Busness env.

Introduction to Business
Environment
Semester- IV
January to May – 2016
01/25/16
1
Prepared by Dr. Moloy Ghoshal

Instructions
 48 sessions
 SemesterEnd Exam- 75 marks
 Class Test( TT1) - 10 Marks
 Class Test (TT2) - 10 marks
 Class Presentations , Extra Curriculums - 5 marks
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Course Content
Introduction to Business Environment
Unit I Lectures:-1
An Overview of Business Environment: Type of
Environment-Internal, External, Micro and Macro
Environment, Competitive Structure of Industries,
Environmental Analysis and Strategic Management,
Managing Diversity, Scope of Business,
Characteristics of Business, Objectives and the Uses
of Study, Process and Limitations of Environmental
Analysis.
Unit II Lectures:-12 Economic Environment: Nature of
Economic Environment, Economic, Nature and Structure of the
Economy, Monetary and Fiscal Policies, Competition Act,
2000.
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Course Content
 Unit III Lectures:-14 Socio-Cultural Environment:
Nature and Impact of Culture on Business, Culture
and Globalization, Social Responsibilities of Business,
Business and Society, Social Audit, Business Ethics
and Corporate Governance. Political Environment:
Functions of State, Economic Roles of Government,
Government and Legal Environment, The
Constitutional Environment, Rationale and Extent of
State Intervention
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Course Content
Unit IV Lectures:-13
 Natural and Technological
Environment: Innovation,
Technological Leadership and
Followership, Sources of
Technological Dynamics, Technology
Transfer , Time Lags in Technology
Introduction, Status of Technology in
India. Management of Technology,
Features and Impact of Technology
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References
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 Text Books :
 1. Dhingra, C.; The Indian Eco no m y Enviro nm e nt and
Po licy, Sultan Chand and Sons, 17th Edition 2003.
 2. Cherunilam, Francis; Busine ss Enviro nm e nt - Te xt
and Case s , Himalaya Publishing House, 2002 12th
revised edition.
 Reference Books:
 1. Aswathappa, K.; Esse ntials o f Busine ss Enviro nm e nt,
Himalaya Publishing House, 2000 7th edition.
 2. C. A. Rangarajan-“Perspective in Economics”-S.
Chand & Sons.

Business?
 Business is an Economic activity which
involves regular production and or exchange
of goods and services with the main purpose
of earning profits through the satisfaction of
human needs & wants.
01/25/16Prepared by Dr. Moloy Ghoshal
7

Familiar the meaning of
Business?
 Business is an economic activity.
 business involves production and exchange
of goods.
 It’s main aim is to earn profit.
 It must satisfy human wants.
“ These activities are organised and
performed under the framework of an
institution known as business
organisation /firm/enterprise.”
8

TYPES OF ECONOMIC
ACTIVITY
ECONOMIC ACTIVITIES
BUSINESS PROFESSION EMPLOYMENT
TRADE
INDUSTRY
BANKING
TRANSPORTATION
INSURANCE
WAREHOUSING
ADVERTISING ETC.
MEDICAL/Doctors
LEGAL/Lawyers
CHARTERED ACCOUNTANTS
ACTORS
MANAGER
FOREMAN
CLERK
SALESPERSON
WORKER,ETC...
01/25/16
Prepared by Dr.
Moloy Ghoshal
9

Business System/Process
 Business enterprise Organisation of
factors of production Processing
Logistics
Marketing of output.
10

TYPES OF BUSINESS
 PROFIT BASED BUSINESS
ORGANISATIONS.
 Sole Proprietorships
 Partnerships(IPA-1932), Infosys, DABAR, Facebook,
Google
 Joint Hindu Family Business(TATA,Birla, Goenka), *Ref
Slide14
 Limited Liability Companies(A blending of partnerships &
corporates, 1st
April 2009,applicable for small firm). Ref
Slide14
 Corporations: is created under the laws of a state as a
separate entity that has privileges and liabilities which
are distinct from those of its members.
11

