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Published by: prabhu381983 on Feb 14, 2011
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Environmental scanning

Environmental scanning is a research process, in which businesses collect all types of relevant information that helps these businesses in making decisions regarding surviving, expanding or entering new markets. In simple words, it can be described as keeping a close eye on external or internal happenings and analyzing this information to know how it can be detrimental or beneficial for the business.

Nature of Modern Business
The Characteristics of Modern Business is 1. 2. 3. 4. 5. 6. Large Size Oligopolistic Character Diversification Technology Orientation Change Government Control

Environment by definition is something external to an individual or an organization. Therefore in strict sense, business environment refers to all external factors which have a direct or indirect bearing on the activities of business. However, some experts have used the term business environment in a broad sense, such as Internal and External Environment of Business.


Management Structure . Goals & Objectives 3. They are strengths and weaknesses of the organization like : 1. Internal Environment : refers to factors within the organization which affect business.ENVIRONMENT OF BUSINESS Internal Environment The Business Environment can be broadly classified in to Internal and External environment. They can be altered according to the needs of the organization. which are controllable. Value System 2.

organizations and forces operating outside the company. They are referred to as Opportunities and Threats. . It consists of institutions. External Environment is divided into Micro Environment and Macro Environment.ENVIRONMENT OF BUSINESS EXTERNAL ENVIRONMENT External Environment : are those factors which influence the business organization from outside.

Micro Environment .

Market Intermediaries 5. Customers 4. Workers and their Unions 3. Publics .External Environment Micro Environment Micro Environment : The micro environment consists of the forces in the company s immediate environment that affect the performance of the company. Suppliers of Inputs 2. 1. Competitors 6.

2) Suppliers y Supplier developments can seriously affect marketing y y y y Supply shortages Supply delays Labour strikes Price trends . .

selling and distributing of company products y y y y Middlemen Physical distribution firms Marketing services agencies Financial intermediaries .3) Intermediaries y Firms that aid in promoting.

4) Customers y There is a need to study customer markets closely y Five types of markets: y Consumer markets y Business markets y Reseller markets y Government markets y International markets .

5) Competitors Gain a strategic advantage by positioning offerings strongly against competitors Competitive marketing strategy depends on its own size and industry position y Steps in Analysing Competitors Identify the company s competitors Determine competitors objectives Identify competitors strategies Assess competitors strengths and weaknesses y Estimate competitors reaction patterns y Select competitors to attack and avoid y y y y .

6)  Publics Any interest group that has an actual or potential interest in.  . or impact on an organisation s ability to achieve its objectives Types of publics Financial publics Media publics Government publics Citizen action publics General public Internal public .

Macro Environment .

.External Environment Macro Environment Macro Environment : It Refers to all those economic and economic factors which exercise their influence on the business activity in general and thus determine opportunities that a company may have to promote its business.

(a) Economic Environment of business is divided into (i) National Environment of Business (ii) Global economic environment of Business .MACRO ENVIRONMENT The Macro Environment of business in divided into two (a) Economic Environment (b) Non Economic Environment.

Secondary sector or Tertiary sector Economic policies: Fiscal policy( Govt policies: Budget FM decides on policies) .Interest rates. If it is a Socialistic Govt play very imp role in deciding the business activities. revolution. Produce goods with low cost to meet the customers requirement Structure of the economy: It could be predominantly Primary sector. Cash reserve ratio.Economic Environment: Economic Environment: The factors which influence economic environment are Nature of level of development: Low income may be the reason for low demand. corporate taxes Exim policies etc. Mixed economic system: If capitalistic in nature there will be more freedom for business. .) Industrial policies: Industrial acts. Monitory policy( RBI decides policies . Economic system : Basically 3 types: Capitalism. economic activities are controlled by marketing forces such as demand and supply. Socialism. Economic conditions or business cycle: Boom or Downturn( Recession) affect the working of an org.

trade policies. such institutions affect economic policies. Global trends : IMF. However per capita increases people goes for capital goods. World Bank. Size of population: IT also another important determining factor due to identification of the market potentialities.In Mixed economy both public sector and private sector plays a major role National income: It plays a major role in deciding the prospects of the business. and business activities International Monitory Fund Arrange international deposits from banks Help to solve balance of payments problems of member Countries Finance investment loans to developing countries ‡ ‡ ‡ . WTO. Can calculate the per-capita income through the measurement of national income. where as with low per-capita income people tend to move towards consumer durables.

