Business environment consists of all factors that have a bearing on a business and affect its operations. It includes internal factors within a business's control as well as external factors outside its control. The external environment can be categorized as micro environment and macro environment. The micro environment includes factors close to the business like suppliers, customers, and competitors. The macro environment includes broad factors like economic, social, political, legal, demographic, and technological factors that create opportunities and threats for businesses. Understanding these factors of the business environment is important for businesses to adapt and make decisions.

1. BUSINESS-
DEFINITION,OBJECT
IVE AND
ENVIRONMENT

2. Business maybe
defined as an
economicactivity
involving the purchase,
production and sale
of goodsand services
with amotive
An
economic
activity Production or
procurement
of goodsand
services
Sale or
exchangeof
goodsand
services for the
satisfactionof
humanneeds
of earning profits by
satisfying humanneeds in
society.
Dealings in
goodsand
services ona
regular basis
Profit
earning
Uncertainty
of return
Element
of risk
DEFINITION AND FEATURES/NATURE

3. Nature of Business
 An activity to earn profit by providing
goods/services
 No limit of partners (can be 1 or 10,000)
 Main purpose should be earning i.e.
economic activity

4. Basis EconomicActivities Non-economicActivities
Meaning Economicactivities are those by which we can
earnour livelihood.
Non-economicactivities are
those performed out of love,
sympathy, sentiments, patriotism
etc.
Purpose/Moti
ve/Expectatio
n.
These activities are under taken to earn
moneyandto create wealth.
These activities are undertaken
to satisfy social, psychological
andemotional needs.
Examples • A worker workingin afactory.
• A doctor operating in his clinic.
• A teacher teachingin aschool.
• A housewife cookingfood
for herfamily.
•A boyhelping anold man
cross the road.
•A persongoesto temple to
offer hisprayer.
Outcome Production, distribution andconsumption of
goodsandservices.
Mental/psychological
satisfaction.
Types Business,profession andemployment . Religious,social, parental and
patriotic activities.
Differentiation between economic and non-economic
activities.

5. Comparisonof business,professionand
employment.
Economic
activities
Business
• Farming
• banking
Profession
• Accounting(C.A)
• doctor
Employment
• Workers
• employees

6. Basis Business Profession Employment
ModeOfEstablishment
Entrepreneur’sdecision
andotherlegalformalities,
if any.
Membershipofa
professionalbodyand
certificateof practice.
Appointmentletterand
serviceagreement.
NatureOfWork
Provisionofgoods
and servicestothe
public.
Renderingof
personalised, expert
services.
Performingwork asper
servicecontractorrulesof
services.
Qualification
No minimumqualification
isnecessary
.
Expertiseandtrainingina
specificfieldismust.
Qualificationandtraining
asprescribedbythe
employer.
Reward/Return
Profit earned. Professionalfee. Salaryorwages
CapitalInvestment
Requiredaspersizeand
natureofbusiness.
Limitedcapital neededfor
establishment.
No capitalrequired.
Risk
Profitsareuncertainand
irregular;riskispresent.
Feeisgenerallyregular
andcertain;somerisk.
Fixedandregularpay; no
risk.
TransferOfInterest
Transferpossiblewithsome
formalities.
Notpossible. Notpossible.
CodeOfConduct
No codeofconduct
is prescribed.
Professionalcodeof
conductisto befollowed.
Normsofbehaviourlaid
downbytheemployerare
to befollowed.
MainObjective/Motive
Profitmaking T
oprovideservices. T
oearnincomeby satisfying
theemployer.

7. BUSINESS : INDUSTRY
AND
COMMERCE

8. INDUSTRY
Industryrefersto economicactivities
whichareconnected with conversionof
resourcesinto useful goods.
Commerce
•Commerceincludes all those
activities whicharenecessary
for facilitating the exchangeof
goods andservices.
Business
activities

9. industry
primary
Theseindustries
are connected
with:
Theextraction
and production
of natural
resources
Reproduction and
development of
living organisms .
Secondary
industry
Theseindustries
are concerned
with :
using the materials
extracted at the primary
stage to produce goods
for final consumption of
for further processing by
other industrial units.
Tertiary
industry
Theseindustries
provide service
facilities.

