Business Environment

BUSINESS ENVIRONMENT
Business environment is a set of political, economical,
social and technological force that are largely out side
the control of business and that can have both
positive and a negative impact on the business.
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TYPE OF ENVIRONMENT
Internal
Environmen
t
External
environ
ment
• Micro
Environment
• Macro
Environment
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Business
Environment

In this session we shall
discuss about the parts of
the macro environment of
business.
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SOCIETY AS THE MACRO
ENVIRONMENT
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SEGMENTS OF THE
MACROENVIRONMENT
Segment Focus
Social Demographics, lifestyles, social values
Political
Processes for passing of laws and election
of officials. Interactions between firms,
politics, and government
Economic
Nature and direction of the economy in
which business operates
Technological
Changes in technological advancements
taking place in society
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SOCIAL AND CULTURAL ENVIRONMENTS
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 Meaning of Social Environment
Social or Societary
environment of business means all factors
which affects business socially . Every business
works in a society , so societies ' different
factors like family , educational institutions and
religion affects business .
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SOCIETY
“Society is not just speaking a common language. It
is sharing a culture and understanding friendships
in the same way”
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Business and society interrelate in a macroenvironment as
stakeholders.
BUSINESS AND SOCIETY
Business
The collection of private,
commercially oriented organizations
Society
A broad group of people and other
organizations, interest groups,
a community, a nation.
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SOCIAL INSTITUTIONS
 Family
 Education
 Religion
 Government
 Business
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1. FAMILY
Family is basic part of society from the birth of
a person and upto death , he lives in family so
personal decision of buying and selling of
goods are affects from family . In the culture
of a family , it may happen that parent does
not allow to use any product , then sale of
such product will decrease , so businessman
must analyze different families needs . Many
occasion of family like marriage of any family
member , can increase the demand of goods .
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2. EDUCATIONAL INSTITUTIONS
Educational institutions are also main part of societies
. They provide good knowledge , education ,
awareness , thinking what should students buy or not
to buy . Suppose if a student is habitual to drink the
tea and if his teacher advice him that this is harmful to
his health after his guidance students can avoid to
drink tea after this the sale of tea will decrease .
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3. RELIGION
Like family and education institution , religion is also
effects the business socially . Religion means the
system in which group of persons trust in God . They
believe that there is one supernatural power in this
earth and its name is God . They gives many name
like Ek onkar sat nam , om and many more etc.
Different religions have different principles , rules and
regulations in which they sacrifice to use some
products and to eat some food , in Hindu religion ,
they never use leather products . They affects the
sale of leather industries . So, businessman must
analyse the targeted audience and after listening their
religious thoughts , he should produce the goods .
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QUALITATIVE ASPECTS
 The qualitative aspect of society relate to life
expectancy, age and sex composition, rural-urban
distribution, literacy and such other dimensions.
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 Age Composition
 Sex Composition
 Urbanization
 Literacy
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SOCIAL EFFECT ON PRODUCT AND
MARKETING
 Some Society not permitted such advertisements in
which one company promote their product by
showing others are not good
 See This Add. Pepsi Vs Coca Cola - Banned
Commercial.flv
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BUSINESS AND STAKEHOLDER
RELATIONSHIPS
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CULTURE
• Culture is acquired naturally early in life through
interaction with others.
• A system of values and norms that are
shared among a group of people
• “Our culture is what is familiar,
recognizable, habitual. It is ‘what goes
without saying.’ ”
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SOCIETY, CULTURE, AND
GLOBAL CONSUMER CULTURE
 Culture – Ways of living, built up by a group of
human beings, that are transmitted from one
generation to another
 Culture is acted out in social institutions
 Culture has both conscious and unconscious
values, ideas and attitudes
 Culture is both material and nonmaterial
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SOCIETY, CULTURE, AND
GLOBAL CONSUMER CULTURE
 Global consumer cultures are emerging
 Persons who share meaningful sets of consumption-
related symbols
 Pop culture; coffee culture; fast-food culture

ATTITUDES, BELIEFS AND VALUES
 Attitudes - learned tendency to respond in a
consistent way to a given object or entity
 Belief - an organized pattern of knowledge
that an individual holds to be true about the
world
 Value - enduring belief or feeling that a
specific mode of conduct is personally or
socially preferable to another mode of
conduct
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RELIGION
Religion is one
important source of
society’s beliefs,
attitudes, and
values. The world’s
major religions
include: Buddhism,
Hinduism, Islam,
Judaism, and
Christianity.
