Business Environment


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Business Environment

  1. 1. Businessenvironment includesthe‘climate’ or set of conditions: economic, social, political or institutional which haveadirect or indirect bearing on thefunctioning of business It signifiesexternal forces, factorsand institutionsthat are beyond thecontrol of thebusinessand they affect the functioning of abusinessenterprise.
  2. 2.  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.
  3. 3. 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
  4. 4. Types of environment Internal environmentInternal environment External environmentExternal environment Micro environmentMicro environment Macro environmentMacro environment ENVIRONMENT OF BUSINESS
  5. 5.  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:  Valuesystem  Vision, mission and objectives  Management structureand nature  Internal power relationship  Human resources  Company image The internal environment is the environment that has a direct impact on the business.
  6. 6. Ranbaxy’s mission: “ to become a research based international pharmaceutical company”- has driven it to enter the foreign markets and development. Thus the business domain of the company, priorities, direction of development, business philosophy, business policy etc, are guided by the vision, mission
  7. 7. Organizational structure, composition of board of directors, extent of professionalisation of management sometime delay decision making while some others facilitate quick decision making. Board of directors is the highest decision making body and it overseas performance of the organization and so its quality is very important. The share holding pattern can also have important managerial implications.
  8. 8. The amount of support the top management enjoys from different levels of employees, shareholders and board of directors have important influence on the decisions and their implementation. For example: relationship between the members of the board of director and between CEO.
  9. 9. The characteristics of human resources like skill, quality, morale, commitment, attitude etc. could contribute to the strength and weakness of an organization Ex: Some organizations find it difficult to carry out restructuring or modernization because of resistance by employees whereas they are smoothly done in some others.
  10. 10. While raising finance, forming joint ventures or other alliances, soliciting marketing intermediaries, entering purchase or sale contracts, launching new products etc. the image of the company matters the most.
  11. 11.  Micro environment consistsof theactorsin the company’simmediateenvironment that affect the performanceof thecompany. They aremoreintimately linked with thecompany.  Macro environment consistsof larger societal forces that affect all theactorsin thecompany’smicro environment.
  12. 12. o Micro environment Suppliers Customers Competitors Marketing intermediaries Financiers Public
  13. 13.  Suppliers:  An important forcein themicro environment of a company isthesuppliers, i.e., those who supply theinputslikeraw materialsand componentsto thecompany. Theimportanceof reliablesource/sourcesof supply to thesmooth functioning of thebusinessisobvious.
  14. 14.  Customers:  Themajor task of abusinessisto createand sustain customers. A businessexists only becauseof itscustomers. Thechoiceof customer segmentsshould bemadeby considering anumber of factorsincluding therelativeprofitability, dependability, stability of demand, growth prospectsand theextent of competition. Thebusinessfirm should not bedependent on asingle customer
  15. 15.  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.
  16. 16.  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 consumers .
  17. 17.  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.
  18. 18.  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.
  19. 19. Input suppliers Workers & their unions Public Competitors Marketing intermediaries Customers BUSINESS
  20. 20. Macro environment  Economic environment  Political environment  Technological environment  Social environment  Global environment
  21. 21.  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 cost.
  22. 22.  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 often political decisions.
  23. 23.  Thebusinessin acountry isgreatly influenced by the technological development.  Thetechnology adopted by theindustriesdetermines thetypeand quality of goodsand servicesto beproduced and thetypeand quality of plant and equipment to beused. Technological environment influencesthebusinessin termsof investment in technology,consistent application of technology and theeffectsof technology on markets.
  24. 24.  Thesocial dimension or environment of anation determinesthevaluesystem of thesociety which, in turn affectsthefunctioning of thebusiness.  Sociological factorssuch ascostsstructure, customsand conventions, mobility of labour etc. havefarreaching impact on thebusiness. Thesefactorsdeterminethework cultureand mobility of labour, work groupsetc.
  25. 25.  The global environment refers to those factors which are relevant to business such as:  WTO principles and agreements  International conventions  Treaties, agreements, declarations, protocols, economic  Sentiments in other countries, hike in crude oil prices etc.
  26. 26. BUSINESS Macro environment