10. Primary
industry
Extractive
These industriesextract
or draw out various
products from natural
resources.
Farming Mining Fishing
Genetic
Genetic means heredity or
parentage. these industries involve
breeding or reproduction of plants
and animals.
Cattle
breeding
farms
Poult r y
farms
pisciculture

11. Secondary
industry
Manufacturing
industry
These industries convert raw materials
or semi-finishedproducts into finished
products.
Analyticalindustry: basic
raw material is analysed
or separated into a
numberof products.
An oil refinery
separates crude
oil into kerosene,
diesel, petrol.
Syntheticalindustry: two or
morematerials are combined
or mixed together to
manufacture anew product.
Cement, soaps,
plastics, paints,
fertilizers etc.
Processingindustry:
involves successive stages
for manufacturing
finished products.
Sugar, pap
er
Assemblingindustry:
various componentsor
parts are brought
together to producea
finished product
TV, car,
computer,
watchesetc.
Construction
industries
These industries are engagedinconstruction of
buildings, bridges, roads, dams,canalsetc usingthe
products of extractive and manufacturing
industries like bricks, sand, cement,Iron andsteel
wires etc.

12. commerce
trade
Trade refers to buying and
selling of goods and
services with the objective of
earning profit.
Auxiliaries to
trade
Activities which are meant
for assisting trade are
known as auxiliaries to
trade.

13. Types of
trade
Internaltrade:
which takes placewithin a country
Wholesale
trade
Wholesale trade refers
to buying and selling of
goods andservices in
large quantities for the
purpose of resale or
intermediate use.
Retail
trade
Retail trade refers to
buying of goods and
services in relatively
small quantities; and
selling them to ultimate
consumers.
External trade:
whichtakes placebetweentwoormore
countries.
Import
trade
If goodsare
purchased
from
another
country,it is
calledimport
trade.
Export
trade
I f goods and
services are
soldto other
countries, it is
called export
trade.
Entrepot
trade
Where goods
are imported for
export to other
countries, it is
called entrepot
trade.

14. Auxiliaries to trade
T
ransportand
comm
unica
tion
• Transport(road,railor
coastal)facilitates
movementof–raw
materialstotheplace of
production,and–the
finishedgoodsfrom
factoriestotheplaceof
consumption
• Communication facilities
likepostal servicesand
telephone facilitiesenable
businessmento exchange
information withone
another.
Bankingand
finance
• Businessneedsfunds
foracquiring
assets,purchasing
rawmaterialsand
meetingday-to-day
expenses.
• Necessaryfundscan be
obtainedby
businessmenfrom
commercialbanks.
• Thusbankinghelps
businessactivities
overcomethe problem
offinance.
W
arehousing
• It referstothe holding
and preservationof
goods untiltheyare
finally consumed.
• It helpsbusiness firms
toovercome the
problemof storageof
goodsand facilitatesthe
availabilityof goods
whenneeded.
• Warehousingcreates
timeutility.
Advertising
• Advertisingbrings goods
andservicesto the
knowledgeof
prospectivebuyers.
• Withthehelpofsuch
knowledge,consumers
canobtainbettervalue for
theirmoney
• Thus,advertisinghelps to
promotethesaleof
productslikeelectronic
goods,automobiles, soaps
etcbyproviding
informationabout them.

15. INTER –RELATION AMONG
INDUSTRY AND TRADE
 Industry, commerce and trade are
closely related to each other.
 Industry produces goods which are
distributed through commerce.
 If industry is the backbone
of commerce, commerce serves as the
lifeline of industry.
 Trade provides the necessary support
to industry and maintains a smooth flow
of commerce.

16. ROLE OF COMMERCE IN
BUSINESS
 COMMERCE IS A VERY IPORTANT PART OF ANY
BUSINESS .Why, you say?
 Well, because it attempts to satisfy human needs
and wants.
 It also contributes to linking producers of certain
products and services with the customers who
require them.
 Since commerce requires a lot of processes to be
completed, it easily generates various
employment opportunities in other areas such as
transport and logistics, banking, and retail.
 Commerce overall is an essential component of
national development and wealth creation.

18. Objectives of Business means the purpose for
which the business is established.
One of the objectives of business is to make profit
and avoid loss , but it is not the sole objective of
any business.

19. To sum up the objectives of business may be
classified as -
a. Economic Objectives
b. Social Objectives
c. Human Objectives
d. National Objectives
e. Global Objective

20. It refers to the objective of earning profit along with
other objectives that are necessary to be pursued to
achieve it such as :
Profit earning
Creation of customers
Regular innovations
Best possible use of resources

21. Profit is the lifeblood of business, without
which no business can survive in a competitive
market.
Profits must be earned to ensure the survival of
business, its growth and expansion over time by
reinvesting a part of the profits.