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RELIGION
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AESTHETICS
 The sense of what is
beautiful and what is
not beautiful
 What represents good
taste as opposed to
tastelessness or even
obscenity
 Visual – embodied in
the color or shape of a
product, label, or
package
 Styles – various
degrees of complexity,
for example are
perceived differently
around the world
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DIETARY PREFERENCES
 Would you eat…..
 Rabbit (France)
 Rice, soup, and grilled fish for breakfast (Japan)
 Kimchi - Korea
 Blood sausage (Germany)
 Aalu ka Prontha ( Punjab and Haryana)

MARKETING’S IMPACT ON CULTURE
 Movement has
70,000 members in
35 countries
 “Slow food is about
the idea that things
should not taste the
same everywhere.”
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SOCIAL RESPONSIBILITY
 Social responsibility of business refer to what the
business does, over and above the statutory
requirement for the benefit of the society.
 The word responsibility connotes that business has
some moral obligation to society.
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RESPONSIBILITIES OF BUSINESS
 Share holders
 Employees
 Consumers
 Government
 Community
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ECONOMIC
ENVIRONMENT
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DEFINITION
 Economic environment refers to those economic factors which
have impact on the working of business-viz.,economic
system,economic policy,nature of economy,trade
cycles,economic resources,level of income,,distribution of
income and wealth,statutoryprovisions ,etc.
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FEATURES
 Economic environment of business is very complex
in nature.
 It is very dynamic .
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ELEMENTS
 Economic conditions
 Economic policies
 Economic system
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ECONOMIC CONDITIONS
 Income level
 Distribution of income
 Demand and supply trends
 Phases of trade cycles
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ECONOMIC POLICIES
 Consumer protection Act, 1986
 MONETARY POLICY
 Fiscal policy
 Securities and exchange board of India
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Economic System
An economic system is a way in which a society is organized to decide the
following three basic questions of any economic organisation:
 What products should be produced and in what quantities?
 How should the products be produced?; and
 For whom should the products be produced?
Major economic systems the world over can be broadly classified as follows:
Capitalism:- such economy is dominated by private sector. Here, private
sector has much roe in economic activities. it is also called open economy
.eg:-U.S.A,U.K
Socialism:-such economies are state owned economies government plays
major role in it.
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Mixed Economy where ‘market’ and ‘command’ none of the two
elements has dominating presence. Most of the developing
economies like India are mixed economies with public sector and
private sector playing important roles together.
Other economic factors:-It includes infrastructure facilities like
roads,railways,other transport facilities,power,communication
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CAPITALISM
 Capitalism is a social system based on the principle
of individual rights. It is an economic system based on the
private ownership of the means of production,
distribution and exchange, characterized by the
freedom of capitalist to operate or manage their property
for profit in competitive condition.
 In capitalist economy the govt. plays a minor role
 Enterprise can produced almost everything and has
freedom to produce and distribute goods and services
according to public demand.
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FEATURES OF CAPITALISM
 Private ownership
 Free enterprise
 Consumer liberty
 Freedom to choose of occupation
 Freedom to save and invest
 The market system
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ADVANTAGES
 Provides optimum allocation of resources, development
of enterprise, invention and use of new technology etc. due
to individual freedom.
‡
 Provides freedom to save and invest, result in higher
growth rate because saving made by sacrificing the
consumption are invested for growth.
 In capitalism consumers liberty to buy or not to buy goods
and freedom of enterprise leads to competition. Therefore,
price and other factors are set to equilibrium by market
forces, i.e., demand and supply, etc.
 Rational talents are better utilizing due to individual
freedom and therefore productivity increases.
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DISADVANTAGES
 Right to property and freedom of enterprise will lead to accumulation of
wealth and income disparities.
