Business environment includes the ‘climate’ or set of conditions: economic, social, political or institutional which have a direct or indirect bearing on the functioning of businessIt signifies external forces, factors and institutions that are beyond the control of the business and they affect the functioning of a business enterprise.
Business environment is the sum total of all factors internal & external to the business firm that greatly influence their functioning It covers factors and forces like customers, competitors, suppliers, government, and the social, cultural, political, technological and legal conditions. The changes in business environment are unpredictable. Business Environment differs from place to place, region to region and country to country. Ex: Political conditions in India differ from those in Pakistan. Taste and values cherished by people in India and China vary considerably.
Business environment is complicated and active in nature and has a far-reaching impact on the survival and growth of the business. Determining Opportunities and Threats Giving Direction for Growth Continuous Learning Image Building Meeting Competition Identifying Firm’s Strength and Weakness: Business environment helps to identify
Types of environmentInternal environment External environment Micro environment Macro environment ENVIRONMENT OF BUSINESS
The internal environment is the environmentthat has a direct impact on the business. Important internal factors which have a bearing on the decisions of a business firm and which are generally controllable because the company has control over these factors: Value system Vision, mission and objectives Management structure and nature Internal power relationship Human resources
Ranbaxy’s mission: “ to become aresearch based internationalpharmaceutical company”- has drivenit to enter the foreign marketsand development. Thus the business domain of thecompany, priorities, direction ofdevelopment, businessphilosophy, business policy etc,
Organizational structure, composition ofboard of directors, extent ofprofessionalisation of managementsometime delay decision making while someothers facilitate quick decision making.Board of directors is the highest decisionmaking body and it overseas performance ofthe organization and so its quality is veryimportant.The share holding pattern can also haveimportant managerial implications.
The amount of support the topmanagement enjoys from differentlevels of employees, shareholdersand board of directors haveimportant influence on the decisionsand their implementation.For example: relationship betweenthemembers of the board of director
The characteristics of humanresources likeskill, quality, morale, commitment, attitude etc. could contribute to thestrength and weakness of anorganization Ex: Some organizations find itdifficult to carry out restructuring ormodernization because of resistanceby employees whereas they are
While raising finance, formingjoint ventures or otheralliances, soliciting marketingintermediaries, entering purchase orsale contracts, launching newproducts etc. the image of thecompany matters the most.
Micro environment consists of the actors in the company’s immediate environment that affect theperformance of the company. They are more intimately linked with the company. Macro environment consists of larger societal forces that affect all the actors in the company’s micro environment.
o Micro environment Suppliers Customers Competitors Marketing intermediaries Financiers Public
Suppliers: An important force in the micro environment of a company is the suppliers, i.e., those who supply the inputs like raw materials and components to the company. The importance of reliable source/sources of supply to the smooth functioning of the business is obvious.
Customers: The major task of a business is to create and sustain customers. A business exists only because of its customers. The choice of customer segments should be made by considering a number of factors including the relative profitability, dependability,stability of demand, growth prospects and the extent of competition.The business firm should not be dependent on a single customer
Competitors: Competition not only include the other firms that produce same product but also those firms which compete for the income of the consumers the competition here among these products may be said as desire competition as the primary task here is to fulfill the desire of the customers.
Marketing Intermediaries The marketing intermediaries include middlemen such as agents and merchants that help the company find customers or close sales with them. The marketing intermediaries are vital links between the company and the final
Financiers: The financiers are also important factors of internal environment. Along with financing capabilities of the company their policies and strategies, attitudes towards risk , ability to provide non-financial assistance etc. are very important.
Public : A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its interests. Ex- media, citizens, local public etc. NGOs have been protesting against child labour, cruelty against animals, environmental problems, deindustrialization resulting from imports etc.
Macro environment Economic environment Political environment Technological environment Social environment Global environment
Economic environment refers to the aggregate of the nature of economic system of the country, business cycles, the socio-economic infrastructure etc.The successful businessman visualizes the external factors affecting the business, anticipating prospective market situations and makes suitable to get the maximum with minimize
It includes factors such as characteristics and policies of the political parties, nature of Constitution and government system relating to business policies and regulations. Important economic policies such as industrial policy, policy towards foreign capital and technology, fiscal policy and foreign trade policy are
The business in a country is greatly influenced by the technological development. The technology adopted by the industries determines the type and quality of goods andservices to be produced and the type and quality of plant and equipment to be used.Technological environment influences the business in terms of investment in technology,consistent application of technology and the effects of technology on markets.
The social dimension or environment of a nation determines the value system of the society which, in turn affects the functioning of the business. Sociological factors such as costs structure, customs and conventions, mobility of labour etc. have farreaching impact on the business. These factors determine the work culture and mobility of labour, work groups etc.
The global environment refers to those factors which are relevant to business such as: WTO principles and agreements International conventions Treaties, agreements, declarations, protocols, eco nomic Sentiments in other countries, hike in crude oil prices etc.