LEARNING OBJECTIVES A. To define what the business plan is who prepares it, who reads it, and how it is evaluated. B. To understand the scope and value of the business plan to investors, lenders, employees, suppliers, and customers. PLANNING AS PART OF THE BUSINESS OPERATION Planning is a process that never ends. In the early stages, the entrepreneur should prepare a preliminary plan. The plan will be finalized as the enterprise develops. Many different types of plans may be part of any business operation-financial, marketing, production, and sales plans. Plans may be short term or long term, or they may be strategic or operational. All of these plans have one purpose: to provide guidance and structure to management in a rapidly changing market environment. What Is the Business Plan? A business plan is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture. It addresses both short- and long-term decision making. The business plan is like a road map for the business’ development. The Internet also provides outlines for business planning. Entrepreneurs can also hire or offer equity to another person to provide expertise in preparing the business plan. In developing the business plan the entrepreneur can determine how much money will be needed from new and existing sources. WHO SHOULD WRITE THE PLAN The business plan should be prepared by the entrepreneur; however, he or she may consult many sources. Lawyers, accountants, marketing consultants, and engineers are useful supplemental sources. Other resources are the Small Business Administration, Service Core of Retired Executives, Small Business Development Centers, universities, friends, and relatives. To help determine whether to hire a consultant, the entrepreneur needs to make an objective assessment of his or her own skills. HOW DO POTENTIAL LENDERS AND INVESTORS EVALUATE THE PLAN Because the business plan should address the needs of all the potential evaluators, software packages and Internet samples should be used only to assist in preparation. As the entrepreneur becomes aware of who will read the plan, changes will be necessary. Suppliers may want to see a business plan before signing a contract to supply products or services. Customers may also want to review the plan before buying the product. The business plan should consider the needs of these constituencies. Potential suppliers of capital will vary in their needs and requirements in the business plan. Lenders are primarily interested in the ability of the new venture to pay back the debt and focus on the four C’s of credit:
The entrepreneur’s credit history or character.
Their ability to meet debt and interest payments (cash flow.)
The collateral or tangible assets being secured. PRESENTING THE PLAN It is often necessary for an entrepreneur to orally present the business plan to investors. Typically the Entrepreneur provides a short (20-30 m

1. Types of
Environment

2. TYPES OF ENVIRONMENT
BUSINESS
DECISION
INTERNAL
FACTORS
EXTERNAL
FACTORS

3. Internal Environment
Company Image and Brand
Human Resources
Internal Power Relationship
Management Structure and Dimensions
Mission and Objectives
Value System

4. InternalEnvironment:
Internal Environment refers to the factors existing within a business firm. These internal factors are considered to be controllable because the
enterprisehascontroloverthese factors.ThemaininternalfactorswhichinfluencesBusinessDecisionsareasfollows:
A. Culture: The values, beliefs and attitudes of the founder and top management of the company exercises a strong influence on what the
company stands for, how it does things and what it considers important. When the value system is shared by all the members, the
organizationislikely to bemoresuccessful.
B. Mission And Objectives:The Objectives of all the firms is assumed to be Profit Maximization in the long run. But Mission is different from
this narrow objective ofprofitmaximization.Missionis definedas theoverall purposeorreason for existence whichguidesand influencesa
firmdecisionsand economicactivities.
C. Top Management Structure: The structure of the organization also influences the business decisions. The composition of the board of
directors, the degree of professionalization of management and the organizational structure of a company have a important bearing on its
businessdecisions.
D. Power Structure: The internal power relationship between the board of directors and the Chief Executive Officer is an important factor.
The extent to which the top management enjoys the support of shareholders and employees at different levels, also has an important
bearingondecisionmaking.

5. EXTERNAL ENVIRONMENT
Micro
Environment
Macro
Environment

6.  External Environment refers to the factors existing outside a business firm.
These External factors are considered to be uncontrollable because the
enterprise has No or Partial control over these factors. Further, External
Environment can be divided into two types Namely:

7. MICROENVIRONMENT
Suppliers
Market
Intermediaries
Competitors
Customers
Publics

8. A. Micro Environment: Micro Environment consists of the factors in the company's immediate environment. These factors
affectsthe performanceof the company and itsability to servethe customers.Micro Environmentconsistsof thefollowing:
I. Customers: Customers constitutes an important segment of the micro environment. Customer is the king of the market and every
businessexiststo serveitscustomers.A businesshas nomeaninguntil and unlesstherearecustomersto serve.
II. Suppliers: Suppliers are the person who supply various inputs such as money, raw material, fuel, power etc. and help in the smooth
conduct of business. Further, firms should have more than one supplier so thatchanges in the policies ofone supplier does not effect their
productionschedules.
III. Competitors: Competitors form an important part of the Micro Environment. Business Firms compete to capture a larger share in the
market.They constantlywatchthe competitorspoliciesandadjusttheirpoliciesto gaincustomerconfidence.
IV. Company Image And Brand Equity: The image and Brand Equity of the company plays a very important and significant role in raising
finance,formingalliances,choosingdealersandsuppliersetc.


