1. Business and its Environment
Meaning – Scope and Characteristics – Significance for
economic policies and decisions in Organisation
2. Global Environment
Nature of Globalisation – Manifestations of globalisation –
Challenges of international business – Strategies for going
global – India, WTO and trading blocks.
3. Technological Environment
Meaning – features – Impact of Technology – Technology and
Society – Management of Technology
4. Political Environment
Political institutions – Legislature – Executive Judiciary – The
Constitution of India – The Preamble – The fundamental rights –
Rationale and extent of state intervention – Role of Government in
5. Economic Environment
Characteristics of Indian Economy, Factors affecting economy,
Economic resources (natural, industrial and technological)
Impact of Liberalisation, Privatisation and Globalisation on
6. Government Policies:
Impact of Fiscal, Monetary, EXIM policy and Industrial policy on
Business (Latest policy measures).
7. Natural Environment:
Meaning and influence on business.
Business & its Environment – An Introduction
Nature of Business
Purpose of Business
Scope of Business
Characteristics of Contemporary business
Critics of Business
Meaning of Environment
Objectives & uses of Business environment study
The process of Environmental Analysis
Limitation of Environmental analysis
• Business may be understood as the organised efforts of enterprises
to supply consumers with goods and services for a profit.
Purpose of Business
• All businesses share the same purpose:TO EARN PROFITS
• But other purposes are:
Supplying goods and services to the society; creating job
opportunities; offer of better quality of life; contributing to the
economic growth of the country.
Activities starting from bringing raw materials to the factory and
selling the products at the market
Characteristics of Contemporary Business
1. Business inTransition: A typical business person is sandwiched
between the compulsions of the new business environment and the old
practices of doing business.
2. Pressure of Competition: Indian businesses are facing competition,
both from within and from foreign business. Competition though
unwelcome to managers, is a boon to customers.
3. Immense Opportunities: Indian business has plenty of opportunities
which can be exploited to one's advantage.
4. Globalisation: Modern business necessitates globalisation.
Internationalisation or globalisation is fast becoming imperative for modern
business due to technological innovations; crumbling trade barriers; global
flow of capital and technology; information explosion; intensity of market
competition; changing life styles & the demand for new products.
5. Technology: Business is characterised by increasing use of
technology.The impact of technology on business is
6. Information: Another characteristic of contemporary
business is the recognition of and the need for information.
The whole area of retrieving & extending information,
including data processing, information systems analysis &
preparation of effective records & reports, has achieved a
Before we describe business objectives, it is desirable to be
clear about related concepts, viz.,
VISION: AVision is a broad explanation of why the firm exists
and where it is trying to lead.
A vision gives the organisation a sense of purpose and a set of
values that unite employees in a common destiny.
One of the most important things to do in the preparation
stage is toVISUALIZE things in your mind.
− Mayor Rudolph Giuliani
Visioning vs. Planning
− process that provides
specific direction and
meaning to the day-to-
− strategic planning places
the strategic vision into
− proactive plan for
− It is a view of the
future that everyone
can believe in.
A Vision Statement
Says what you want out of Business.
Details principles and beliefs.
Gives you the power to create and design your business
around your values.
You have to have a plan for success!
It starts with a vision.
You get the vision by reaching each goal.
You reach goals by hard work, dedication, and
A Mission statement outlines the fundamental purpose of the
A Mission statement incorporates four elements:
1. Customer needs, or what is being satisfied.
2. Customer groups, or who is being satisfied.
3. The company’s activities, technologies, and competencies,
or how the firm goes about creating and delivering value to
customers and satisfying their needs.
4. The company’s concern for survival, its philosophy, its
self-concept and its concern for public image.
Dayananda sagar Institutions
To be a centre of excellence in education, research & training
and to produce human resource of exceptional leadership
quality to serve national needs
To achieve our objectives in an environment that enhances
creativity, innovation and scholarly pursuits within the stated
Growth has no limit at Reliance. I
keep revising my vision.
Only when you can dream it, you can
Dhirubhai H. Ambani
Founder Chairman Reliance Group
December 28, 1932 - July 6, 2002
Objectives render mission statements more concrete.
