BUSINESS ENVIRONMENT Business environment Business environment may be

BUSINESS ENVIRONMENT

Business environment : - Business environment may be defined as a set of external factors such as economic factor, socioculture factor , government and legal factors , demographic factors , which are uncontrollable in nature and affect business decisions of a firm or a company. Business environment is always changing and uncertain According to Gerald bell “An organization’s external environment consists of those things outside an organization such as customers, competitors , govt. units suppliers , financial firms and labor pools that are relevant to an organization operations. ”

Business environment can be divided into two parts: üInternal Environment v. Promoter’s/Shareholder’s v. Mission/Objectives v. Management Structure v. Company Image/Brand Equity v. Human Resources v. R&D v. Financial Resources

üExternal Micro Macro Environment (Task/Operating Environment) (General/Remote Environment)

Micro Environment of Business : - Micro environment consists of forces in the company’s immediate environment that affects the performance of the company. Micro factor may effect different firms in same industry in different ways. When competing firm in industry have same micro factors , then the success depends upon how effectively they deal with these elements. According to Charles Hill and Gareth Jones “ A company’s micro environment consists of element that directly affects the company such as competitors , customers and suppliers. ”

Various micro environment factors are as follows: ØCompetitors Ø Suppliers ØCustomers ØLabor

Competitors : - Competitors plays a very important in business. Business has to adjust its various activities according to the behavior of its competitors. Various types of competitors are as follows • Desire competition • Generic competition • Product form competition • Brand competition

Labour : - In the big organizations, where hundred of workers are employed, the labour force is organized in the form of trade unions. The trade union interact with the management to discuss the problem faced the by workers. Sometimes trade union also pressurize the management for the fulfillment of their demand even resort to go to slow tactic like strikes etc. Supplier : - Supplier are the person who supply the input like raw material and components to the business. Supplier plays an important role in business environment. For the smooth functioning it is very important to have a reliable source of supply and there should be no uncertainty regarding the supply. Organization could even have multiple source of supply.

Customer : - Customers have direct impact on the micro business environment. A company may have different type of customer i. e. § Industrial customer § Retailers customer § Wholesaler customer To be successful, a business must try its best to know what people want and will buy. The consumer acceptance impose a constant challenge because non- economic factors such as attitudes, desire and expectations of people also influence consumer behavior.

Macro Environment of Business : - Macro Environment of Business consists of the broader economic , social , demographic , political , legal and technological setting within which the company and industry are placed. Various Macro environment factors are as follows : ØEconomic environment ØPolitical and government environment ØSocial culture environment ØNatural environment ØDemographic environment ØTechnological environment ØInternational environment

Economic Environment : - Economic Environment of business has reference to the broad characteristics of the economic system in which the business operate. The present economic system is complex one. The business sector has economic relation with the government, capital market, household sector and global sector. These sector together influence the trend and structure of economy. The survival and success of business is determined by the economic environment and various market condition. The external factor that determine the economic environment of the business are as follows : • Economic condition • Economic System • Economic policies • Economic Growth

Political and government environment : - Political environment refers to the influence by the three political institutions: • Legislature • Execution • Judiciary Legal and political environment provides a frame work within which the business is to work and its success depend upon the success with which it can face the various challenges comes out of the political and legal framework.

Socio- culture environment : - Socio- culture environment include the total social culture within which the organization operate. Culture consists of the cultivated behavior of the individual with in the society. Socioculture include the people attitude towards the work, role of family, marriage, religion, education, social responsibility of business. From marketing point of both caste and class plays an important role in deciding the source and type of marketing. Natural Environment : - In natural environment we include geographical and ecological factor. These factors include : • Natural resources • Weather and climate conditions • Location aspects • Port facilities.

Demographic Environment : - Demographic Environment include size , growth rate , age and sex composition of the population , family size , educational level , caste and religion. Demographic factor affects the demand of goods and service. Market with growing population and income are growth market as increasing population indicate growing demand for product. More population also supply easy labor. International environment: - Another environmental factor which is fastly emerging is the international environment. Implications of the global environment are as follows – • Due to liberalization , Indian companies are forced to view business view from the global prospective • World is becoming small in size due to transport and communication facilities so there is no safe market. • Facing new political and legal uncertainties.

Technological environment: - In today’s world a business has to adopt technical changes from time to time. Constant innovation is necessary because the purpose of every business is to create and satisfy the customer , therefore every business enterprise have two basic functions i. e. • Marketing • Innovation Technological environment also include research base of decisions. Research identify the customer need and provide information for target setting and programming the complete marketing effort. Innovations helps by the establishment of research and development market in the enterprise.

Nature Of Business Environment: - The organization environment are multidimensional. The multidimensional features are as follows – • Complexity • Volatility • Capacity

Complexity: - The external environment of an organization may range from simple to complex. The degree of complexity refers to range of activities which are involved in organization. More the number of activities, higher the complexity and viceversa. Organization working in complex environment have to process a large variety of information to work successfully whereas organization working in simple environment need not to do that. Volatility: - When the rate of change in environment is insignificant, it is termed as a stable or static environment. But the environment of modern organization is dynamic because of increased rate of change. The environment volatility affects the task performance of organization. More the volatility, more will be the uncertainty in task performance. Uncertainty affects the ability of organization to pre plan or to make decision about activities in advance.

Capacity: -The capacity of environment refers to the degree to which it can support growth. More the resources of the organization , better the organization perform at the time of scarcity. Easy availability of labor or other factors is favorable for firm whereas scarcity of labor and other factors will create problems for the firm.

Different types of business environment : - Ross A Webber has identified three types of environment as follows: - ØStable environment ØChanging environment ØTurbulent environment

Complexity and Diversity of Business Environment in the 21 st century Coping with the complexity of today’s business environment is not about predicting the future or reducing risk. It’s about building the capacity, in yourself, your people, and the organization to adapt continuously and learn speedily, in order to maximize the chances of seizing fleeting opportunities.

Complex environments, complex organizations Complexity is one of the salient hallmarks of the 21 st century. It’s evident not only in business, but in every facet of the globalized world in which we live. • Interconnection of Countries • Interconnection of Industries • Interconnection of Companies • Interconnection of People • Diversity

Diversity • Diversity in business models • Diversity in management systems • Diversity in employees • Diversity in customers, suppliers

Dealing with complexity & Diversity • By departmenatation & Segmentation policy • Distribute leadership • Build expertise and real-time communication • Design a learning organization that can improvise • By Building a common interaction server

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