THE NATURE AND SCOPE OF BUSINESS

ENVIRONMENT
 EVENTS AFFECTING BUSINESS

CPI ----Backing out in the matter of INDIA

signing The Nuclear Deal
With The USA (PE)
RELIANCE ---- Walking out of Retail in U.P. (SE)

TATA Nano ---- Being evicted from Singrur

US Sub ---- Led to worldwide recession (IE)

prime Crisis

NEW ECONOMIC ---- Led to economic progress (EE)

POLICY OF INDIA

RANBAXY ---- 30 Drugs banned by USFDA (LE)

TROUBLE
RIL …… Resistance to increase in tariffs (SE)

Budget ……. Placing emphasis on Rural Sector (EE)

Pope’s Call ……. Threat to Outsourcing

SEZ ……. Stamp duty waiver (PE)

SATYAM ---- Poor Internal management (LE )

COLLAPSE
 MEANING & SCOPE OF BUSINESS

TO
PRODUCER USER

Activity
…. Raise funds from capital markets
…. Obtain various inputs

…. Raise financial resources

…. Transport finished product to market

…. Advertisement creates awareness of product

…. Distribution agencies reach the product to the ultimate user

…. Risks are covered through Insurance companies

BUSINESS DIMENSIONS

….. FINANCE

….. TRADE

….. TRANSPORT

….. PRODUCTION

….. BANKING
….. INSURANCE

….. ADVERISING
….. INDUSTRY
….. COMMERCE
 CHARACTERISTICS OF MODERN BUSINESS

HUL, Telco, L&T, Tata Motors,

LARGE SIZE Maruti Udyag, Hero Honda

OLIGOPOLISTIC Small number of firms selling a

CHARACTER homogenous or differentiated product

Modern business in its attempt to

DIVERSIFICATION grow over time takes recourse to
diversification

Companies have expanded their

revenues and assets base across
GLOBAL REACH countries and engage in cross border
flow of capital goods and know how
 Technology orientation to improve products
TECHNOLOGY and cut costs. R & D
ORIENTATION
Japanese & Korean Companies

Strategies for making changes in product

CHANGE design, quality, and packaging for offering
differentiated products.

Role of Govt. in both developed &

underdeveloped countries has diminished
GOVERNMENT Govt. Role
CONTROL
Market failures
Externalities
Public goods
 CHARACTERISTICS OF ENVIRONMENT

Environment consists of a number of factors,

events, conditions and influences arising
Complex from different sources which impact business

Dynamic Environment is constantly changing

Environment has different effects on different

Multi-
industries e.g. WTO
faceted

Environment has different effects on different

Impact firms in the same industry e.g. Drugs
Opportunity It may be an opportunity as well as a threat
& Threat to expansion. E.g Liberalization…HUL

General environmental changes alter the

Increases
boundaries of an industry and change the
Competition
nature of its competition

Environmental changes are difficult to

predict with any degree of accuracy e.g.
Unpredictable interest rate fluctuations, rate of inflation,
exchange rate variations.
 IMPORTANCE OF THE STUDY OF BUSUNESS ENVIRONMENT

STRATEGIES & POLICIES : Helps an organization its broad

strategies and long term policies

COMPETITORS ANALYSIS : Enables an organization to

analyse its competitors strategy and thereby formulate effective
competitive strategies

DYNAMISM : Knowledge about changing environment will keep

the organization dynamic in its approach

IMPACT : Enables the organizations to foresee the impact of

socio-economic changes at the national and international level on its
stability
ADJUSTMENT : As a result of the study, executives are able to
adjust to the prevailing conditions and thus influence the
environment to make it congenial to do business
 Environment and Strategic Management

Environ- Strategy Strategy Evaluation

mental Formul- Implemen- and
scanning ation tation Control
 Input Employees
Providers

INTERNAL
Customers ENVIRONMENT Rivals

Channel Government
Members
 Domestic Macro
Environment

Economic Growth
System & Distribution
Environment
Economic
Stability EXTERNAL Economic
ENVIRONMENT Policy

Socio-Cultural Demographic
Competitive
Environment Environment
Environment

Non Economic
Macro Environment
INTERNATIONAL
ENVIRONMENT
DIFFERENT LAYERS OF BUSINESS ENVIRONMENT
INTERNATIONAL
ENVIRONMENT

Domestic Macro Environment

Growth
Economic EXTERNAL & Distri-
System bution En-
Input Employees vironment
Economic Providers
Stability
Internal Economic
Customers Rivals Policy
Competitive Environment
Environment
Channel Govern- Demo-
Socio- Members ment graphic Envi-
Cultural ronment
BUSINESS
Environment

Non Economic Macro Environment

INTERNATIONAL
ENVIRONMENT
 BUSINESS ENVIRONMENT

DOMESTIC
NON ECONOMIC
MACROECONOMIC
ENVIRONMENT
ENVIRONMENT

INTERNAL PUBLIC
ENVIRONMENT RELATIONS
ENVIRONMENT

THE
SECTORAL
INTERNATIONAL
ENVIRONMENT
ENVIRONMENT