Business Environment Learning objectives Business Environmental scanningmeaning nature
Business Environment • Learning objectives: Business Environmental scanning-meaning, nature and scope Economic and non-economic environment Interaction between internal and external environments Overview of political, socio-cultural, legal technological Global environment
Business Environment What is Business? Business is an activity which involves buying and selling of goods & services. Modern business covers a complex field of industry and commerce which involve activities related to both production and distribution. These activities on the one hand satisfy societal need and desires and on the other hand bring profits to business firms. All the business activities are normally motivated by profits, in case , any of these activities is carried out by some organization for the purpose other than profit seeking, it cannot be justifiably considered as business.
Business Environment What are the contribution from business? Economic growth creates employment opportunities Provides all kinds of goods and services which we need for consumption
NATURE OF MODERN BUSINESS Large size Oligopolistic character Diversification Global reach of modern business Technological orientation Change Government control
Business Environment by definition is something external of an individual or an organization. Therefore in strict sense, business environment refers to an external factors which have a direct or indirect bearing on the activities of business. Certain aspects of both internal and external environment pose a threat to business, other aspects provide opportunities for business growth.
ENVIRONMENTAL SCANNING • What do you mean by Environmental scanning? • It is the process of monitoring & collecting the information about the various current and potential changes taking place in the environment to facilitate in decision making and problem solving.
ENVIRONMENTAL SCANNING • Objectives of Environmental scanning: 1. To provide and understanding of current and potential changes taking place in the environment. 2. To provide inputs for strategic decision-making. 3. To facilitate and foster strategic thinking in organization.
Benefits of Environmental scanning • “Firms which systematically analyze and diagnose the environment are more effective than those which don’t” 1. Development of broad strategies and long –term policies of the firm. 2. Development of action plans to deal with technological advancements. 3. To foresee the impact of socio-economic changes at the national & international level. 4. To analyze the competitors strategies and formulation of effective counter-measures. 5. TO keep oneself dynamic.
Business Environment-Internal Factors • Internal Environment : • Value system, Goals and objectives, Management structure, • Relationship among the various constituents, • Physical assets, • Technological capabilities • Human, financial and marketing resources make the internal environment of business.
Business Environment-Internal Factors • Internal Environment • : Persons holding top positions in certain modern enterprises have some values which influence their policies, practices and overall internal environment. • Ex: JRD TATA –Value system – responsibilities towards his employees did some commendable work in the field of labor welfare. • Attitude of TATA’s to employ 8 disabled persons out of their total workforce of more than sixty thousand. • The company value system need not be always positive. totally negative. • Cases of pharmaceutical companies selling banned drugs world over. • Rational firms attempt maximize long-run profit. It can be
Business Environment-Internal Fact • There are often differences in the goals and objectives of the various firms, which in turn, lead to differences in the overall internal environment and also in priorities, policies and direction of development. • Ex: Corporate enterprise professionally managed or family controlled. • Board of Directors - dynamic entrepreneurs capable of taking quick decisions or the BOD may be dominated by persons with conservative or bureaucratic outlook. • Nominees of Financial institutions having large holdings – their decision making. • Conflicts among BOD’s, Erosion of shareholders confidence in the BOD’s • Serious differences among the senior executives officers on critical matters are criticalfactors in the Co’s internal working conditions.
Business Environment-Internal Factors • Functioning & Competitiveness of a company are very much influenced by physical resources, Production technology, R&D work and distribution logistics. • Co’s R&D activity and the speed at which technological changes occur determine Co’s internal environment which in turn influence Business decisions. • Quality of Human Resources of a Company, • Depends on Commitment, attitude and morale of the employees also have an impact on business as an internal factor.
Business Environment-External Factors • External Environment of Business consists of institutions, Organizations and forces operating outside the company. • External Environment of business may be classified into : • A) Micro Environment • B) Macro Environment • Micro environment refers to such players whose decisions and actions have a direct bearing on the company. Since modern business broadly has two aspects, Viz, Production and selling of goods,
Micro Environment of Business • The micro environment of business can be Input Suppliers divided : Publics Workers & their unions BUSINESS Customers Competitors Marketing Intermediaries
Micro Environment of Business Micro Environment has great relevance on Co’s business operations. The players in micro-environment do not effect all the companies in an industry in the same way. Their decisions and actions often differ in accordance with the size, capability and strategies of each company. Ex: 1. Suppliers of inputs are more accommodating if the Company is large. 2. Competitor does not mind starting price war if the rival co. is small
Business Environment • Suppliers of inputs: Important factor in Co’s success is low cost of production of goods. • Availability of raw materials without any interruption especially raw materials thru out the year lessen the financial burden on the company. • Sometimes monopolistic suppliers manages to secure monopoly control over the supply of some strategic raw material, such as iron ore or copper, it starts regulating its supply to generate maximum possible monopoly profits. • No Co. should depend for the supply of some input on single source. • Supply management should be high on agenda of the company.
Business Environment-Internal factors • Workers and their Unions: • Labor is an important input in production. • Any policy that disturbs labor peace at the company level may adversely affect its competitiveness. • Also constant conflict between labor and management will not allow the company to grow and overtime may transform into a sick unit.
Business Environment-Internal factors • Customers: Demand for product – enterprises, institutions & the individuals, business government. • Universally loyalty depicts customer accepted fact that the satisfaction of satisfaction. customers is the ultimate bench mark of the Co’s success. •
Business Environment-Internal factors • Marketing intermediaries: Wholesalers, retailers, distribution firms agents etc constitute an important element. • Co. lacking its own distribution channels can’t afford to have conflict or strained business relations. • Some Co’s adopt direct mail or data base marketing. • EX; nestle –slump in demand for baby products – France could have responded to this situation by lowering production laying-of • • CO. workers.
Business Environment-Internal factors • Competitors: Brand Competition: affect sales operations of the business firms. • A Company encounters various forms of competition. The most competition which a company’s products faces is from common differentiated products of other companies. • Ex: In the Air conditioner market Voltas air conditioner faces competition from other branded air conditioner such as Videcon, Elgi, Samsung companies. • Public : Environmentalists, consumers protection groups & media persons may influence both Production & Sales.
Macro environment • Macro environment of business consist of the following factors: • A. Economic Environment • National • Global • B. Non –Economic Environment • Political • Socio Cultural • Demographic • Technological • Natural
Economic Environment of the Business (National) • Business enterprise is essentially an economic institution. It conducts its activities in the market system with the objective profit maximisation. • In Modern economy there are five sectors contribute to the development of the economy they are: The Business sector The household sector The capital market The Government These factors determine the prospects of business activity. • • • In a recessionary situation business firms encounter steep fall in effective demand leads to business slowdown. Developed financial system –precondition for the efficient mobilization of financial resources for the business.
Global Environment • Globalization- expansion of business activities across boundaries of the nation states. • It refers to a process of increasing economic openness growing economic interdependence and deepening economic integration between countries in the world economy.
Global Environment • Over the past ten years the Indian economy is integrates into the global economy. • The three policy measures initiated to realize the objectives of globalization are: • 1. Exchange rate adjustment and rupee • convertibility. • 2. Import liberalisation & • 3. Opening upto foreign capital
- Slides: 24