1. Elements of External environment
1. Micro environment
i) Suppliers
ii) Customers
iii) Competitors
iv) Marketing intermediaries
v) Public
2. Macro environment
i) Economic environment
ii) Political environment
iii) Legal environment
iv) Social environment
v) Demographic environment
vi) Natural environment
vii) Physical and technological environment
viii) International environment
2. Economic Environment
Economic stages/nature 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
Structure of the Economy
Economic conditions
3. Demographic Environment
Growth of population
Age Composition
Life Expectancy
Sex Ratio
Inter-state migration
Density of population
Level of literacy
4. Overview of political environment
Meaning of Political
environment:
The political
environment consists of
factors related to the
management of public
affairs and their impact
on the business of an
organization
5. Political Environment
Political environment also includes policies &
characteristics of political parties, political
ideologies, nature of constitution & govt.
system etc.
Political system
Laws
Government agencies
Political institutions
Stability of the government
Mutual responsibility of business and
Government
6. Political system
A system of politics and government
Definition-a political system is a complete set of
institutions, political organizations, interest groups
(such as political parties, trade unions, lobby groups),
the relationships between those institutions and the
political norms rules that govern their functions
(constitution, election law)
A political system is composed of the members of a
social organization (group) who are in power
7. Types of political systems
1. Democracy
2. Republic
3. Monarchy
4. Communism
5. Dictatorship
8. Business responsibilities towards
government
Payment of tax
International business can bring the foreign exchange
Employment can be provided
Provide information “relevant during budget-source of
information”
Information “in Policy formulation”
For welfare of people, voluntary programs e.g. temple,
shopping complex
Infrastructure development help government by
having contracts form government Eg. Dams
9. Government’s responsibility
towards business
To reduce excise duty
To provide loans and credits
Infrastructural development for the business eg. Electricity,
road transportation
Technology, right types and at right time should be
provided
Govt. should take initiative in R & D
Crumbling competition
Restricting monopoly
Encouraging small scale industries
Increase export
11. Impact of Socio cultural
environment on business
1. Family
2. Social class
3. Culture
12. 1. Family
Often called as basic social institution
The minimal form of family consists of a husband, wife
and children
“A family is a group of persons united by the ties of
marriage, blood or adoption constituting a single
household, interacting and inter-communicating, with
each other in their respective social role of husband
and wife, mother and father, son and daughter,
brother and sister, cradling and maintaining a
common culture”
- Burgess and Locke
13. 2. Social class
Used to describe the ranks of
people in a society
“Relatively permanent and
homogenous divisions in a society
into which individuals or families
sharing similar values, life styles,
interests, wealth, status, education,
economic position and behavior
can be catagorized”.
- Roger D. Blackwell
14. Classification of social class
1. Upper-Upper
2. Lower-Upper
3. Upper-Middle
4. Lower-Middle
5. Upper-Lower
6. Lower-Lower
15. Components of social class
1. Occupation
2. Income
3. Possessions
4. Associations
5. Level of influence
16. Culture
Culture is everything that is socially learned and shared by
the members of a society
“Culture is the sum of learned beliefs, values, and customs
that serve to direct the consumer behavior of members of a
particular society”
Beliefs-consist of the very large number of mental or verbal
statements that reflect a person’s particular knowledge and
assessment of something
Values-Are also beliefs
Customs-are overt modes of behavior that constitute
culturally approved or acceptable ways of behaving in
specific situations
18. Cultural Environment
Social Customs & Rituals and
practices
Language
Collectivism and Individualism
Education
Religion
Lifestyle patterns
Family structure
Role & position of men, women,
children and aged in family & society
19. Legal and Regulatory
Environment
RE refers to controlled environment which is
closely monitored by a body, usually the
govt.
Even in highly decontrolled & free market
economy, Govts. have certain regulations
which allow them to intervene in business.
Purpose of regulation is to ensure equality &
justice in society by framing Laws, Acts &
Regulation.
20. Overview of legal environment
Opportunities that are created by government:
1. Governments are large purchasers of goods and
services
2. Governments subsidize firms and industries and
thus help them survive and prosper
3. Governments protect home industries against
“unfair” foreign competition
21. To regulate the market power & minimize
exploitation, by way of framing industrial
policies, labor laws, pricing regulations,
licensing etc.
To curb negative externalities – like
pollution, unemployment, greater disparity
between the rich & poor etc.
To ensure welfare of various stakeholders in
the economic system
To achieve balanced regional & economic
development in all parts of the country.
22. Labour legislation
Environmental laws
Intellectual Property Rights
Commercial, civil & criminal laws
Tariffs and Quotas
Non-tariff Barriers
SEBI, FEMA
23. Legislations Passed by the Govt.
1. Industries act 1951
2. Indian companies Act 1956…..2015
3. Income tax act 1961
4. Competition Act 2002
5. Foreign exchange regulation act 1973
6. Sick industrial companies act 1985, and
7. Consumer Protection Act 1986
24. SEBI
Constituted in 1988 and made statutory in 1992
Objective/ Purpose of the SEBI Act :
To protect the interest of the investors
To promote the development of the securities market
To regulate the securities market
For matters connected there with or incidental there to
25. Overview of technological
environment
Refers to the state of science and technology in the
country and related aspects such as rate of
technological progress, institutional arrangements for
development and application of new technology etc.
“Systematic application of scientific or other organized
knowledge to practical tasks”
- J.K. Galbraith
26. Technology
Knowledge of methods to perform certain tasks or
solve problems pertaining to products or services
Provides information about Product design,
Production techniques, quality assurance measures,
human resource development and management
systems
27. Transfer of technology
The process by which commercial technology is
disseminated
May or may not be legally binding contract but
involves the communication, by the transferor, or the
relevant knowledge to the recipient
28. Impact of technology on
business
Higher productivity
Global competitiveness
Changing job profile
Need for multi skilling and multi tasking
Difficulty in motivation
Increasing need for capital
Increasing Obsolescence
Organizational restructuring
Resistance to change
Social implication
30. 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
32. SWOT analysis
Credited by Albert Humphrey
S W
O T
Helpful Harmful
Internal
origin
External
origin
33. ETOP Study
Involves dividing the environment into different
sectors and then analyzing the impact of each sector
ETOP for a bicycle company
Environment Impact
Social Customer preference for sports cycles which are
fashionable, easy to ride and durable
Political No significant impact
Economic Growing affluence among urban consumers, export
potential high
Regulatory Bicycle industry a thrust area for exports
Market Industry growth rate for sports cycles is high at 30%
Technological Technological up gradation in progress
- Favorable impact - Neutral impact - Unfavorable impact