TYPES OF BUSINESS
 Private limited company(2-50)
 Public limited company
(Public Limited Company is a Company limited by shares in which there is no restrictions on the
maximum number of shareholders. It can offer its shares or debentures to Public, can make or
accept deposits from Public and there are no restrictions on the transfer of shares. The liability of
each shareholder is limited to the extent of the amount of shares subscribed. However, the
liability of a Director / Manager of such a Company can at times be unlimited.
 The minimum number of shareholders is 7 and Directors is 3. It also has a minimum share
capital requirement of Rs.500,000. A Public Limited Company should be registered with
Registrar of Companies (RoC) of the respective State under The Companies Act, 1956.
Although the registration with RoC is on State level, it is free to do Business anywhere in India.)
 Co-operatives.
12

TYPES OF BUSINESS
 Not-for-Profit Businesses(follow many of the rules
of incorporation but instead of partners it is run by a
board of directors. In addition it has to submit lots of
paper works to support it status).
 NGOs
 REGISTERES SOCIETIES( SR Act1860), central act, 7
persons required to sign Memorandum of
Association(MOA) which include-name, address,
objectives and occupations of members of the society.
 Public trust
 Private trust( ITA 1882) not enjoy tax benefit like public
trust/NGOs.
13

14

15
Being a “limited liability” enterprise means that the company is a separate legal entity from its owners
and can own assets in its own name, and not in the name of the owners. And, in case of any legal
discrepancies, it has the right to sue or to be sued.

Objectives Of Business
 Business objectives as the purpose or the
reason for the existence of the business in the
society.
16

Contemporary Business Objectives
 Profit.
 Growth(diversification, add more pdt. in pdt
line, integration, increase mkt. share)
 Market Leadership(HLL, Airtel, Asian Paints)
 Customer satisfaction
 Employee satisfaction(if you want to plan for a year plant
corn, if you want to plan for 30 years plant a tree, if you want to plan for 100
years plant men.
 Quality Products & Services
 Service to Society(CSR)
 Power
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Characteristics of contemporary
Business
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Nature of business environment
 Dynamic in nature(change)
 Unpredictable(policies)
 It differs(geography)
 Composite(sum of external force)
 Total approach( direct & indirect stake
holders)
19

Importance of business
environment
 Helps in determining opportunities & threats,
 Provides direction for growth,
 Continuous learning: case of success MIL,
failure HM.
 Image building, Apple(quality),
Samsung(innovative) vs Nokia(out dated).
 Meeting competition, Case of Kodak.
 Identifying it’s strength and weakness.
20

Indian companies – Fortune 500
 8 Indian companies have made it to Fortune 500 list in
2015. These are:
Indian Oil Corporation (rank119)
Reliance Industries(158)
Tata Mo to rs(254)
State Bank of India(260)
Bharat Petroleum(280)
Hindustan Petroleum(327)
Tata Steel(401)
ONGC(449)
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Contd..
The league of 500 elite companies for 2015 is topped by
U.S. retailer giant Wal-Mart since 2010, followed by oil
major, Exxon Mobil.
A total of 46 from 2010 to 100 in2015 Chinese
companies made it onto the list this year.

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Rank Company
Revenues
($ millions)
Profits ($ millions)
1 Wal-Mart Stores
2 Exxon Mobil
DATAS ARE YET TO
BE UPDATED.
3 Chevron
4
Berkshire
Hathaway
5 Apple
6
General Motors
7
Phillips 66
8 General Electric
9 Ford Motor
10
CVS Health
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Role of Government
 To correct market failures in case of
externalities
 To create stable business conditions (stimulate
Aggregate Demand) through monetary & fiscal
regulation
 To provide infrastructures
 Create more and more SEZ, EPZ etc.
 Boost the PPP model.( HPCL & Mittal
EnergyPvt.Ltd)
 Act as a major buyer. 01/25/16
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Example of –ve mkt externality
25
Air pollution from vehicles is an example
of a negative externality. The
costs of the air pollution for the rest of society
is not compensated for by either the
producers or users of motorized
transport.

