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2. The environment of any organization is “ the
aggregate of all conditions, events and influences
that surround and affect it.”
Characteristics of Business Environment:
 Complex
 Dynamic
 Multi-faceted
 Far- reaching impact

3.  Development of broad strategies to ensure
sustainability
 To foresee the impact of socio-economic changes at
the national and international levels on firm’s ability
 Analysis of competitor’s strategies and formulation of
effective counter measures
 To keep oneself dynamic

4. Internal Environment
External Environment
• Micro environment
• Macro environment
Economic
Non Economic

5.  Refers to all the factors that are within an organization
which impart strengths or cause weaknesses of
strategic nature.
 Controllable factors. These include:
Value system
Mission and Objectives
Management Structure and Nature

6.  Human Resources
 Company Image and Brand Equity
 Other Factors
 Physical Assets and Facilities
 R & D and Technological Capabilities
 Marketing Resources
 Financial Resources

22.  Includes all factors outside the organization which
provide opportunities or pose threats to the
organization
 Uncontrollable factors
 Consists of Micro and Macro environment

23. “It consists of the factors in the company’s
immediate environment that affect the
performance of the company”.

24. Suppliers
Customers
Marketing Intermediaries
Competitors
Publics
Financial Community

25. Components
Supplier
Customers
Car Dealers
Competitors
Stakeholders
Car
Manufacturer
Potential
Supplier
Potential
Customers
Customers
Pressure
Groups
For
Supplies
For
Customers
Potential
Dealers
Government
Local
Communities

26. It comprises general trends and forces
that may not immediately affect the
organization but sooner or later will
alter the way organization operates.
Macro Environment :-
 Economic
 Non Economic

27. • Economic stages that exists at a given time in a country
• Economic system that is adopted by a country for example.
Capitalistic, Socialistic or Mixed Economy
• Economic planning, such as five year plans, budgets, etc.
• Economic policies for example, monetary, industrial and
fiscal policies
• Economic Indices such as National Income, Per Capital
Income, Disposable Income, Rate of growth of GNP,
Distribution of Income, Rate of savings, Balance of
Payments etc.
• Economic Problems
• Functioning of economy

28. • Regulatory Environment
• Socio- Cultural Environment
• Demographic Environment
• Technological Environment
• Political Environment

29.  Cultural Environment
• Social Customs & Rituals and practices
• Lifestyle patterns
• Family structure
• Role & position of men, women, children and aged in
family & society

30.  Demographic Environment
 Growth of population
 Age Composition
 Life Expectancy
 Sex Ratio
 Fertility and Mortality rates
 Inter-state migration

31.  Technological Environment
 Sources of technology
 Technological development
 Impact of technology
 Political Environment
 Political parties in power
 Political Philosophy

32.  Regulatory Environment
• Constitutional framework
• Policies relating to pricing and foreign investment
• Policies related to the public sector, SSIs,
development of backward areas and control of
environmental pollution

33. Important factors that operate at global level which have
an impact on organization are:
 Growth of world economy
 Distribution of world GDP
 International institutions IMF,WTO ILO
 Economic relations between nations
 Global human resource-nature and quality of skills,
mobility of labor
 Global technology and quality standards
 Global demographic patterns

34. The impact of WTO on Indian companies is likely to
include the following :
 Increasing competition
 Consolidation of activities in core competence
areas
 Improvements in infrastructure to negate
structural disadvantages.
 Shake out of minor players and M&As to gain
global scale.

35. MACRO ENVIRONMENT
ECONOMIC
Environment
MICRO ENVIRONMENT
BUSINESS
Internal Environment
Values,
Mission & Objectives.
Human Resources,
Co. Image & Brand Equity
TECHNOLOGICAL
FACTORS
MARKETING
INTERMEDIARIES
DEMOGRAPHIC
FACTORS
SOCIAL
CULTURAL
FACTORS
Non - Economic
Environment

36. Environmental Scanning
The process by which organizations monitor their
opportunities and threats affecting their business
is known as environmental scanning
SWOT Analysis

37.  PEST Analysis
 PESTLE
 STEEPLE
• S - Social
• T - Technological
• E - Economic
• E - Environmental
• P - Political
• L - Legal
• E - Ethical

38. PESTLE

39.  Political environment is defined as the state,
government, institutions and laws together with the
public and private stakeholders who operate and
influence that system.
 Business managers will pay attention to the political
environment to see how government actions will
influence their company.
 Political environment also includes the political culture
which are views held about what governments should
act with relation to its citizens.