22. A business unit cannot survive unless there are
customers to buy the products and services.
Again a businessman can earn profits only
when he/she provides quality goods and
services at a reasonable price.
For this it needs to attract more customers for its
existing as well as new products.
This is achieved with the help of various
marketing activities.

23. Innovation means changes, which bring about
improvement in products, process of production
and distribution of goods.
Business units, through innovation, are able to
reduce cost by adopting better methods of
production and also increase their sales by
attracting more customers because of improved
products

24. Reduction in cost and increase in sales gives more
profit to the businessman.
Use of power-looms in place of handlooms, use of
tractors in place of hand implements in farms etc.
are all the results of innovation.

25. To run any business you must have sufficient capital
or funds.
The amount of capital may be used to buy machinery, raw
materials, employ men and have cash to meet day-to-day
expenses.
Thus, business activities require various resources
like men, materials, money and machines.
The availability of these resources is usually limited.
Thus, every business should try to make the best
possible use of these resources.
This objective can be achieved by employing efficient
workers, making full use of machines and minimizing
wastage of raw materials

26. Since business operates in a society by utilizing
its scarce resources, the society expects
something in return for its welfare.
Social objectives are those objectives of
business, which are desired to be achieved for
the benefit of the society.

27. Production and supply of quality goods and
services
Adoption of fair trade practices
Contribution to the general welfare of
society through :
running of schools and colleges
opening of vocational trainingcen
Opening hospitals for medical
facilities
providing recreational facilities for
the general public like parks, sports
complexes

28. Human objectives refer to the
objectives aimed at the well-being as
well as fulfillment of expectations of
employees as also of people who are
disabled, handicapped and deprived of
proper education and training.

29. Economic well being of the
employees
Social and psychological
satisfaction of employees
Development of human resources
Well being of socially and
economically backward people

30. Provide performance based fair remuneration and
incentives
Provide provident fund, pension , medical
facilities, housing facilities etc.
It leads to job satisfaction , job involvement and
hence the rise in productivity.

31. making the job interesting and challenging
putting the right person in the right job
reducing the monotony of work
Providing Opportunities for promotion and
advancement in career
Grievances of employees be given prompt
attention
Their suggestions should be considered

32. Employees as human beings always
want to grow.
improve their skills and
competencies by providing
training and development

33. Business should keep some provision for
helping :
backward classes
Physically and mentally challenged people
vocational training programs may be arranged to
improve their earning capacity
Corporates can also help and encourage
meritorious students by awarding
scholarships for higher studies.

34. National goals includes:
Providing employment opportunity to its citizen
Earn revenue for its government
Becoming self-sufficient in production of goods and
services
Promote social justice
Business activities should be conducted keeping
these goals of the country in mind, which may be
called national objectives of business.

35. One of the important national objectives of
business is to create opportunities for gainful
employment of people.
This can be achieved by :
establishing new business units
expanding markets
widening distribution channels

36. As a responsible citizen, a businessman
should :
provide equal opportunities of employment to all
provide equal opportunities of growth and
development to all employees
Towards this objective special attention must be
paid to weaker and backward sections of the
society.

37. Business units should produce and supply
goods in accordancewith the prioritieslaid downin
theplansandpoliciesof the Government.
One of the national objectives of business in our
country should be to increasethe productionand
supplyof essential goods at reasonableprices.

38. The business owners should pay their taxes and
dues honestly and regularly.
This will increase the revenue of the
government, which can be used for the
development of the nation.

39. Business units have the responsibility of :
Restricting import of goods.
increasing exports
And hence add to the foreign exchange
reserves of the country.

40. Raise general standard of living
Reduce disparities among nations
Make available globally competitive goods and
services.

41. International trade makes available quality goods at
reasonable prices all over the world.
The people of one country get to use similar types
of goods that people in other countries are using.
This improves the standard of living of people.

42. Business should help to reduce disparities
among the rich and poor nations of the world:
Byway of capital investment in developing as well
as underdeveloped countries
By sharing new technology , methods and
ideas globally

43. Business should produce globally competitive
goods and services according to the demand of
foreign markets.
Bydoing so it will:
i)improve the image of the exporting
country
ii)earn more foreign exchange for its
country.

44. BUSINESS ENVIRONMENT

45. What IsBusinessEnvironment?
It consists of all those factors t
h
a
t have
bearingonthebusiness…..
A set of conditions – Social, L
e
g
a
l
,
Economical, Political or Institutional that are
uncontrollable in nature and affects the
functioningoforganization.

46. Characteristics
• Business environment is compound in nature.
• It is constantly changing process.
• It is different for different business units.
• It has both long term and short term impact.
• Unlimited influence of external environment
factors.
• It is very uncertain.
• Inter-related components.
• It includes both internal and external
environment.