‡ ‡ ‡ .‡ ‡ World Bank The main function of the World Bank is the provision of low interest loans. and To provide a dispute settlement mechanism. To provide a forum for negotiations. Credit that is interest free as well as aids to the least developed countries for the development in the field of education health and infrastructure World Trade Organization: To oversee implementing and administering WTO agreements.

attitudes values. etc. education system. change in lifestyle. tastes and preferences. growth of an intellectual jobs. business regulations etc. . International regulations. living habits. traditions. Legal Environment: Rules and regulations. Social Environment: Religious aspects. etc Technological environment : Technological factors are redefine the boundaries of global business. judiciary systems. religions and family system also affect the working of an organization. customs.Macro environment of business: Political Environment: The political environment includes factors such as characteristics and policies of political parties. religious practices. the nature of constitution. practices. these factors increases productivity. government system and the government s economic policies. language. beliefs. dispute settling methods. customs. widening boundaries of business. IPR: intellectual property rights Cultural environment: Knowledge. social institutions. beliefs. eating habits.

An over view of Macro Environment of Business Economic    Economic environment can affect supply and demand Identify the economic influences relevant to the business and monitor them Economic Growth and Unemployment Need to predict economic boom and recession Example: economic boom may lead to greater purchase of luxuries Unemployment levels will affect spending patterns .

 Development of a single domestic market One objective was to improve economic performance by lowering costs of operating throughout the country Barriers to competition reduced: physical. fiscal and technical Establishment of a strict competition policy .

money supply. price level. population. basic economic philosophy. Per capita Income. through NI percapita income can be known. agriculture. planning. PCI gives the standard of living which helps business people Economic resources: these resources rich in the country which helps business activities. trade cycles are major factors which have an impact on the total economic environment Economic Condition National Income: NI refers values of production of goods and services. infrastructure. stages in the economic development. Distribution of income and wealth: if income and distributed in favor of rich people more no of luxury products have to be produced Economic development: The level of economic development in a country influences on business environment Business cycles: Different stages of business cycles such as Boom and downturn( Recession) are the indicators of good trade and bad trade .ECONOMIC ENVIRONMENT OF BUSINESS: It refers to all forces which have an economic impact on business like industrial production. savings.

etc. encouragement to SSI.ECONOMIC ENVIRONMENT OF BUSINESS: Economic policies: Budget: it is an annual estimation of revenue and expenditure of the government for ensuring financial Financial decision like tax policies. sector wise allocation etc are outlined in budget so budget will have bearing effects on business Industrial regulations: such as industrial sector wise set up the norms. Import of foreign technology. agreement year. Business laws: laws of the business like contracts. Control on prices and wages: Prices on the commodity and wages for labors Trade and Transport policies Industrial policy: regarding FDI( Foreign Direct Investment) licensing policy. Economic planning: Resources allocated b/w private and public sector Exim norms: Rules and regulations regarding International trade .

ECONOMIC ENVIRONMENT OF BUSINESS: ECONOMIC LAWS Factories act of 1948 Industrial disputes Act of 1947 FERA/FEMA: Foreign Exchange Regulation Act & Foreign Exchange Management Act Companies act 1956 etc Interest rates If interest rates are less that encourages business people to take add-on projects. It makes domestic goods cheaper . Devaluation is an important measure where government reduces the external value of domestic currency. diversification. etc Currency Exchange rate The exchange rate influences the volume international trade. In order to avoid fluctuations in exchange rate many measures are available.

framing industrial policies. executive control. Council of Ministers with PM as the head. Vice President. curbing or monopoly power and fixation of ceiling on profits and dividends etc. It consists of Supreme Court at the top followed by High Courts I states. approving. Judiciary determines the manner in which the work of the been fulfilled. Judiciary: This is very powerful wing under political set up. An important regulatory functions relating to business are granting of licenses. An important functions are policy making. This frames decides a particular course of action. reservation of industries under small medium and large scale.POLITICAL ENVIRONMENT OF BUSINESS: Influence exerted by three political institutions Legislature: It s a powerful body comprising the Union which termed as Parliament. executive has . It is the centre of political authority which consists of President. and acting as a mirror of public opinion. budget Executive: It can also called as state or Government.

