2. INTRODUCTION
● Business Environment is sum or collection of all internal and external factors such as employees,
customers needs and expectations, supply and demand, management, clients, suppliers, owners,
activities by government, innovation in technology, social trends, market trends, economic
changes, etc.
● Definition: “The sum total of all individuals, institutions and other forces that are outside the
control of a business enterprise but the business still depends upon them as they affect
the overall performance and sustainability of the business.”
● it can be said that the study of Business Environment is the most important aspect of any
business
3. SIGNIFICANCE OF BE:
1. Enables to Identify Business
Opportunities
2. Helps in Tapping Useful Resources
3. Coping with Changes
4. Assistance in Planning
5. Helps in Improving Performance
7. MICRO AND MACRO
ENVIRONMENT
The environment which has a huge but
indirect and immediate bearing on
the company.
It not affects one organization but the entire
industries.
8. ECONOMIC ENVIRONMENT:
Refers to all the factors in the nature and direction of the economy that affect the business
It includes :
a. Economic conditions: the stage of development of an economy, level of income, the distribution of income,
assets in the economy etc
b. Economic policies: The industrial policies, Fiscal policies, Monetary Policies, Foreign Investment Policy,
Export-Import Policy .
c. Economic systems: Capitalist economy , socialist Economy, Mixed economy.
POLITICAL :
state, government and its institutions and legislations and the public and private stakeholders who operate and
interact with or influence the system.
It includes the nature of constitution, policies of political parties,
Forces affecting political environment:
•Long term forces: a government’s policy
•Quick changes: rebellion, military insurgency, rebellious group,
•Cyclic changes: change in government due to regular election,
• Regional factors: if an area is backward due to its location or other factors, the government or institutions will
take special policies, legislations for that area.
LEGAL ENVIRONMENT:
Consists of the laws that regulate the conduct of the business in the country.
Eg: The Companies Act, The Factories Act, The standards of Weights and Measures Act, Environment Protection
Act etc.
9. SOCIAL AND CULTURAL ENVIRONMENT:
Customs, Beliefs, Traditions, Values, Beliefs, Poverty, attitudes, Literacy, Life expectancy rate etc.
DEMOGRAPHIC ENVIRONMENT:
Factors related to the population of the country i.e, growth rate, sex, educational level, caste ,
employment pattern, occupational status etc.
NATURAL ENVIRONMENT:
It is the study of the important components of nature. It consists of geographical and ecological
factors such as climate conditions.
E.g: Farming, Tourism, Seaside Ports,
TECHNOLOGICAL ENVIRONMENT:
Includes the methods, techniques, and approaches adopted for production of goods, and services and
its distribution.
LABOUR ENVIRONMENT:
The labour laws, working conditions, remuneration, availability of skilled and unskilled labour,
presence of trade unions, etc are different from country to country.
INTERNATIONAL ENVIRONMENT:
The global environment includes different sovereign countries.
10. Environmental Scanning
•It is the gathering of information from an organizations internal and external environments, and careful monitoring
of these environments to identify future threats and opportunities. It is the analyses of all factors that may affect the
future of the organization.
•The purpose of this process of environmental scanning is to provide the entrepreneur with a roadmap to the
changes likely to happen in the future.
•The organization can adapt the business to overcome the threats and capitalize on the opportunities coming their
way.
Importance of Environmental Scanning
The close study of the internal and external environment of an organization will reveal some very valuable
information, i.e. the strengths, weaknesses, opportunities, and threats of a company.
2] Best Use of Resources
Environmental scanning helps us conduct a thorough analysis and hence leads to the optimum utilization of
resources for the business. Environmental scanning will help us avoid any wastages and allow for the most
effective and economical use of these resources.
3] Survival and Growth of the Business
4] Planning for Long Term
The planning of long-term objectives can only occur after proper analysis and environmental scanning meaning.
This will help the entrepreneur plan the necessary business strategy.
5] Helps in Decision Making
Environmental scanning allows the firm to make the best decision keeping in mind the success and growth of the
business.
