The Business Environment Microenvironment Market environment Macro environment

The Business Environment Microenvironment Market environment Macro environment Prof. Arjun B. Bhagwat Department of Commerce, S. M. Joshi College, Hadapsar, Pune-28 F. Y. B. Com 1

The business environment There is a direct relationship between successful management and the influence and impact of environmental change F. Y. B. Com 2

The business environment • Change is a process of constant renewal and regeneration in every conceivable sphere of society • Business organisation as the central component of the business environment are naturally also subject to change F. Y. B. Com 3

The business environment • The interaction between the environment and a business organisation is an ongoing process that results in new problems and new opportunities F. Y. B. Com 4

The business environment: examples • • • Technological innovation Globalisation Growth of poverty Collapse of emerging markets Shift from manufacturing jobs to service jobs New ways of doing work F. Y. B. Com 5

Micro - Environment • Mission and objectives of the organisation • The organisation and its management , e. g. marketing , financial and purchasing management • Resources – human resources , capital and know how F. Y. B. Com 6

Market environment • Consumers – needs , purchasing power and behavior • Suppliers • Intermediaries • Competitors • Opportunities & threats F. Y. B. Com 7

Macro - environment • • • Technological environment Economic environment Social environment Physical environment Institutional – political environment International environment F. Y. B. Com 8

Strategic Management The set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives. F. Y. B. Com 9

The Balanced Scorecard Financial “To succeed financially, how should we appear to our shareholders? ” Customer “To achieve our vision, how should we appear to our customers? ” Vision and Strategy Internal Business Processes “To satisfy our shareholders and customers, what business processes must we excel at? ” Learning and Growth “To achieve our vision, how will we sustain our ability to Y. B. Com change. F. and improve? ” 10

Porter’s Five Forces Industry Competition Potential entrants Threat of new entrants Bargaining power of suppliers Industry competitors Suppliers Bargaining power of buyers Buyers Rivalry Among Existing Firms Threat of substitute products or services Substitutes F. Y. B. Com 11

Market environment • Interaction between business and its suppliers , consumers and competitors • Interaction can result in opportunities or threats to a business • Business awareness rely on – environmental scanning , market research and information management F. Y. B. Com 12

The Firm’s External Environment Remote Environment (Global and Domestic) • Economic • Social • Political • Technological • Ecological Industry Environment (Global and Domestic) • Entry barriers • Buyer power • Supplier power • Substitute availability • Competitive rivalry Operating Environment (Global and Domestic) • Competitors • Customers • Creditors • Labor • Suppliers THE FIRM F. Y. B. Com 13

Macroenvironment • Macro variables have an effect on the market environment , decision –making by management and on one another • Emphasis is on change caused by the uncontrollables and implications for management F. Y. B. Com 14

Macroenvironment Technology • Originates in research and development • New processes , methods & even approaches to management • Technology results in higher productivity • Source of competitive advantage F. Y. B. Com 15

Macroenvironment Economic environment • Influenced by technology , politics and the social and international environments. • Cross influences result with change in economic growth rate , levels of employment , consumer income , the rate of inflation , interest rate & exchange rates F. Y. B. Com 16

Macroenvironment Economic environment • Gross Domestic Product – total value of all goods and services produced within a country • 7 – 8 % signals an economy which grows fast to create jobs for its country • Exports more products than it imports and stable currency F. Y. B. Com 17

Macroenvironment • Inflation – higher rate than country’s major trading partners & international competitors results with a reduction in international competitiveness • Monetary policy – affects money supply , interest rates and strength of the currency F. Y. B. Com 18

Macroenvironment Economic environment • Fiscal policy – affects business and consumers through taxation and tax reforms F. Y. B. Com 19

Social environment • Demographic change – increasing or decreasing population rate • Urbanisation • Levels of education • Changing role of women • Consumerism • Social responsibility & business ethics F. Y. B. Com 20

Social environment • Hiv/Aids • culture F. Y. B. Com 21

Physical environment • Population & health patterns – land degradation, pollution, malnutrition and illness. • Food • Water • Energy and climate • Biodiversity F. Y. B. Com 22

Political – government environment • • Regulatory environment Labour laws Employment Equity Act 55 of 1998 Safety Health & Environment F. Y. B. Com 23

International environment • Globalisation – borderless world F. Y. B. Com 24