BUSINESS ENVIRONMEN SOCIAL CULTURAL POLITICAL

1. Course Code CGA1110
Business Environment
CIA 1 - REVISION
Dr. V. Ramidha
Assistant Professor

2. What is Business
• It is a continuous production and distribution of goods and services
with the aim of earning profits under uncertain market conditions.
• It is a form of regular activity conducted with an objective of earning
profits for the benefit of those on whose behalf the activity is
conducted.

3. Objectives ofBusiness
•Profit
•Growth
•Customer Satisfaction
•Employee Satisfaction
•Quality products and services
•Market Leadership
•Employment creation
•Service to Society...

4. Meaning of Business Environment
• The term “Business environment” represents the sum of all the
individuals, institutions, competing organisations, government,
courts, media, investors, and other factors outside the power of the
business organisations but affects the business performance.

5. Business Environment Definition
• The term “Business environment " is the sum of all conditions, events,
and influences that surround and affect business activities and
growth.
• Business environment consists of individuals, institutions and other
forces which are outside the control of a business but that potentially
affect is performance.

6. Types of Business Environment
•Mainly Business Environment divided into two types.
These are:
1.InternalEnvironment
2.ExternalEnvironment

7. Components of Business Environment

8. Components of Business Environment
Internal - It combines the factors that exist within the company.
These are –
• Human resources
• Value system
• Vision and mission
• Labour union
• Corporate culture

9. Components of Business Environment
External - An external Environment includes those outside factors
that exercise an influence on a business’s operations. It is further
classified into two segments.
• Macro - Socio-cultural, political, legal, and global factors fall into this
category.
• Micro - This environment has a direct and immediate impact on a
business. It consists of customers, investors, suppliers, etc.

10. Micro Environment
•Suppliers
•Customers
–Wholesalers
–Retailers
–Industries
–Government and Other Institutions
–Foreigners
•Market Intermediaries
–Middleman
–Marketing Agencies
–Financial Intermediaries
–Physical Intermediaries
•Competitors
•Public

11. Macro Environment
Political Environment: It affects different business units
extensively
•Political Belief of Government
•Political Strength of the Country
•Relation with other countries
•Defence and Military Policies
•Centre State Relationship in the Country
•Thinking Opposition Parties towards Business Unit

12. Macro Environment
• Socio-Cultural Environment
It implies the tradition, culture, customs, and values of a
society in which the business exists.
Tradition: In India, festivals like Diwali, Christmas, and Holi
provide a financial opportunity for several market segments
like sweet manufacturers, gifting products suppliers, etc.
Value: A company that follows long-held values like social
justice, freedom, equal opportunities, gender equality, etc.
excels in that given society.
Recurrent Trends: It refers to development or general changes
in a society like consumption habits, fitness awareness,
literacy rate, etc. which influence a business.
For example, the demand for organic vegetables and gluten-
free food is increasing; therefore, companies that
manufacture food items keep this in mind to attract more
crowds.

13. Macro Environment
• Technological Environment
It comprises the knowledge of the latest technological advancements
and scientific innovations to improve the quality and relevance of
goods and services.
Example: A Watch Company that sells smartwatches and traditional
watches will prosper as smartwatches are trendy recently.
• Economic Environment
It involves market conditions, consumer needs, interest rate, inflation
rate, economic policies, etc.

14. Macro Environment
• Legal Environment
It includes the laws, rules, regulations, and acts passed by the
government. A company has to operate by abiding by the rules and
regulations of laws like the Consumer Protection Act 1986, Companies
Act 1956, etc. A proper understanding of these laws assists in the
smooth operations of a company.
Example: A cigarette-selling company compulsorily has to put the
slogan “smoking is injurious to health” on every packaging.

15. Importance of Business Environment
The business environment and its importance are necessary for the
following reasons:
• Enabling the identification of opportunities and taking immediate
steps to explore the benefits.
• Helping identify threats and early warning signals
• To cope with the immediate changes.
• Support in planning and policy.
• Improving the business performance.

16. Defining the Political Environment
• Politics by definition is “Social relations involving authority or
power”
• The political environment is one of the less predictable elements in an
organization's business environment. The fact that democratic
governments have to seek re-election every few years has
contributed towards a cyclical political environment.
• Political decisions inevitably affect the economic environment.
• Political decisions also influence the social and cultural environment
of a country.
• Politicians can influence the pace at which new technologies appear
and are adopted.

17. Political Environment
• The framework for running a business is given by the political
environment. The success of a business lies in its ability to adapt and
sustain to political changes.
1. The legislative,
2. Executive or government
3. Judiciary
are the three political institutions which directs and influences a
business

18. Effect of Politics on Business
Environment
• Business Ethics
• The political framework
• A typical bureaucratic political system
• An efficient Government

19. The major elements of political environment
1) Political stability is reflected by the following parameters like the election
system, the law and order situation, the role and structure of Military and
Police force, the declaration of President’s rule, civil war etc
2) Political organisation refers to the ideology and philosophy of the political
parties, the government, the role and degree of authority of bureaucracy,
the level of political consciousness among citizens an
the funding of political parties by business houses and the clout wielded by
them.
3) The image of the leader and the country in the inter-national arena.
4) Legal framework of business and their degree of flexibility.
5) The constitution of the nation.
6) The Foreign policy of the country with special reference to tariffs and free
trade.

20. The importance of monitoring the political
environment
• It is important for organizations to monitor their political environment, because change in this
environment can impact on business strategy and operations in a number of ways:
• The stability of the political system affects the attractiveness of a particular national market.
• Governments pass legislation that directly affects the relationship between the firm and its
customers, its suppliers and other firms.
• Governments see business organisation as an important vehicle for social reform.
• The government is additionally responsible for protecting the public interest at large.
• The economic environment is influenced by the actions of government.
• Government is itself a major consumer of goods and services.
• Government policies can influence the dominant social and cultural values of a country.

21. Role of Government in the Economy
• Government: Regulator of Business
• Government: Promoter of Business
• Government as an Entrepreneur
• Government as the Planner