13. This framework provides companies a general overview of their strengths and weaknesses analyzing various factors
that determine the success of the particular organization.
PESTEL ANALYSIS OF AMAZON:
1. Political Environment:
• The political stability and the capitalist nature of countries of developed countries like USA and Australia.
• The government of India is trying to boost technology and Digitization. Amazon had committed more than $5.5
billion in investment in India and how it provided an online platform for 400,000-plus Indian sellers.
• Indian government had just announced foreign direct investment regulations that threatened to disrupt Amazon's
business in the world's second most populus country.
2. Economic Environment:
•It permits 100% FDI in food processing sector. a foreign company can open a wholly-owned subsidiary in India. The
government has approved Amazon's proposed USD 500 million investment in retailing of food products.
•Ecommerce companies are barred from setting up deals with sellers that can result in huge discounts.
•The disposable income of the people are increasing in India.
•The recession that hit in 2008 profited Amazon.
PESTEL ANALYSIS
14. PESTEL ANALYSIS
3. Social Environment:
•Increase in online customers.
•The lifestyle is changing and this is what is the need of the hour, customers want to access thousands of products
on a single page and get the products on the doorstep on the very next day.
4. Technology Environment:
•Amazon exists because of technology.
•many Amazon traders and customers are concerned about safety of sensitive data e.g. credit card and debit card
and any identifiable personal information stored on Amazon website.
15. •Natural Environment:
•The pandemic has positively affected . Amazon’s quarterly profits increased from 2.6 billion in July 2019 to 5.2
billion I July 2020.
•people argue that the company is contributing to environmental damages. Volume of packaging, traffic-related
emissions, and environmentally dangerous products have been the main areas of their criticism. However, it
should be mentioned that Amazon aims to make 50% its shipments zero carbon (Shipment Zero) by 2030 and net
zero carbon across its businesses by 2040.
•Legal Environment:
•Indian rules bar marketplaces from holding inventory. However, Amazon is learnt to have created structures
through which it does business in India by having indirect control. There is an investigation led by Enforcement
Directorate against Amazon.
•Canada has put legal restrictions in Foreign –owned book sellers. Hence Amazon was prevented from operating
any headquarters, servers, fulfillment centers or call centers
PESTEL ANALYSIS
16. INDUSTRY ANALYSIS
An industry is a group of companies which produce similar goods or services.
For example: Healthcare
Pharmaceuticals
Automobile
Tourism
Telecom
Printing
Oil and Gas
Infrastructure
Industry analysis is a tool that facilitates a company's understanding of its position relative to other
companies that produce similar products or services.
Industry analysis is conducted by the business entity to analyze the effects of the surrounding
environment on the entire industry.
Industry analysis is defined as an assessment tool designed to offer business entity a comprehensive
idea about the complex nature of a specific industry.
17. INDUSTRY ANALYSIS
Organizations use the following techniques to analyse the environment .
1. SWOT Analysis
2. PESTEL Analysis
3. Porter’s Five forces Models
Porter’s Five forces Model: the model is named after its founder Micheal .E. Porter. Porter's Five Forces is a
model that identifies and analyzes five competitive forces that shape every industry and helps determine
an industry's weaknesses and strengths.
1.Industry rivalry: Mentions the cut throat competition in the industry. The product differentiations, the pricing,
the features of the product, the delivery system etc are factors that affect the competition in a market. The
larger the number of competitors, along with the number of equivalent products and services they offer, the
lesser the power of a company.
when competitive rivalry is low, a company has greater power to charge higher prices and set the terms of
deals to achieve higher sales and profits.
18. INDUSTRY ANALYSIS
2. Threat of New entrants into the industry.: This determines the ease with which a new entry can
enter the market and gives an idea about the difficulties that a new competitor or investor is going to
face in the current conditions.
An industry with strong barriers to entry is ideal for existing companies within that industry since the
company would be able to charge higher prices and negotiate better terms.
3. Power of suppliers: The power of suppliers is predominant in places where their number is far
and few between, there are not enough substitutes of their products, the suppliers are resourceful
and the cost of switching from one supplier to another s too high.
