Business

Environmen
t
Business Environment
 What is Business ?
“Business comprises of diverse set of activities to be
carried out in planned manner and with a purpose like to
earn profit by selling goods and services, to satisfy
customers’ need/ want/ demand, to discharge obligation to
employees and stakeholders, to return something worth to
the society”

“Business covers complex activities of industry and

commerce involving organizing production, delivering
product to customer with ultimate objective of profit
maximization”

“5 Ms”
Business Environment
 Business
Environment
“Comprises ? if not totally beyond the
of the complex factors, largely
control of management in which a particular enterprise operates”

“ Consist of set of internal factors and of external factors which affect

an enterprise and its management”

•Internal environment
•External environment
 Micro
 Macro
Business Environment
 firm

Internal env.

Micro env.

Macro env.

Business Environment
 Internal
Environment
• Generally regarded as the set of controllable
factors, because a good management can alter
or modify such factors.
• A no. of such Internal factors influence the
organizational decision.
• Could be the potential source of differentiation.

Business Environment
1.Value System
Value system of founders and directors affect a
business firm in following ways-
•Nature of business
•Policies
•Objectives
•CSR

2.Mission & Objectives

These guide Priorities, Philosophy, Policies

Business Environment
3. Management Structure & Nature
-Organizational Structure
-Responsibilities of BoD
(Including Independent directors)
-Extent of professionalism
-Share holding pattern

4.Internal power relationships

-Level of support enjoyed by the top management
-BoD relationships

Business Environment
5.HR
-- Quality -- Quantity

6.Misc.
-R&D capabilities
-Marketing resources
-Financial resources

Business Environment
MICRO ENVIRONMENT
•Consists of the factors in firm’s immediate external
environment affecting performance of that firm.

Suppliers
- If uncertainty (regular supply, quality, price) about
suppliers exists, high inventory cost.
- JIT, WalMart
- Suppliers as partners
- Vertical integration

Public
- Media, Consumer action groups, NGOs, Citizens

Business Environment
Customers
- Profile
- Customer switching
- Relationship marketing

Competitors
- Mono/Duo/Oligopoly/Perfect competition
- Desire/Generic/Product form/Brand competition

Marketing Intermediaries
- Distribution channels
- Logistics, Warehouse
Business Environment
- Ad agencies, Market research firm, Consultancy
 Micro Env.is….
•More controllable than the macro
environment

•May be firm specific

•More intimately linked with firm than

the macro environment

Business Environment
MACRO ENVIRONMENT
• Part of external environment mainly
responsible for creating opportunities as well
as threats for the firm, and is more
uncontrollable than micro environment.
• Elements
 Economic Natural
 Sociocultural Technological
 Politicolegal International

Business Environment
 ECONOMIC ENVIRONMENT
Economic conditions
•Stage of economic cycle
•National Income-GDP, GNP
•Per capita Income
•Income distribution
•Inflation- CPI, WPI
•Growth rate

Economic policies
•Exim policies
•Monetary policies- availability and cost of credit
•Fiscal policies- taxation, public expenditure
•SEZ policies

Business Environment
Economic system
•Free market/ capitalist economy
-USA, Japan, UK
•Controlled/ socialist economy -China
•Mixed economy-India
 Socio-cultural
Environment

“Customs, ethics, ethos, values, language, tastes,

preferences, habits, education, occupation, beliefs,
religion, caste system, family”

Directly affects buying and consumption behavior.

Very deep impact on business-

Organizational culture, CSR, Employee relations,
Competition, Employee attitude

Business Environment
Business Environment
CocaCola- china

Chevrolet Nova- Spain

Medimix- UP & Kerela

Shariyat Banking- Islamic nations

Bonding – Japan

America - Individualism

Business Environment
 Technological Environment

•Rate of tech change

•Techno Infrastructure
•Technical know how
•Strong driver of demand, especially replacement
demand – GM strategy, Electronic goods
•Cost reduction – Ford
•Consumerism – Hamara Bajaj to 280 cc

Business Environment
 Political Environment

• Political system (forms of govt)- Pure democracy,

Republic, Theocracy, Totalitarianism
• Political philosophy- LPG
• Regulations and laws for general
conduct of business
• Govt. policies
• Political stability
• Institutions

Business Environment
 SIGNIFICANCE OF BUSINESS
ENVIRONMENT
• In-cashing business opportunities
• Affect internal control
• Optimize scare resources
• Market relevant technology development
• Avoiding threats
• Competitors analysis, Sustainable competitive advantage
• Monitoring and forecasting
• Strategy formulation
• Power relationships and lobbying
• International trade
Business Environment