9. MACROENVIRONMENT

10.  Macro Environment: The Macro Environment consists of the Economic and Non-Economic variables that provide opportunities
and threats to firms. This is largely uncontrollable and therefore, firms must adjust their operations to these environmental
factors.MacroEnvironment consistsof thefollowing:
I. Political Environment: Political Environment consists of the elements relating to government affairs. The political environment
providesthe frameworkwithinwhichbusinesshasto function.Themaincomponents of PoliticalEnvironmentare:
• TheConstitutionoftheCountry.
• PoliticalOrganization:includesPhilosophyofpoliticalparties,ideologyofthegovernment,natureandextentofbureaucracy,
influenceofprimarygroupsetc.
• PoliticalStability:includes structureofMilitaryandpolice force,electionsystem,Lawandordersituationetc.
• Imageofthecountryanditsleaders.
• Foreignpolicyalignmentornon-alignment.
• LawGoverningBusiness

11. Environmental Factors and their Features

12. Economic Environment
 The totality of economic factors, such
as employment, income, inflation, interest rates, productivity,
and wealth, that influence the buying
behaviour of consumers and institutions.
 Economic environment can be divided into three parts. We shall now
study their effect on business. They are as under:
 (i) Economic system
 (ii)Economic policies
 (iii) Economic conditions

13. (i) Economic System:
 It is necessary to know about the economic system prevailing in a
country in order to understand the economic environment. Economic
system influences the freedom or openness of business. Economic
system is mainly of three kinds:
(a) Socialistic Economic System
(b) Capitalistic Economic System
(c) Mixed Economic System.

14. (ii) Economic Policies:
 Economic policies deeply influence the business of a country. The
economic policies are laid down to direct the economic activities.
 Economic activities include import-export, employment, tax structure,
industry, public expenditure, public debt, foreign investment, etc. In
order to direct all these economic activities, the following economic
policies are laid down:
 For example, under the import-export policy, restrictions on imports
will benefit the indigenous industry.

15. (iii) Economic Conditions:
Economic conditions are those conditions which are related with
possibilities of economic development of a country. On the basis of
the economic conditions the government starts various programs
the welfare of the people.

16. Political Environment
 Political environment is the outcome of a combination of various
ideologies advocated by different political parties.
 Factors connected with the activities of the government are
included in it, e.g., the type of government (single-party
government or multi-party government), the attitude of the
government towards different industries, progress in passing
different laws.

17. Technological environment in 1990s
 The success or failure of any business is highly dependent on the type of
technology in use, the level of technological developments, the speed with
which new technologies are adopted and diffused, the type of technology
that are appropriate etc.
 For many years in the past, India did not have a favorable attitude towards
latest technology to meet foreign standards. The reservation of products for
the small scale sector sometimes comes in the way of adoption of modern
technology if it involves capital investment higher than the specified limit.

18. Technological environment in 1990s
 It is only after the introduction of liberalization and globalization of Indian
economy drastic changes have come in the technological standards in India.
Also very high duty structure made the import of latest technology not only
expensive but also almost impossible.
 Today, the scenario has changed. Free availability of foreign exchange,
welcoming foreign collaborations, FDI, JVs, and setting up of MNCs have
led to development of various R & D centers in many firms. Even the
development taken place in the infrastructure has also facilitated the
technological development

19. Legal Environment
 Many Acts are passed from time to time in order to control and
regulate business activities.
 The sum total of all these Acts creates legal regulatory environment.
Acts are mossy passed to regulate such business activities as sale-
purchase, industrial disputes, labour, regulating partnership
business, regulating company business, foreign exchange, etc.

20. What is Social Environment?
Social environment is the totality of conditions which concern in the
effecting of the activity feature of a human being. Those conditions
promote or hinder, motivate or restrain, the characteristic activities
of a living being.

21. Cultural Environment
 The cultural environment mean a environment which affect the
basic values, behaviours, and preferences of the society-all of which
have an effect on business decisions. Socio-cultural environment.
 All companies often include an examination of the socio-cultural
environment prior to entering their markets.