40. • Politics is universal social activity
• Politics is concerned with gaining/using power to achieve goals
• To study political system business firm should know to:
 Analyze constitution
 major political parties
 form or structure of government
 the mechanism designed to guide a transition of power
from one leader to another
 key power blocks
• All above factors are concerned with political stability a major
factor for business environment

41. • Business firms have to bear, cope with ideological tensions,
conflict
• Political system is concerned with i) the direction and
administration of state
• ii) the government iii) the regulation of social relationship
• State: is an association of people formed for specific common
purpose with a clearly defined territory system of laws and an
organized government
• Government: involves in making and implementing laws,
representing state, reunite political affairs management
• Social relationships: in aggregated forms are integrated &
regulated by state & its government for national harmony, peace
& well being, development & human rights

42. Market economy: what is produced in what
quantity determined by supply/demand and
through a price system
Mixed economy: a balance of both of the above
State-Directed economy: state directly
influences investment activities of private
enterprise through “industrial policy.”
Command economy: planned by government

43.  India is a democratic nation wherein the
government plays an active role in business
affairs. Political changes exercise a significant
influence on business. For example, coca-cola and
IBM were forced to leave India due to very strict
policy of the government during 1977-1980.
 Bangalore and Hyderabad have become the most
popular locations for information technology firms
due to supportive political climate. Changes in the
political scenario led to the entry of coca-cola,
Pepsi-cola, IBM and other multinational
corporations in India.
Political and legal environment of business

44. Rights and duties of citizens as specified in
the constitution
Laws concerning promotion, operation and
expansion of business
Flexibility and adaptability of laws
Judicial system of the country

45.  Every society needs some people to make
and enforce decisions upon the society and
the government refers to the process of
exercising power in a group.
 Government generally means the public
government as of a nation, state, province,
country, city or village.
 . It is the set of political institutions by which
a government of a state or a country is
organized.

46. Each successive government is composed
of a body of individuals who control and
exercises control over political decision-
making. Their function is to make and
enforce laws and arbitrate conflicts

47.  In some countries and states this group is often of
hereditary class and in some of democracy, where
political roles remain but there is frequent turnover
of the people actually filling the positions.
 In parliamentary system, government is used to
refer as the executive branch and governing party
in presidential system. The government is
composed of the prime minister and cabinet and in
other cases as executive, legislative, judicial,
bureaucratic and sometimes devolved powers

48.  The government plays an important role in almost every country's
economy.
 According to the World Bank, "a substantial share of the nation's
product goes to satisfy public wants, a substantial part of the private
income originates in the public budget, and public tax and transfer
payments significantly influence the state of private income
distribution. Moreover, the budget policy affects the level of
employment and prices in the private sector.
 " In socialist economies government interference is greater. Hence,
state control of economy is found in every country of the world.
However, the nature and extent of control differ widely from one
country to another depending upon political philosophy, social
attitudes, and stage of economic development and behavior of the
private sector.

49. Government roles can be classified into
four categories:
Regulatory role: the government
prescribes rules and regulations
concerned with the entry into business,
conduct of the enterprise, disposal of
surplus and relationships.

50.  Promotional role: in a developing country like India,
infrastructure for industrial development is inadequate.
Therefore, the government has to assume direct responsibility
to build-up and strengthen infrastructural facilities like power,
transportation, communication, finance, training, research and
so on.
 The promotional role of government consists of assistance by
way of subsidies, allocation of scarce resources, providing
land at concessional price, concessional rates for power and
water supply and facility of concessional rate of interest for the
development of backward regions. Fiscal, monetary and other
incentives, insurance of business risks for the development of
priority sectors and activities.

51. Entrepreneurship role: consists of
government's participation in business
through public ownership and
management of industrial and commercial
undertakings. This role of government has
given rise to a strong public sector in
developing countries like India

52.  Planning role: government has the responsibility of
fulfilling the aspirations of public. Scarcity of
economic resources is the main problem in
achieving the socio-economic objectives of growth
and social justice. Therefore, the government leys
down national priorities for optimum allocation of
scarce resources through planning. The
government of India had set up planning
commission in 1950 and the basic goal of five year
planning have been balanced regional
development, rapid industrialization, employment
generation and development of agriculture and
small scale industries

53.  In a democratic country like India, the political
environment includes the following three
political institutions
 LEGISLATURE: it refers to the elected
representatives. It comprises of parliament at
the centre and state legislature at the state
level. It frames policies, enacts laws, frame
budgets and so on. Business firms are
supposed to follow these rules, policies and
guidelines

54.  EXECUTIVE: the executive is a smaller group of
people which is responsible for implementing laws
and running the government. It executes the rules
and regulations framed by legislature. It is
responsible for implementing the laws. It
comprises of the ministers and the government
officials. In the parliamentary system, some
members of executives are members of the
legislature too. Executives ensure that the general
public is following the rules and regulations framed
by the legislature.

55.  JUDICIARY: refers to the system of courts in the
nation. It consists of the courts like the Supreme
Court, high court and district courts. It also
includes the government officials having judiciary
powers. It settles the legal disputes and interprets
the provision of law. It ensures that legislature is
making laws within the framework of the
constitution. It also ensures that the executive is
implementing the rules laid down by the
legislature, in true spirits. If judiciary finds the rule
framed by legislature as arbitrary or
unconstitutional, it can challenge such rule.