy Sustainability Report. Retrieved from: https://amul.com/files/pdf/annual_sustainability_report_2704.pdf
Mukherjee, A. (2020). Why I’m Losing Hope in India. Bloomberg. Retrieved from: https://www.bloomberg.com/graphics/2020-opinion-india-and-modi-are-losing-china-battle/
Rajshekhar, M. (2017). The Amul story: How politics is hurting the economics of Gujarat’s milk cooperatives. Scroll.in. Retrieved from https://scroll.in/article/858576/the-amul-story-how-politics-is-hurting-the-economics-of-gujarats-milk-cooperatives
Singal, N. (2020). How integrated IT infrastructure helped Amul steer through coronavirus impact. Business Today. Retrieved from: https://www.businesstoday.in/latest/corporate/story/how-integrated-it-infrastructure-helped-amul-steer-through-coronavirus-impact-259870-2020-06-01
Umarji, V. (2022). Amul bucked Covid blues, launched more than 100 products during lockdown. Business Standard. Retrieved from: https://www.business-standard.com/article/companies/amul-bucked-covid-blues-launched-more-than-100-products-during-lockdown-122072200909_1.html