2) Political/Legal ‡ Determines the rules by which business can be conducted Companies may make contributions to political parties in an attempt to maintain favourable relationships Government legislation may affect business ‡ ‡ .

‡ Functions ± Protect consumers ± Protect competitors ‡ Benefits ± Consumer choice among alternatives may be improved when they are better informed ± Product quality may improve ± May lead to reduced prices resulting from a reduction in the seller s informational power .

‡ Important legal influences on marketing activity: ± Monopolies and mergers Prevent the abuse of a dominate market position ± Restrictive practices Prevent restrictions ± Codes of Practice( Ethical issues) Protecting consumer interests. .

Business responsibility to government Tax payment: Taxes paid by business enterprises constitutes a major source of revenue to the government in the form of corporate tax Providing information about the business : There is practice that Finance minister consulting top people of the Industrial field before presenting the budget. roads. Government services: Business people normally accompany delegation to foreign countries. flyovers Political activity: Many business icons have close nexus with politicians and political parties. Voluntary Programmers: Helping the government during the time of emergencies. ex: donating one day salary towards Prime Minister relief fund to help the people who suffer from natural disasters Government Contracts: Many business firms bid for government contract for executing of the projects like housing. This helps In the growth of international trade . Corporate sector provides funds to political parties during election time etc.

Ensure orderly growth : Balanced regional development. agriculture.The decision if the government regarding tariff and quota decides the volume of international trade .Government Responsibility to Business Establishment and enforcement of laws: It is the responsibility of government to establish and enforce laws and regulations under which the business functions. protect the integrity of rupee by protecting the value. Development of Infrastructure : The business sector wants to develop its branches where the infrastructure facilities are more Providing information : Regarding commerce and industry. equal distribution of wealth and assets. full employment and avoid business cycles. Maintenance of law and order : Government has the responsibility of maintaining law and order. Assistance to small scale industries Transfer of technology Inspection and licenses Tariffs and quotas. labour health. It is very essential for the smooth functioning of business activity Money and credit : Regulate the supply of money. banking etc.

mutual obligations of labour and management and a multitude of laws and regulations constraining the way of business activities are carried out constitute are carried out legal environment of business. (Foreign exchange Regulatory Act ) Its replaced now as FEMA (Foreign Exchange Management) The Industries Development and Regulations Act 1952: development and regulations of the industries in the private sector Capital Issues Act: Taken care of capital issues SEBI: It regulates the securities market Conservation of Foreign exchange and prevention of smuggling act: Protection og foreign exchange transactions with reference to smuggling of goods and other things Prevention of Block Marketing and Maintenance of Supplies of essential commodities Act: Torudal. Contract Act: Provides the rules for systematic exchange transaction Company Law: In the industrial sector all economic activities are set up under the provisions of company law MRTP Act 1969: Anti monopoly and prevention of unfair trade practices FERA 1973: It regulates the foreign exchange related transactions. etc Foreign Trade Act: Regulates the foreign transactions like import and export of commodities . Rice.Legal Environment Legislations defining property and business org. There are certain companies acts which have legally control on the business. laws of contracts and bankruptcy. They are as follows .

Consumer tastes and preferences Etiquettes: Behaviour in a society. Occupation. Culture consists of the cultivated behaviour of individual within society. People s attitude towards work. Attitude towards employment. perception and behaviour of society towards business and its management etc. Marriage. knowledge. There are some elements which have got a greater impact on the business organization. Marriage. socio cultural environment includes expectations of the society form the business. etc Language: Language is very important because of approaching. Religion and education.Socio Cultural Environment Its very comprehensive because it may include total factors within which an organization operates. Dress. From the business point of view. . are as follows. as such attitude. Age and Sex compositions of population Family size. Religion: Food habits. Customs like Pooja.

6) Socio-Cultural  Cultural influences can have an effect on the way in which business is conducted Society s culture/Religion affects the business activities Management styles differ across the country Type of leadership and organisation are important    .

Social Responsibility ‡ Person or organisation should be accountable for how its acts might affect society ‡ This realisation affects decision making ‡ Marketing ethics are the moral principles and values that govern the actions and decisions of those involved in marketing decision making .