 Theoretically, expressed that there will be free competition but generally
larger firms will take advantage, which will lead to monopoly.
 Absence of central planning results in no definite guidelines for national
development.
 Cut-throat competition among individual may result in imperfection in
market & adoption of unfair practices.
‡
 Once the upward and downward cycle starts there is no situation to
normality. This results in price hike, inflation , deflation, unemployment
etc.
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SOCIALISM
 A swedish king once remarked to his minister,”if
one is not a socialist up to the age of twenty-five,it
shows he has no heart;but if he continues to be a
socialist after the age of 25, he has no head”.
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SOCIALISM
 Socialism means an economic system in which the means
of production are owned by the state.
 In most important aspect of this type of economy is
that all major decision related to the production,
distribution, commodity and service prices are all made by
the govt.
 Govt. is the final authority to take decision regarding
production, utilization of the finished industrial products and
the allocation of the revenues earned from their distribution
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FEATURES OF SOCIALISM
 Abolition of private property
 Collective ownership of means of production
 Central planning
 Elimination of unfair gaps in income
 Provision of necessaries of life
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ADVANTAGES
 Elimination of wastage of resources
 Elimination of concentrate of wealth
 Elimination of unequal distribution of wealth
 Provision of necessaries of life
 Immunity from Economic crisis
 Elimination of unemployment
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DISADVANTAGES
 End of liberty
 Weakening of the will to work
 Error in planning
 Failure in practice
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MIXED ECONOMY
 Mixed economy is a mix between socialism and
capitalism. It is an economic system where
some important production is undertaken by the
state, directly or through nationalized industry,
& some is left for private enterprise.
 In this type of economy both the private
ownership as well government takes part in the
process of production, distribution and other
economic activities.
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FEATURES
 Right to private ownership
 Free enterprise
 Consumer liberty
 Freedom of choice of occupation
 Central planning
 Significant role of government
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MONETARY POLICY
 Monetary policy refers to the process by which
the central bank or monetary authority of a
country controls the supply of money, often target
Government appointed central bank, RBI in India, usually
administers monetary policy.
 It is the process by which central bank of a country controls
Supply of money
Availability of money
Cost of money/rate of interest
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OBJECTIVES
 To achieve price stability by controlling inflation and
deflation.
 To promote and encourage economic growth in the
economy.
 To ensure the economic stability at full employment or
potential level of output.
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METHODS OF MONETARY POLICY
 General credit control or quantitative methods
 Selective credit control or qualitative methods
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GENERAL CREDIT CONTROL
 Its main instruments are:
 Bank rate
 Open market operations
 Reserve requirements
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SELECTIVE CREDIT CONTROL
 Change in margin requirements on loans
 Moral persuasion
 Direct action
 Ceiling of loans
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FISCAL POLICY
 It refers to the expenditure a
government undertakes to provide goods and
services and to the way in which the government
finances these expenditures.
 Government spending policies that influence macro
economic conditions are known as fiscal policies.
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INSTRUMENTS OF FISCAL POLICY
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 Taxation
 Public debt policy
 Public expenditure
 Deficit financing

POLITICAL ENVIRONMENT
The influence of political environment of business is
enormous. The political system prevailing in a country
decides promotes, fosters, directs and controls the
business activitiesof that country. A political system
which is stable, honest, efficent, and dynamic which
ensure political participation of the people
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 The political environment in which the firm
operates will have a significant impact on a
company's international marketing activities.
Changes in government often result in changes
in policy and attitudes towards foreign business.
Bearing in mind that a foreign company operates
in a host country at the discretion of the
government concerned, the government can
either encourage foreign activities by offering
attractive opportunities for investment and trade,
or discourage its activities by imposing
restrictions such as import quotas, etc…..
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ROLE OF GOVERNMENT IN BUSINESS
 Regulatory role
 Legal role
 Infrastructure development
 Human resource development
 Entrepreneurial role
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REGULATORY ROLE
Government regulate the business. They
not only decide the rules of the game but
also looks after the implementation of those
rules :-
Reservation : The govt. limits the
spheres of investment by reserving the
industry for small scale, public and co-
operative sector. Before liberalisation,
petroleum, telecommunication, coal,
power,etc. were the monoply of the public
sector.