Example of +ve mkt. externality
26

SEZ/EPZ in India
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Nature of Competition
 Monopoly
 Duopoly
 Monopolistic competition
 Oligopoly
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BUSINESS CHALLENGES
 Managing Bottom line
 Meeting stakeholders expectations
 Developing and retaining top talent
 Creating a customer responsive organization
 Diminishing time to market
 Market agility
 Pricing and quality
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Market agility
30

What do you mean by Business Environment???
The environment of any organization is “ the
aggregate of all conditions, factors, forces and
Institutions that are beyond control & affect the
functioning of organisation.”
Characteristics of Business Environment:
 Complex
 Dynamic
 Multi-faceted
 Far- reaching impact
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Why Study Business Environment
 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
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Types of Environment
 Internal Environment
 External Environment
 Micro environment
 Macro environment
Economic
Non Economic
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Internal Environment
 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
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Components of Internal Environment
 Human Resources
 Company Image and Brand Equity
 Other Factors
 Physical Assets and Facilities
 R & D and Technological Capabilities
 Marketing Resources
 Financial Resources
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External Environment
 Includes all factors outside the organization which
provide opportunities or pose threats to the
organization
 Uncontrollable factors
 Consists of Micro and Macro environment
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Micro Environment
“It consists of the factors in the company’s
immediate environment that affect the
performance of the company”.
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Micro Environment Factors
Suppliers
Customers
Marketing Intermediaries
Competitors
Publics
Financial Community
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Micro Environment of a typical carmanufacturer
Components
Supplier
Customers
Car DealersCompetitors
Stakeholders
Car
Manufacturer
Potential
Supplier
Potential
Customers
Customers
Pressure
Groups
For
Supplies
For
Customers
Potential
Dealers
Government
Local
Communities
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Macro Environment
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
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Economic Environment
 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
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Non Economic Environment
 Regulatory Environment
 Socio- Cultural Environment
 Demographic Environment
 Technological Environment
 Political Environment
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Non- Economic Environment
 Cultural Environment
 Social Customs & Rituals and practices
 Lifestyle patterns
 Family structure
 Role & position of men, women, children and aged in
family & society
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Non- Economic Environment
 Demographic Environment
 Growth of population
 Age Composition
 Life Expectancy
 Sex Ratio
 Fertility and Mortality rates
 Inter-state migration
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Macro Environment
 Technological Environment
 Sources of technology
 Technological development
 Impact of technology
 Political Environment
 Political parties in power
 Political Philosophy
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Macro Environment
 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
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International Environment
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
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WTO and its relevance for Indian
companies
The main guidelines of WTO are:
 Trade without discrimination
 Growing market access
 Promotion of fair competition
The response of Indian government to WTO constitutes
the following actions
 Reduction of tariffs
 Opening Indian markets for Global Players
 Rationalizing industrial licensing and removal of
controls on the size of operations
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WTO and its relevance for Indian
companies
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.
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Overview of Business Environment
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
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Environmental Analysis
Environmental Scanning
The process by which organizations monitor their
opportunities and threats affecting their business
is known as environmental scanning
SWOT Analysis
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Tools forAnalyzing the Environment
 PEST Analysis
 PESTLE
 STEEPLE
 S - Social
 T - Technological
 E - Economic
 E - Environmental
 P - Political
 L - Legal
 E - Ethical
01/25/16
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Global Competiveness Index
 The World Economic Forum has ranked 139
economies in its 2010-2011 Global
Competitiveness Report.
 In overall competitiveness India scores a
passable 51st
place. It ranks notably ahead of
Latin America’s powerhouse Brazil (58) and
way ahead of its neighbors Pakistan (123), Sri
Lanka (62) and Bangladesh (107), but behind
China (27).
 Switzerland tops the chart and USA is on 4th
position due to economic instability from 2007-
10 01/25/16
53

Delhi tops 2010 ranking of India's most competitive city
 Chennai cornered the second position in the list ahead of Mumbai ,
which dropped to third place from second position last year.
Chennai's ranking improved on the back of good performance
under all the sub-indices used to benchmark the cities, particularly
its educated workforce and logistics infrastructure, while Mumbai's
fall was primarily due to the worsening state of its physical
infrastructure.
Bengaluru is at fourth place in the list, followed by Kolkata,
Hyderabad , Ahmedabad, Pune, Nagpur and Jaipur.
 Ahmedabad and Pune have emerged as the most competitive tier-
two cities in India.
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Questions forCase Study
Prepare the environmental threats and opportunity
profile (ETOP) for Arvind Mills.
Prepare the strategic advantages profile (SAP) for
Arvind Mills.
On the basis of ETOP and SAP, propose strategic
alternatives before Arvind Mills.
List down all components of Internal & External
Environment of Arvind Mills & identify its strengths &
Weaknesses

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ThankYou
01/25/16
56

Busness env.

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