This can drive up input costs and push for other advantages in trade.
4. Power of Customers:
The ability that customers have to drive prices lower or their level of power is one of the five forces.
A smaller and more powerful client base means that each customer has more power to negotiate for
lower prices and better deals.
A company that has many, smaller, independent customers will have an easier time charging higher
prices to increase profitability.
19. INDUSTRY ANALYSIS
5. Threat of Substitutes: Substitute goods or services that can be used in place of a company's
products or services pose a threat.
Companies that produce goods or services for which there are no close substitutes will have more
power to increase prices and lock in favorable terms.
When close substitutes are available, customers will have the option to forgo buying a company's
product, and a company's power can be weakened.
20. MARKET RESEARCH
Can be defined as the activity of gathering information from the market.
It can tell you how your company is perceived by the target customers and clients you want to
reach.
It gives a comparative view of your business to your competitors.
It can help you determine who and where your customers are, and which customers are most
likely to do business with you.
It shows you if you are or are not meeting your customers’ needs.
It can help you decide whether a new idea for a business or product will be appealing to your
customers.
It can help you make wise product packaging and promotional decisions, as well as effective
marketing messages.
Both primary and secondary data can be collected through MR.
21. DATA COLLECTION METHODS
Data can be collected through different methods:
1. Interviews
2. Questionnaires and surveys
3. Observations
4. Documents and records
5. Focus groups
6. Oral histories
22. EXPERT OPINION
•Jury of expert opinion is used as one of the qualitative methods for demand forecasting.
•It is similar to Delphi method.
•The expert have enough experience and knowledge to provide any accurate data.
•Jury of expert opinion considers experts from Marketing, Sales, HR, Finance, Operations, Production
department, who discuss and provide their opinions and experience to the board of directors as high level
executes.
A few disadvantages of Jury of expert opinion are:
1. Its opinion and experience oriented not based on facts.
2. There can be biased opinions.
3. The responsibility of the decision is distributed among all the executives and no single person will be
liable for any faulty forecast.
23. FACTORS TO BE CONSIDERED FOR ENVIRONMENTAL SCANNING
The external environment consists of variety of factors we can explain them as follows:
1. Events are important and specific occurrences taking place in different environment sector.
2. Trends are the general tendencies or courses of action along which events takes place.
3. Issues are the current concerns that arise in responses to events and trends.
4. Expectations are the demands made by interested groups in the light of their concern for issues.
DATA COLLECTION FOR ENVIRONMENTAL ANALYSIS
1. Verbal Sources:
Media such as radio and television
The firm's employees such as peers, subordinates and supervisors.
Other sources of verbal information outside the firm are:- Customers of the enterprise, persons in
industry channel (such as wholesalers, brokers, distributors, etc.), suppliers doing business with the
firm, competitors and their employees, financial executives such as bankers, stockholders, and
stock analysts, consultants and the government.
2. Information By Reading:
Available in newspapers, trade journals, industry newsletters, journals and publications, government
reports, reports of various marketing research agencies , departmental publications
24. 3. Management Information System:
The organization has to design an MIS which will maintain a large amount of data and also
provide easy access to the authorized people.
4. Corporate Intelligence:
Corporate Intelligence (CI) can be described "as a technique of adopting industry/research
expertise to analyse the information available on competition from public sources and to draw
conclusion based on this data." A typical CI activity involves collection, organization, analysis and
utilization of business-related data of competitors to make informed decisions.
5. Spying:
Corporate espionage can be defined as 'spying' on business competitors to acquire proprietary
information such as product design, research projects, marketing plan, trade secret, source code
for new software, intellectual property and research information and other business strategies. In
1996 the US government passed the Economic Espionage Act to restrict espionage.
METHODS OF ENVIRONMENTAL SCANNING
There are three ways of scanning the business environment:
1. Ad-hoc scanning: Short term, infrequent examinations usually initiated by a crisis
2. Regular scanning: Studies done on a regular schedule (say, once a year).
3. Continuous scanning: (also called continuous learning) – continuous structured data collection
and processing on a broad range of environmental factor