47. IMPORTANCE OD STUDYING
BUSINESS ENVIRONMENT

49. ComponentsofBusinessEnvironment

50. Types ofBusiness Environment
• MainlyBusinessEnvironmentdividedintotwo types.
Theseare:
1. InternalEnvironment
2. ExternalEnvironment

51. INTERNALENVIRONMENT
The factorswhichcanbecontrolledb
y
companyor
Primary factorswhichdirectlyaffectst
h
e growthof
organization….. man, material, money
, machinery
andmanagement.

52. TypesofInternalEnvironment
1. ValueSystem
2. Mission&Objectives
3. ManagementStructureandNature
4. InternalPowerrelationship
5. HumanResources
6. CompanyImage&BrandEquity …..

53. ExternalEnvironment
• Those factors which are beyond the control of business
enterpriseareincludedin external environment.
• ExternalEnvironmentisdividedintotwoparts
1. Micro Environment:Theenvironmentwhich is close
to businessandaffectsits capacityto workis known
asMicro Environment.
2. Macro Environment: It includes factors that create
opportunitiesandthreatstobusiness units.Following
aretheelementsofMacro Environment.

54. MicroEnvironment
• Suppliers
• Customers
– Wholesalers
– Retailers
– Industries
– GovernmentandOtherInstitutions
– Foreigners
• MarketIntermediaries
– Middleman
– MarketingAgencies
– FinancialIntermediaries
– PhysicalIntermediaries
• Competitors
• Public

55. Busines
env
Economic
Factors
Social
factors
Political
Factors
Legal
Factors
Demographi
c
Factors
Technologi
cal
Factors

56. Socio-Cultural Environment
– Influence exercised by social and cultural
factors, not within the control of
business, is known as Socio-Cultural
Environment.
customs,traditions,values, beliefs,poverty,literacy,life
expectancyrate etc.
For example, during festive seasons there is an
increase in the demand for new clothes, sweets,
fruits, flower, etc.

57.  Due to increase in literacy rate the consumers are becoming
more conscious of the quality of the products.
 Due to change in family composition, more nuclear
families with single child concepts have come up.
It has lead to the increases in the demand for the
different types of household goods.
The consumption patterns, the dressing and
living styles of people belonging to different social
structures and culture vary significantly.

58. 1. Political Environment: It affects different business
extensively. Components are
• Political Belief of Government
• Political Strength of the Country
• Relation with other countries
• Defense and Military Policies
• Centre State Relationship in the Country
• Thinking Opposition Parties towards Business Unit

59. This includes the political system, the government
policies and attitude towards the business
community and the unionism.
All these aspects have a bearing on the
strategies adopted by the business firms.
The stability of the government also influences
business and related activities to a great extent.

60. The trade union activities also influence the
operation of business enterprises.
Most of the labour unions in India are
affiliated to various political parties.
Strikes, lockouts and labour disputes etc. also
adversely affect the business operations.

61. This refers to set of laws, regulations, which
influence the business organisations and their
operations.
Every business organisation has to obey, and work
within the framework of the law.
The important legislations that concern the
business enterprises include:
(i) Companies Act, 1956
(ii) Foreign Exchange Management Act, 1999
(iii) The Factories Act, 1948
(iv) Industrial Disputes Act, 1972

62. Technological environment include the methods,
techniquesandapproaches adopted for production of
goods and services and its distribution.
The varying technological environments of
different countries affect the designing of
products.

63. This refers to thesize,density,distribution and
growthrateof population.
All these factors have a direct bearing on the
demand for various goods and services.
For example :
A country with the largepopulation of children
is bound to have moredemandfor
babyproducts.
A country with the largepopulation of senior
citizens is bound to have moredemandfor
productsrelatedto them.

64. The natural environment includes
geographicalandecologicalfactorsthat
influence the business operations.
These factors include the availabilityof natural
resources,weatherandclimatic condition,
locationaspect,topographical factors,etc.
Business is greatly influenced by the nature of
natural environment.

65. The survival and success of each and every
business enterprise depend fully on its
economic environment.
The main factors that affect the economic
environment are:
(a) Economic Conditions
(b) Economic Policies
(c) Economic System

66. gross domestic product
per capita income
markets for goods and services
availability of capital
foreign exchange reserve
growth of foreign trade
strength of capital market
All these help in improving the pace of
economic growth.

