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Business Environment

Business Environment

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Published by only_vimaljoshi
MBA NOTES FOR Business Environment
MBA NOTES FOR Business Environment

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Published by: only_vimaljoshi on Feb 14, 2010
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Business EnvironmentVIMAL JOSHI
Nature, components and determinants of business environment; basic nature of Indianeconomic system; relation size and growth of public and private corporate sector; socialresponsibility of business; broad features of India’s now economic policy.
Q.1 What are the main components of Business Environment? Account for the inherentdynamism of business environment.
Ans. Generally Business refers to those activities that are related to the buying and selling ofgoods.Business Environment consists of all those factors that have a bearing on the business.The survival and success of a business firm depend on its strength, resources at its command,including physical resources, financial resources, human resources, skill and organisation andits adaptability to the environment and the extend to which environment is favourable to thedevelopment of the organization. The survival and success of a fir, thus, depend on two sets offactors, viz., the internal factors the internal environment and external factors- the externalenvironment.Some of the external factors have a direct intimate impact on the firm (like the suppliers anddistributors) of the firm. These factors are classified as microenvironment also known as taskenvironment and operating environment. These are other external factors which effect anindustry very generally (such as industrial policy, demography factors etc.). They constitute whatis called macro-environment, general environment or remote environment.Hence business environment has three components.
Internal environment
Micro environment/task environment/operating environment
Macro environment/general environment/remote environmentInternal EnvironmentThe important internal factors which have a bearing on an organisation include:a) Value system: The value system of the founders and those at the helm of affairs hasimported bearing on the choice of business, the mission and objective of theorganisation, business policies and practices.b) Mission and objectives: The business domain of the company, priorities, direction ofdevelopment, business philosophy, business policy etc. are guided by the mission andobjectives of the company e.g. Ranbaxy’s thrust in to the foreign markets anddevelopment have been driven by its mission “to become a research based internationalpharmaceutical company.”c) Management Structure and Nature: The organisation structures the composition of theBoard of Directors, experts of professionalisation of management etc. are importantfactors influencing business decisions. Some management structures and styles delaydecision while some others facilitate quick decisions making.
Business EnvironmentVIMAL JOSHI
d) Internal Power Relationship: Factors like the amount of support the top managementenjoys from different levels of employees, shareholders and board of directors haveimportant influence on the decisions and their implementation.e) Human Resources: The characteristics of the human resources like skill, quality, morale,commitment, attitude etc. could contribute to the strength and weakness of anorganisation.Company Image and Brand Equity: The image of the company matters while raising finance,forming, joint venture or other alliances, soliciting marketing intermediaries, entering purchaseor sale contracts, launching new products etc.Microenvironment: The microenvironment consists of the actors in the company’s immediateenvironment that affects the performance of the company. These include the suppliers,marketing intermediaries, competitors, customers’ etc.Suppliers: Supplier supply the inputs like raw materials and components to the company. Forthe smooth functioning of business, it is important to have a reliable source of supply of rawmaterial and components.Marketing intermediaries: Marketing intermediaries are the firms that aid the company inpromoting, selling and distributing its goods to final buyers.Marketing intermediaries include middlemen such as agents and merchants like: help thecompany find customers or close sales with them “, physical distribution firms which assist thecompany in stocking and moving goods from their origin to their destination such as advertisingagencies marketing research firms etc and financial intermediaries which finance marketingactivities and insure business risk.Competitors: The firm’s competitors include not only the other firms which market the same orsimilar products but also all those compete for the discretionary income of the consumers. Animplication of these different demands is that a marketer should strive to create primary andselective demand for his products.Customers: The major task of a business is to create and sustain customers. A business existsonly because of its customers monitoring the customer sensitivities, therefore, prerequisite forthe business success. A company may have different categories of customers like individuals,households, industries and other commercial establishments, and government and otherinstitutions.With the growing globalization, the customer environment is increasingly becoming global. Notonly the markets of other countries are becoming more open the Indian market is becomingmore exposed to the global competition and the Indian customer is becoming more “global” inhis shopping.Macro Environment: The macro environment consists of the societal forces that affect all thesectors in the company’s macro environment namely, the demographic, economic, natural,technological, political and cultural forces. These environment forces are beyond the control of afirm, its success will depend to a very large extend on its adaptability to the environment.
Business EnvironmentVIMAL JOSHI
Socio-cultural Environment: The buying and consumption habits of the people, their language,beliefs and values, customs and traditions, tastes and preferences, education etc are theconstituents of Socio-economic environment.For a business to be successful, its strategies should be the one that is appropriate in the Socio-cultural environment. The marketing characteristics of the market e.g. Nestle, a Swissmultinational company brews more than forty varieties of instant coffees as per different nationaltastes.Natural Environment: Difference in geographical conditions between markets may sometimescall for changes in the marketing mix, geographical and ecological factors also influence thelocation of certain industries, climate and weather conditions affect the location of certainindustries like the cotton textile industry. Topographical factors may affect the demand pattern.For example, in hilly areas with a difficult terrain, jeeps may be in greater demand than cars.Demographical Environment: Demographic factors like the size, age composition, sexcomposition etc of the population, family size, educational levels, language, religion etc are allfactors which are relevant to business.The occupational and spatial mobility of population have implications for business if labour iseasily mobile between different occupations and regions, its supply will be relatively smooth andthis will affect wage rate.Technological Environment: Technological developments may increase the demand for someexisting products. For example, voltage stabilizers help increase the sale of electrical appliancesin market characterized by frequent voltage fluctuations in power supply. However, theintroduction of TVs, refrigerators etc. with build-in-voltage stabilizers adversely affects thedemand for voltage stabilizers.Political Environment: Political and government has close relationship with the economic systemand economics policy. Certain changes in government policies such as the industrial policy,traffic policy, fiscal policy etc. may have profocused impact on business. In may countries with aview to protecting consumer business. In many countries with a view to protecting consumerinterests, regulations have become stronger. Regulations to protect the purity of theenvironment and preserve the ecological balance have assumed great importance in manycounties.
. 2 What do you mean by social responsibility of business: Why should businessoirganisation by socially responsible?
Ans. As business operates in society, it can’t exist and grows unless it cares for society. It existvis-à-vis with society. It is required to meet different needs of the society. For meeting theseneeds, business has certain social responsibilities to discharge. “Cooperate socialresponsibilities” is defined as considering the impact of the company’s action on society. Anewer concept,” social responsibilities”, is defined as the ability of a cooperation to relate it’soperation and policies to social environment in ways that are mutually beneficial to both thecompany and society. Social responsibilities of business are different for different sections ofsociety, which include responsibilities towards(a) employees(b) consumers

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