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but liberalization brought new investment opportunities
for the private sector. Not only two sectors i.e. railways
and atomic energy are reserved for public sector.
LICENSING: licensing is an effective tool in hand of the
govt.to regulate business .Earlier , for most every venture
a license was required from govt. which is used to keep
tight control on production in public sector .But now only
investment in a few industries requires licenses.
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Expansion : The govt. can both provide
business house, the opportunity to expand as
well as restrict their expansion activities.
Restriction existed even on the advertisement
budget of the big business house or on their
investment abroad.
Foreign direct investment : The govt.
decides whether MNCs can invest in a country or
not . Because of these govt. policies there are
few MNCs in India. Even many companies had
to leave. India in the past because of the govt.
policies. Today MNCs are in present sector but
they are not still present in the retail sector.
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 Import and export policy : With a small declaration
the govt. can open and close various avenues for
export and import. Till 1991 India followed a
protectionist policy to keep the industry from
imports that were deemed harmful. But now
policy has been amended and imports are easy.
 Taxes : The govt. usually imposes a high rates of
taxes on the industry which doesn’t want to
encourage. For instance after independence a
very high excise was imposed on products like
air conditioners, automobile etc. there was no
taxes on production on small scale industry and
govt. provide subsidy on items like fertilizer
tractors and other farm equipments.
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 Incentives : The govt. also regulates the industry by providing
incentives in the key thrust areas. It also grant subsidy under
various schemes to small scale sector. It also directs financial
institution to give liberal loans to that sector at easy terms. To
provide a boost to the housing industry, the govt. has given
exemption to housing loans from income tax.
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DEMAND Purchasing
power of
consumer
Supply of
money
Government
decide
Through :
R B I
C R R
S L R etc
Supply of money:
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LEGAL ROLES
 The parliament is the law making authority and it is
council of ministers that presents the proposed law on
the table of parliament. It is the govt. which decides and
implements the legal structure of the country. The govt.
has enacted many laws to regulate industry.
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INFRASTRUCTURE DEVELOPMENT
 In developing nations the growth of infrastructure is
imperative and govt. plays a critical role in this. In
developing nations where infrastructure is in poor
state the government has to take steps to develop
the same.
Since independence, the state in India
has invested heavily on infrastructure .
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HUMAN RESOURCE DEVELOPMENT
 It is not the raw material to the market which
decides the location of unit, but availability of
human resource which now play decisive role in
settling down on the location of any establishment.
But in India, private sector was not in position to
invest higher and technical education.
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ENTREPRENEURIAL ROLE
 The state also plays the role of an entrepreneur by
investing in business. The govt. of India has been
one of the biggest investor in business and industry
since independence. The govt. reserved some
industries for only public sector where private
sector cannot invest. But the govt. has invested in
other areas, which were not reserved for the private
sector.
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THE INDIAN POLITICAL SYSTEM
 Full name of the country: Republic of India
 Type of govt. : Multi party parliamentary democracy
 Head of the state : President of India : Smt.
Pratibha Devisingh Patil.
 Head of the govt. : Prime Minister Dr Manmohan
Singh
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POLITICAL PARTIES IN INDIA
 Congress party
 Bhartiya janta party
 Indian national league
 Samajwadi party
 Shiv sena
 Janta dal etc.
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Technological Environment
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CONTENTS
 Meaning
 Impacts of Technology
 Aims of Technological Policy
 Strengthening the Technology Base
 Indigenous Technological Development
 Strategic Point
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What is Technology?
•“Systematic application of scientific or other
organized knowledge to practical tasks”.
•The important feature of technology is its
change and then more change.
•Technological impacts are wide spread,
reaching
far beyond the immediate point of technological
impact.
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Impacts of Technology
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1.Increased productivity
•The most fundamental effect of technology is
greater productivity in terms of both quality and
quantity.
•As a result of productivity, prices of some
products decline, which spreads the beneficial
economic effects of technology throughout the
whole social system.