67. These are framed by the government from time
to time and include :
Industrial policy
Fiscal policy
Monetary policy
Foreign investment policy
Export –Import policy (Exim policy)

68. The governmentkeepsonchangingthese policies
from time to time in view of the developments
taking place in the economic scenario, political
expediency and the changing requirement
.
Everybusinessfirm has to functionstrictly within
the policy framework and respondto the changes
therein.

69. The world economy is primarily governed by three
types of economic systems, viz.,
Capitalist economy
Socialist economy
Mixed economy.
Indiahasadopted the mixedeconomysystem which
implies co-existence of public sector and private
sector.

70. BUSINESS ETHICS

71. BUSINESS ETHICS = HONESTY, INTEGRITY AND QUALITY

72. What is Business Ethics?
Novus Business and IT Training Program 72
• Decisions a business makes between right and
wrong
– Includes actions of employees and organizations
• Reflects the philosophy of business
• Corporate social responsibility: businesses act as
responsible citizens in their communities

73. History of Business Ethics
Novus Business and IT Training Program 73
• Relatively new field of study
• Has not spread equally around the world
• Ethics change over time

74. Examples of Ethics in Business
• Accounting:
misrepresenting the truth
• Human Resources: hiring
relatives
• Marketing: selling
unhealthy products to
youth
• IT: using illegal copies
of software
Novus Business and IT Training Program 74

75. International Views & Ethics
• Ethics is interpreted differently around the
world
– Bribes
– Minimum working age
– Safe workplaces
– Copyright protection
– Nepotism
• Religion also plays a big role in shaping ethics
Novus Business and IT Training Program 75

76. Corporate Social Responsibility
Novus Business and IT Training Program 76
• Popular way for businesses to address ethics
• Goal is a positive impact on people and things a
business works with
• Several ways to be socially responsible:
– Philanthropy
– Responsible business model
– Create shared value

77. Benefits of Corporate
Social
Responsibility
Novus Business and IT Training Program 77
• Human Resources – attractive to potential hires
• Risk Management – keeps customers happy
• Unique Brand – stand out from the crowd
• New Customers – reach new people with your
products by helping them

78. Arguments Against Corporate
Social Responsibility
• Benefits are hard to measure
• Does not have a big impact on success
• How genuine are companies’ efforts?
Novus Business and IT Training Program 78

79. Negative Impact of Unethical
Behavior
Novus Business and IT Training Program 79
• Unethical actions hurt many to benefit a few
• Examples
– Media company: unfair competition
– Airline: poor treatment of others
– Gold mining company: destroys homes and
environment

80. The Role of Trust in Ethics
• Trust can promote ethics
• Important with customers AND employees
• Transparency creates trust
Novus Business and IT Training Program 80

81. The Gray Area
Novus Business and IT Training Program 81
• Ethics is very complicated
• Sometimes right and wrong aren’t clear
• Ethics depends on our idea of business
• We must try our best to behave ethically
• Competition should never compromise ethics

82. WHY GOOD ETHICS IS GOOD
BUSINESS ?
 Good ethics make good business sense. Your
company stands to profit from a reputation for
acting with honesty and integrity.
 People pay attention to social behaviour or an
organization.
 Having a code of ethics helps your company define
and maintain standards of acceptable behavior.
 A good ethical framework can help guide your
company through times of increased stress, such
as rapid growth or organizational change, and
decreases your firm's susceptibility to misconduct.
 Ensuring ethical practices in the workplace, such
as with personnel policies, can stave off expensive
litigation or fines in the future.
 Last but not least, it can translate to great PR for
your business.

83. How good ethics make good
businesses:
1. Treat your employees well.
 Pay fair wages, and keep your promises. Act
quickly to put an end to any kind of harassment,
and show the same high level of respect for all
your employees.
Payoff: Low turnover, high employee motivation
and productivity. Commitment to growing your
company.
2. Be honest in all business dealings.
Pay suppliers the amount agreed upon, and on time.
Be fair with customers, not over-charging and not
inflating the quality or potential of your products or
services.
Payoff: A sterling reputation that will help sustain
your company even when times are tough.

84. 3. Be socially responsible.
 Don't pollute the environment; recycle when
possible. Heed protests of company policy or
actions. Give back to the community through
charity fund-raising or other worthy causes.
 Payoff: Goodwill that enhances your
reputation as a positive force in the
community.
4. Back up your products and services.
Provide what you promise on your service
contracts and in your advertising. Example: A
Canadian roofing company won't accept payment
on roof replacement or repair until after a
rainfall proves the roof doesn't leak.
Payoff: Repeat business as customers learn they
can trust you not to cheat them — and these
people tell their friends.