Business Environment

The objective of the paper is to provide the student with a background of various environment factors that have major impact on business and sharpen their mind to watch and update the changes that occur constantly and analysis of competitive business environment with special reference to India.

Unit I:

Business Environment and Analysis:
The concept of Business Environment, significance and nature. Overview of Political, Socio-cultural, Legal, Technological environment: Impact of technology on business. Technological policy, import of technology, appropriate technology, problems in technology transfer. Global environment. Environment Scanning: meaning, nature and scope, the process of environmental scanning, Interaction between internal and external environments. Unit II:

Indian Financial System:
Current Financial Structure, Non Banking Finance Companies (NBFCs) and Financial Institutions. Reforms of the banking sector and Financial Sector, Role of SEBI, FEMA. The changing dimensions of these laws and their impact on business.

Unit III: Macro Economic policies of India:
Indian tax system, Direct and Indirect taxes. MODVAT, CENVAT and Value Added Tax. An evaluation of recent fiscal policy of Government of India ± Highlights of Budget. Monetary Policy: RBI , Objectives of monetary and credit policy, Policy tools and Recent trends of Monetary Policy.

Unit IV: Micro Economic policies of India:
Public sectors reforms and disinvestment, Industrial Policy in recent years, MRTPAct. policy, Foreign investment Policy, EXIM Policy, Flow of Capital, Acquisition, Mergers, India and WTO.

Unit V: LPG Liberalization, Privatization and Globalization:
New Economic Policy , Privatization, Liberalization Globalization, their Implication for Indian Business, its Impacts and emerging trends and issues of LPG in Indian Business

Meaning of Business Nature of Modern Business Environment of Business

How environment influences business:  What is the meaning of business and how one understands the nature of modern business? How is internal environment of business different from its external environment? How can one distinguish micro and macro environment of business? From the point of view of present day which is more relevant.   .

 Moderns business covers a complex field of industry and commerce which involve activities related to both production and distribution. finance. These activities related to both production and distribution.Business refers to buying and selling of goods««. transport.  . banking.. Business in brief : includes activities connected with production. insurance. advertising and certain other activities related to industry and commerce. These activities on the one hand satisfy society¶s needs and desire and on the other hand bring profits to business firm. trade.

Nature of Modern Business        Large Scale Oligopolistic character Diversification Global Reach Technology orientation Change Government Control .

profits. Key Feature: Business interdependence among the seller. ONGC Oligopolistic Character Oligopolistic business is characterized by a small number of firms selling a homogeneous or a differentiated product. Indian companies in terms of sales revenues.Reliance Industries.Large Size Business that matters today is large in size.Tata steel . asset and stock holders· equity are relatively small as compared to the companies in develop countries. . 2008 Indian Oil . Hindustan Petroleum. State Bank Of India. Bharat Petroleum. Fortune 500 List.

Maruti Udyog Horizontal diversification: Adding new related products or services for existing customers. Modi Groups . Philips Conglomerate diversification: Big business houses expands their activity by establishing new companies which undertake production of unrelated new products or services.Diversification: Concentric diversification: Business firms prefer to add new related products to their existing production. Tata Group Ambani Group Reliance.

Global Reach: Liberalization.Eg. goods. Because modern companies regard technological research strtegic to their future. dish washers and rice cooker with buzzy controls systems. Novartis has more than teo-thord of its R & D activity in Switzerland. consumer goods. These activities are central ised in the countryof the company¶s origin. Technological Change & Falling trade barriers have rapidly changed the business landscape. televisions video cameras. Eg. refrigerators. . Nestle. Philips Electronics. Technology: Japanese and Korean Companies have launched a large no. Companies expanded their revenue and assets base across countries and engages in cross ±border flows of capital. washing machines. they carry out their R & D activities very close to their head quarters. including air-conditioners.

education and public health and security. To create stable business condition .Government Control       Pollution Hazardous wastes Unsafe drugs and food Radioactive matarials Public Goods: Buolding highway network.

To create stable business condition . education and public health and security.Government Control       Pollution Hazardous wastes Unsafe drugs and food Radioactive matarials Public Goods: Buolding highway network.

Transition Competition Information Business Opportunities Technology Globalization .

leveraging technology. Mission & Objectives Vision: Why the firm exists and where it is trying to lead.´ . Where do we go from here? What changes lie ahead in the business landscape? What differences will these changes make to the company¶s present business? The Vision of Infosys is: ³To be globally respected corporation that provides best ±of ±breed business solutions.Vision. vendors and society at large.

