B.E.

Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
BBA(G)
SEMESTER-IV
Subject Code-204
BBA(G)
SEMESTER-IV
Subject Code-204
BUSINESS ENVIRONMENT-
Introduction & Its Types
By: Ms. Saumya Goel
AP(MGT)

What is Business Environment?
Business environment includes the ‘climate’ or set of conditions:
economic, social, political or institutional which have a direct or indirect
bearing on the functioning of business.
It signifies external forces, factors and institutions that are beyond the
control of the business and they affect the functioning of a business
enterprise.

Features of Business Environment
 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.

Nature of Business Environment
AGGREGATIVE
INTER RELATED
RELATIVE
INTER-TEMPORAL
UNCERTAIN

Importance of Business Environment
Business environment is complicated and active in nature and has a far-
reaching impact on the survival and growth of the business.
 FIRST MOVER ADVANTAGE
 Giving Direction for Growth
 Continuous Learning
 Image Building
 Meeting Competition
 Identifying Firm’s Strength and Weakness: Business environment
helps to identify

Types of Environment
Internal EnvironmentInternal Environment External EnvironmentExternal Environment
Micro EnvironmentMicro Environment Macro EnvironmentMacro Environment

Internal Environment
The internal environment is the environment that has a direct
impact on the business.
 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:
 Value system
 Vision, mission and objectives
 Management structure and nature
 Internal power relationship
 Human resources
 Company image
Internal Environment

Value System

 Vision, Mission & Objective
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 and objectives of
the company

 Management Structure & Nature
Organizational structure, composition of board of directors,
extent of professionalization 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.

 Internal Power Relationship
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.

Human Resources
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

Company Image
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.

External Environment
 Micro environment consists of the actors in the company’s
immediate environment that affect the performance of the
company. They are more intimately linked with the company.
 Macro environment consists of larger societal forces that
affect all the actors in the company’s micro environment.

o Micro Environment
 Suppliers
 Customers
 Competitors
 Marketing intermediaries
 Financiers
 Public

 An important force in the micro environment of a company is the
suppliers, i.e., those who supply the inputs like raw materials and
components to the company. The importance of reliable
source/sources of supply to the smooth functioning of the business is
obvious.
1) Suppliers:

2) Customers:
 The major task of a business is to create and sustain
customers. A business exists
only because of its customers. The choice of customer
segments should be made by considering a number of
factors including the relative profitability, dependability,
stability of demand, growth prospects and the extent of
competition.
The business firm should not be dependent on a single
customer

3) 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
fulfil the desire of the customers.

4) 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 .

5) 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.

6) 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 labor,
cruelty against animals, environmental problems,
deindustrialization resulting from imports etc.

Input
suppliers
Workers &
their unions
Public
Competitors
Marketing
intermediaries
Customers
BUSINESS

Macro Environment
1) Economic Environment
2) Political Environment
3) Technological Environment
4) Social Environment
5) Global Environment

1) Economic Environment
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.

2) Political Environment
 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.

3) Technological Environment
The business in a country is greatly influenced by the
technological development.
The technology adopted by the industries determines the type
and quality of goods and services to be produced and the type and
quality of plant and equipment to be used.
Technological environment influences the business in terms of
investment in technology, consistent application of technology and
the effects of technology on markets

4) Social Environment
The social dimension or environment of a nation determines
the value system of the society which, in turn affects the
functioning of the business.
Sociological factors such as costs structure, customs and
conventions, mobility of labour etc. have far reaching impact
on the business. These factors determine the work culture
and mobility of labour, work groups etc.

5) Global Environment
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.

BUSINESS
Macro Environment

B.E.

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