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.2. Need to spend on R&D
• R&D assumes considerable technological
advances.
•To gain competitive edge and market share in
the global market, technological advancement
is necessary.
• To achieve technological advancement,
company has to spend on the R&D by
introducing new innovations.
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3. Jobs tend to become More
intellectual
With the advent of technology, jobs tend to become more
intellectual or upgraded.
• A job handled by an illiterate and unskilled
workers, requires services of an expert, educated
and competent engineers.
• Introduction of new technology dislocates some
workers unless they are well-equipped to work on new
machines.
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4. Increased Regulation and Stiff
Opposition
• A by- product of technological advancement is the
ever-increasing regulation on business by the govt.
and stiff opposition from the public.
• The govt. has the powers to investigate and ban
products that are directly harmful or hurt the sentiments
of society.
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5. Demand for Capital
•Today’s technology necessitates investment of
money on acquiring or discovering of new ideas
and their adoption; education, training and
maintaining of the managers and several other
related areas.
•Business organizations should raise huge fund,
to adopt new technological advancements.
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6. Business Boundaries Redefined
•Technological change is one of the important
factors giving rise to product substitution and
product differentiation.
•For multi product companies technological
change may have multiple impacts.
•Helps in widening the market with in the country
and outside the country
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7. Social Change
•There is the change in social life
which results from a change in a
technological process.
•Changes the patterns of social life.
•Status differences are likely to be
created by technological
advancement in developing
countries.
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8. High Expectations of
Consumer
•Technology has contributed to the
emergence of new society. Now
consumers want more of many things than
more of some things.
• New varieties of products, superior
quality, free from pollution, more safe and
more comfortable products are to be
produced and supplied to the new
sections of consumers.
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9. Resistance to Change
•New technology poses new
problems which may not be to the
liking of the organizational
employees.
•Fear of loosing job, increased work
load, makes people to resist the
technological change.
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Aims of Technology policy
• Technology must suit local needs
and to make an impact on the lives
of ordinary citizens.
•It must give importance to even
small improvements which could
make better and more cost effective
uses of existing materials and the
methods of work.
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Aims of Technology Policy contd
• The basic objectives of the technology
policy will be the development of
indigenous technology and
adaptation of imported technology
appropriate to national priorities and
resources.
• Other aims are –
i. Attain technological competence and
self-reliance .
ii. Sustainable and equitable
development.
Maintenance of national security.
To enhance international
competitiveness of Indian industries.
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Aims of Technology Policy contd
iii. To use skills and capabilities and
making them commercially competitive.
iv. Ensure maximum developments with
minimum capital outlay.
v. To Develop technologies which are
internationally competitive, particularly
those with export potential.
vi. To reduce demands on energy,
particularly energy from non-renewable
sources.
vii. To reduce waste materials and make
full utilization of by products.
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Strengthening the Technology
Base
• Special attention given to promotion and
strengthening of the technology base in
newly emerging frontier areas such as
information and material sciences and bio-
technology etc.
• Skills and skilled workers will be
accorded recognition.
• The quality and efficiency of the
technology generation and delivery system
will be continuously monitored and
upgraded.
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Strengthening the Technology
Base contd.
•Technologies relevant to the
cottage, village and small industries
sector will be upgraded.
•Measures will be devised to avoid
wastage and to optimal use of
energy.
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Strategic Point
• Fullest support should be given to the
development of technology to achieve
technological self- reliance and reduce the
dependence on foreign inputs.
•Suitable mechanism will be established to
facilitate investments on technology.
• Existing design engineering will be
strengthened.
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Strategic Point contd
• Strengthening measures to increase the
rate of generation of high quality skilled
technical manpower at various levels.
• Establishing new funding mechanisms for
promoting basic science research.
• Evolving mechanism for making S&T
personnel
an integral part of planning.
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Strategic Point contd
•Making arrangements and creating
facilities for developing indigenous
knowledge for wealth and employment
generation.
• Strengthening S&T infrastructure in
academic institutions.
•Policy decided to spend 0.8% on R&D
and science and technology related
activities.
• Decided to increase this amount to 2% by
2007.
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Thank You

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