Technology plays a vital role in Business: Technology improves a competitive advantage of a firm. The technological policies are very important because the management has to kept eye on the technical advancement in the market to gain the competitive advantage. to gain competitive edge and advantage. Business relies on technology from scratch to an end( raw materials stage to finished product stage). Efficiency as well as effectiveness of the productivity can be increased. It improves the quality in 360 degree that is total quality management(TQM). Technological changes leads to uniqueness. Jobs become more intellectual as employees become highly professional and knowledgeable. It is a systematic application of scientific and organized knowledge to practical tasks . Redefines the business boundaries. Increase in the investment due to insatiable demand for capital. J. .K Galbraith defines technology as. it has to be adopted the current and advanced technology in a right Manner. If the business organizational goals need to be achieved. R&D: it helps business to go for innovation. Technology changes reduces the cost of production.Technological Environment Technological environment plays significant role in business.

g.‡ Broader societal forces that affect the company and also other actors in the environment Effects of technology: ± Creation of entirely new industries e.g. robotics ± Demise of other industries e. cassettes ‡ .

‡ Monitoring the technological environment may lead to new opportunities ‡ However. technology may pose a threat if firms cannot compete with their more advanced rivals ‡ The internet is revolutionising how companies conduct business .

‡ Trends in technology: ± Accelerating pace of technological change ± More new product ideas ± Shorter time lag between introduction and peak production ± Minor rather than major product improvements ± Copying of competitors products ± Increased regulation of technological change ± Investigation and banning of potentially unsafe products . ..

3) Ecological/Physical y Environmentalists concerned with the social costs of consumption. not just the personal costs to consumers Environmental Issues y Use of environmentally friendly ingredients y Recyclable and non-wasteful packaging y .

± Animal testing of new products ± Pollution ± Energy Conservation ‡ Increased government intervention on environmental issues .

5) Demographic ‡ Population ± Population size affects the size of the market ± World population growing ± Population in developed economies expected to stay stable or shrink ± Population growth expected in Africa. India and Latin America ± Some companies focusing on these so-called pre-markets .

‡ Age Distribution ± Decline in younger age groups in developed countries ± Growing senior market ± Affects demand for products and services aimed at these age groups ± Marketers may need to change their focus ± Future demographic changes will affect the economy ± Focus on pensions and personal savings .

‡ Household Size and Composition ± Relatively large household size in India ± Many dual-earner families ± Demand for childcare and convenience ± High disposable income .

WTO established in the year 1995 by replacing GATT. It reduces the conflicts among the membering countries. In other words elimination of restrictions in international trade. contracts. Even political and geographical barriers become irrelevant for the growth of the economy. more income Increases the unity among nations Availability of more products Inflation curtailed (Restrict) Innovation quality Specialization increases Disadvantages of Globalization Loss of Economic sovereignty ( Independence) Globalization kills domestic business Exploits human resources Decline in demand for domestic products Leads to unemployment & underemployment Adverse effect on domestic culture and life style Transfer of improper technology widening gap between rich and poor Transfer of natural resources Leads to political and commercial colonialism(Practices) . Such unification calls for the removal of all trade barriers among countries. It stands for free trade( without tariff and quota) across the world. royalties. Advantages of Globalization Flow of capital Increase global competition Enhancement of Customers knowledge Job opportunities increased Standard of living increased Easy growth of technology Globalization facilitates transfer of operation Due to overseas profits. Its principles and agreements foster. The World Trade Organization is profound(great) environmental factor in global business.Global Environment The meaning of globalization is the opening doors of domestic economy to the world economy. In simple economic terms globalization refers to the process of the world into one huge market. monitor and regulate the emerging borderless business world. It is a more powerful body. encouragement of Direct Foreign Investment etc .

Its a process of analyzing the environment for the identification of the factors which have impact on business. Forecasting the direction of future environmental changes. Stages of environmental analysis Scanning the environment to detect warning signals. Monitoring specific environmental trends. .Environmental Analysis Analysis of the environment is a process through which an organization monitors and includes various environmental factors so as to determine the opportunities and future threats. It helps the organization to formulate appropriate strategies. Some factors may appears suddenly and some are slowly so identification of these trends is very essential for the betterment of business. Basically environmental scanning is very important for the growth of the business organization because it gives the proper direction to set goal as well as the right path to reach the goals. Assessing current and future environmental changes for their organizational implications.

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