Mission statements seek to make a vision more specific and
Objectives are attempts to make mission statements more
Objectives therefore, represent the operational side of an
1. Profit: Profit is the main incentive, motivator, strong
sustainer, judicious allocator of resources, objective indicator
of productivity and a solid basis for growth, expansion and
Profits enables a businessman to realise his other objectives
2. Growth: Business should grow in all directions over a period
of time. The strategies adopted to achieve growth are:
(a) add more products/markets;
(b) diversify into new areas;
(c) increase market share;
(d) cut down costs and increase productivity.
3. Power: Business houses have vast resources at
its command. These resources confer enormous
economic and political power on owners and
managers of business ventures.
4. Employee satisfaction & Development:
Concern for employees continues to be an
important aspect of management.
5. Quality products & services: Those who
insisted on and persisted in quality survived
competition and stayed ahead of others in the
market. Persistent quality of products earns
6. Market Leadership: To earn market
leadership, innovation is the key factor.
Innovation may be in product, advertising,
distribution, finance or in any other field.
7. Challenging: Business offers vast scope and
poses formidable challenges.
8. Joy of creation: It is through business
strategies new ideas and innovations are given a
shape and are converted into useful products
and services for the benefit of customers.
9. Service to society: Business is a part of
society and has several obligations towards it.
10. Good Corporate citizenship: It implies that
the business unit complies with the rules of the
land, pays taxes to the government regularly,
discharges its obligations to society and cares
for its employees and customers.
• The Four-Step PyramidThe Four-Step Pyramid
Corporate SocialCorporate Social
CRITICS OF BUSINESS
Specific criticisms are the following:
1.Business activity has a corrosive effect on a range of cherished
1. Business dehumanises and expolits workers
2. Business harms interests of consumers.
3. Business degrades nature and the environment.
4. Business has destroyed handicraft and rendered artisans
There are five groups of Critics
1. Activist Reformers
2. Liberal Intellectuals
4. Radical Non-Marxists.
Meaning of Environment
Environment refers to all external forces which have a bearing
on the functioning of business.
Environment of a Firm
1. Technological Environment
2. Economic Environment
3. Political Environment
4. Global Environment
5. Social and Cultural Environment
Business environment refers to all those internal and external
factors that have a bearing on the business.
Keith Davis defines business environment as the aggregate of all
conditions, events and influences that surround and influence
Three different levels of Business Environment
are as follows:
The important internal factors which have a bearing on the
strategy and other decisions are:
1. Value system
2. Mission & Objectives
3. Management Structure & Nature
4. Internal Power relationship
5. Human resources
6. Company image & Brand equity
1.Physical assets and facilities
2.R & D and Technological capabilities.
The external business environment consists of
Micro environment and
The micro environment consists of the actors in the company’s
immediate environment that affect the performance of the
Suppliers: Suppliers are the important force in the task
environment of a business.
Multiple sources of supply often help to reduce risks.
Customers: To succeed in capturing customers, a business must
try its best to know what people want and will buy.
Labour: The labour force is organised in the form of trade unions.
The trade unions interact with the management & pressurise the
management for the fulfilment of their demands.
Competitors: Competitors play a vital role in
running the business enterprise. There are
various types of competitions:
• Desire competition: Under this type of
competition the primary task is to influence the
basic desire of the customer.
• Generic competition: The competition among
alternatives which satisfy a particular category
of desire is called generic competition.
• Product form competition: In this type of
competition, the consumer has to choose
between different forms of the product.
Brand competition: The competition between
different brands of the same product.
Taking into consideration these different factors
every marketer should strive to create primary
and relative demand for his product.
Regulating agencies: The regulators include
government departments and other
organizations which monitor the activities of
The macro forces are, generally, more uncontrollable than the
Important macro environment factors includes:
Political and Regulatory environment
Natural & Global environment
The survival & success of a business enterprise is
finally decided by the economic environment
& various market conditions. The important
external factors that affect the economic
environment of a business are as follows:
• Economic conditions
• Economic system
• Economic policies
POLITICAL & LEGAL
Political environment refers to the influence
exerted by the three political institutions:
It provides a framework within which the
business is to function & its existence
depends on the success with which it can face
the various challenges contructed out of
political & legal framework.
