Business environment 01


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Business environment 01

  1. 1. Business Environment <ul><li>Environment refers to all external forces which have a bearing on the functioning of business. </li></ul><ul><li>It has been derived from the French word “environner”- (to surround) and “virer” – (to turn around). </li></ul><ul><li>Business environment is the aggregate of all conditions,events and influence that surrounds and affect it-Keith Davis. </li></ul><ul><li>It comprises of micro and macro factors. </li></ul>
  2. 2. Concept of Business <ul><li>Old concept - “The business of business is to do business”. </li></ul><ul><li>Modern concept - </li></ul><ul><li>The concept of profit cum service. </li></ul><ul><li>The concept of profit through service. </li></ul>
  3. 3. Objectives of business <ul><li>Profit. </li></ul><ul><li>Growth. </li></ul><ul><li>Innovation. </li></ul><ul><li>Employee satisfaction & development. </li></ul><ul><li>Quality products & services. </li></ul><ul><li>Fair return to investors. </li></ul><ul><li>Service to society. </li></ul>
  4. 4. Growth To add more products Diversification Integration To cut down Expansion of markets To increase Market share GROWTH
  5. 5. Service to society To provide safe & quality goods at reasonable prices To provide employment To promote cultural & religious activities To maintain & protect ecosystem To help in supporting less privileged sections of society
  6. 6. Features of B.E. <ul><li>Is unlimited,extends beyond national frontiers. </li></ul><ul><li>Is beyond management control mostly. </li></ul><ul><li>Is very complex and its factors may be highly interrelated and interdependent. </li></ul><ul><li>Is highly volatile,affected by sudden changes. </li></ul><ul><li>Is subject to perception values. </li></ul>
  7. 7. Factors influencing Business Decision Internal Environment External Environment Business Decision
  8. 8. Types of Environment <ul><li>Internal environment. </li></ul><ul><li>External environment- </li></ul>
  9. 9. Internal Environment Value system Mission & objectives Management structure & nature Internal power relationship Human resources Company image Miscellaneous factors Internal environment
  10. 10. Micro Environment - Factors Employees Suppliers Customers Competitors Marketing intermediaries Public Financiers Regulating agencies Micro Environment
  11. 11. Macro Environment - Factors Economic Demographic Political & legal Global Natural Socio-cultural Technological Macro Environment
  12. 12. McKinsey's 7S Model
  13. 13. Hard S’s <ul><li>Strategy - Actions a company plans in response to or in anticipation of changes in it’s environment to gain sustainable competitive advantage. </li></ul><ul><li>Structure - The basic organization of the company, its departments, reporting lines, areas of expertise, and responsibility (and how they inter-relate). </li></ul><ul><li>Systems - Formal and informal procedures that govern everyday activity, covering everything from management information systems, through to the systems at the point of contact with the customer ( call centre systems, online systems, etc). </li></ul>
  14. 14. Soft S’s <ul><li>Style - the leadership approach of top management and the organization's overall operating approach; also the way in which the organization's employees present themselves to the outside world, to suppliers and customers. </li></ul><ul><li>Skills - what the company does best; the distinctive capabilities and competencies that reside in the organization. </li></ul><ul><li>Staff - the organization's human resources; refers to how people are developed, trained, socialized, integrated, motivated, and how their careers are managed. </li></ul><ul><li>Shared values - the guiding concepts and principles of the organization - values and aspirations, often unwritten; the fundamental ideas around which a business is built & works together for a common aim. </li></ul>
  15. 15. SWOT Analysis
  16. 16. Meaning <ul><li>It is an important planning tool for auditing the overall strategic position of a business and its environment. </li></ul><ul><li>It helps to identify internal & external factors that affect achievement of business objectives. </li></ul>
  17. 17. SWOT PROFILE <ul><li>Situation Analysis </li></ul><ul><li>Internal Analysis External Analysis </li></ul><ul><li>Strengths Weaknesses Opportunities Threats </li></ul><ul><li>SWOT Profile </li></ul>
  18. 18. Factors of Analysis <ul><li>Strengths & weaknesses </li></ul><ul><ul><li>Resources: financial, intellectual, location </li></ul></ul><ul><ul><li>Cost advantages from proprietary know-how </li></ul></ul><ul><ul><li>Exclusive access to high grade natural resources </li></ul></ul><ul><ul><li>Favorable access to distribution networks </li></ul></ul><ul><ul><li>Product width and length </li></ul></ul><ul><li>Opportunities and threats </li></ul><ul><ul><li>Takeovers </li></ul></ul><ul><ul><li>Market Trends </li></ul></ul><ul><ul><li>Economic condition </li></ul></ul><ul><ul><li>Mergers </li></ul></ul><ul><ul><li>Joint ventures </li></ul></ul><ul><ul><li>Strategic alliances </li></ul></ul><ul><ul><li>Expectations of stakeholders </li></ul></ul><ul><ul><li>Technology </li></ul></ul><ul><ul><li>Public expectations </li></ul></ul><ul><ul><li>Competitors and competitive actions </li></ul></ul><ul><ul><li>Bad PR </li></ul></ul><ul><ul><li>Criticism (Editorial) </li></ul></ul><ul><ul><li>Global Markets </li></ul></ul><ul><ul><li>Environmental conditions </li></ul></ul>
  19. 19. Benefits of SWOT Analysis <ul><li>It can act as a filter to reduce information to a manageable quantity of key issues. </li></ul><ul><li>It can be used in a pre-crisis planning and in preventive crisis management. </li></ul><ul><li>It helps to leverage strengths,correct or stop weakness,capitalize on golden opportunities,deter or defend potentially disturbing threats. </li></ul>
  20. 20. SWOT Analysis Limitations <ul><li>It may oversimplify the situation by classifying the firm’s environmental factors into categories into which they may not always fit. </li></ul><ul><li>The classification of some factors as strengths etc might be illogical, more important is the company’s awareness about these and development of a strategic plan. </li></ul><ul><li>Multiple perspectives needed rather than one person being interviewed and a SWOT being created. </li></ul><ul><li>Opportunities external to the company are many a times confused with internal strengths. </li></ul><ul><li>SWOT is just a description of conditions,while strategies define actions. </li></ul>