It is very comprehensive because it may include
the total social factors within which an
• Socio-cultural environment may include
expectations of the society from business,
attitudes of society towards business & its
management, views towards achievement of
work, views towards structure, responsibility
& organisational positions, views towards
customs, & labour mobility & level of
It includes geographical & ecological factors.
Almost every aspect of business depends
upon natural environment.
• Manufacturing depends on physical inputs.
• Mining depends on nature
• Agriculture depends on nature.
• Trade between two regions depends on
• Topographical factors may affect the demand
• Size, growth rate, age composition, sex
composition etc., of population
• Family size
• Caste, religion,
• Educational level...etc
Business has to adopt technological changes
from time to time. Every business enterprise
has two basic functions i.e.,
• Marketing &
Technological environnment also includes
research base decisions.
The fast changes in technology also create
problems for enterprises as these render
plants and products obsolete quickly.
Implications of global or international
environment are as follows:
• Indian companies are forced to view business
issues from a global perspective.
• Safe & protected markets are no longer there.
• Learning of foreign languages is a must for
every business manager.
• Acquiring familiarity with foreign currencies
is also a must.
Thus, business is the product of the technological,
political-legal, economic, socio-cultural, global
& natural factors amidst which it functions.
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Environmental analysis is the process by` which strategist
monitors the Environmental sectors to determine
opportunities for threats to their firms.
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Conducting Environmental Analysis
Identifying threats and opportunities
Gathering of information about competitors intelligence
Forecasting future direction of environmental changes
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Marketing EnvironmentMarketing Environment
The actors and forces thatThe actors and forces that
affect a firm’s ability toaffect a firm’s ability to
build and maintainbuild and maintain
successful relationshipssuccessful relationships
with customers.with customers.
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Aspects of the marketingAspects of the marketing
Actors close to theActors close to the
– Larger societal forcesLarger societal forces
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Actors in the
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Key Demographic TrendsKey Demographic Trends
World populationWorld population
Now 6.2 billionNow 6.2 billion
Projected toProjected to
reach 7.9 billionreach 7.9 billion
by 2025by 2025
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The Economic EnvironmentThe Economic Environment
Affects consumerAffects consumer
purchasing powerpurchasing power
and spendingand spending
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The Political EnvironmentThe Political Environment
Includes laws,Includes laws,
agencies, andagencies, and
pressure groupspressure groups
that impactthat impact
organizations andorganizations and
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The Cultural EnvironmentThe Cultural Environment
Is composed of institutions andIs composed of institutions and
other forces thatother forces that
affect a society’saffect a society’s
basic values,basic values,
and behaviors.and behaviors.
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Core beliefs areCore beliefs are
Secondary culturalSecondary cultural
values change andvalues change and
shift more easilyshift more easily
Society’s cultural values are
expressed through people’s
The Cultural Environment
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Techniques of environmental scanning
Send the researchers, technicians, engineers to international and national conferences
and trade shows
Visit the global competitors in trade fairs and exhibitions.
Systematically gather data on the result of government funded research in other
Carefully review technical and scientific journal and newspaper published in another
country and home country.
Developing management information system in each and every department and
ultimately for the whole organization.
Develop a strategic management information system at all levels of management in
collaboration with customers, peers (office people), suppliers, and other middleman,
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NEED FOR ENVIRONMENTAL ANALYSIS
Increases managerial awareness of environmental changes.
Increases understanding of the context in which industries and
Increases understanding of multilateral settings;
Improves resource allocation decisions;
Facilitates risk management;
Focuses attention on the primary influences on strategic changes;
Acts as an early warning system to anticipate opportunities and
threats and devise appropriate strategies.
This analysis is a valuable mechanism for increasing strategic
awareness of managers.
The Process of Environmental
Environmental analysis is a challenging, time consuming and
expensive affair. The analysis consists of four sequential
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Five stages of environmental analysis
Audit of environmental influences
Assessment of the nature of the environment
Identification of the key environmental forces
Identification of the principal Os and Ts
SIGNIFICANCE OF BUSINESS
The significance of business environment is that business
decisions in general and strategies in particular are moulded by
the business environment.
The importance of environmental analysis from the fact that
strategy is some times referred to as a proper firm –
environment fit. An analysis of the strengths and weaknesses of
the organisation and opportunities and threats in the
environment (SWOT analysis) is, in fact, one of the first steps
in the strategic management process.