Mission: A mission statement outline the fundamental purpose of the organization. The company¶s concern for survival. The company¶s activities. its self-concept and its concern for public image     . its philosophy. business emphasis and path for development. or how the firm goes about creating and delivering value to customers and satisfying their needs. or who is being satisfied. If the vision statement answers the question µWhere do we go from here?´ The mission statement answers ³What is our business ? ´ A mission statement gives the organisation its own identity. or what is being satisfied. technologies. A vision becomes tangible as a mission statement. and competencies. Customer groups. A mission statement incorporates four elements: Customer needs.

Objective represent the operational side of an organisation. Mission statement seek to make a vision more specific and objectives are attempts to make mission statement more concrete.Objective: Objective render mission more concrete. .

Objective: Profit Power Quality Products and Services Growth Challenging Business Goals Employees Satisfaction And Development Joy of Creation Market Leadership Service to Society .

external objects. events.Environment: Environment means the surroundings. influences that surround and affect it. The environment of any organization is the aggregate of all conditions. Business Business Firm ± Economic activity ± Economic Unit Business Decision Making ± Economic in Nature . influences or circumstances under which someone or something exists.

Business Environment External Environment Internal Environment Micro Environment Macro Environment .Environment of Business  Business Environment refers to all external factors which have a direct or indirect bearing on the activities of business.

Environment of Business External Environment Internal Environment Micro Value System Goals/ Objectives Managemen t Structure Business Internal power Relationship Physical and technological Capabilities Macro Human Financial & Marketing resources .

Political-Legal Physical Rival Firms Economic New Entrants Suppliers Cultural Buyers Substitute Products Global Technological External Environment Internal Environment .

Goals and Objectives: Sales maximization and the balanced rate of growth maximization . Internal Power relationship: The strength of management depends largely on the relationship between the company¶s shareholders Physical resources and technology: Production technology R&D work and distribution logistics. Human Resources: The quality of human resources of a company depends largely on skills.Internal Environment  Value System: Persons holding top positions in certain modern corporate enterprises have some values which influence their policies. commitment.      . practices and overall internal environment . attitude and morale of the employees. Management Structure: A corporate enterprise may be professionally managed or family controlled.

Business Firm: Adaptability and adoptability to environment. Managers: Capability to deal with environment. Internal Environment Business Environment External Environment Regarded as controllable Regarded as controllable factors factors Regarded as uncontrollable factors .

culture Staff Resources of the organization Marketing-distribution Finance accounting Human resources Production-operation Research-development Industry level Suppliers Customers Competitors Financiers Society General level Regional National International level .Internal and External business environment Internal business environment          External business environment           Internal structure System.

Macro Environment: Economic Environment                Non Economic Environment  Industrial Production Agriculture Planning Infrastructure National Income Per Capita Income Money Supply Price Level Population Savings Trade cycles Economic System Growth Economic stability Economic policy Global Environment Political Environment Regulatory & Legal Environment Social / Cultural Environment Demographic Environment Technological Environment Natural Environment       .

Technological Environment: exercises considerable influences on business. Rise and decline of products and organisations. High expectations of consumers. 6. It changes fast and to keep pace with it. 4. 7. 3. Fast changing technology. Increased productivity. businessmen should be ever alert to adapt changed technology in their businesses. Technology reaches people through business. 8. Need to spend on R&D. Social change . 2. Demand for capital. Features: 1. 5.

 Capital and technology transfers  Deciding which market to enter and how to enter.Global Environment: Features: Increasing opportunity as world has become one market.  Competition from MNCs. learning of foreign languages is a necessity. facing political and legal uncertainties is inevitable. and that adapting their products to different customer needs and tastes would only help companies survive amidst intense competition.  Adjusting the management process  India and WTO A manager must understand that safe and protected markets are no more there.  Improving quality. . the world is becoming small in size-advanced means of transport and communication facilities.

viz. Legislature decides on a particular course of action. executive and the judiciary in shaping.Political-Legal Environment: refers to the influence exerted by the three political institutions. A stable and dynamic political environment is indispensable for business growth.      Role of legislature Role of executive Role of judiciary Constitution of India. the executive also called the government. directing. New direction for government role. legislature. implements whatever was decided by the parliament and the judiciary as the watchdog in order to ensure that both the legislature and the executive function in the public interest and with in the boundaries of the Constitution. . developing and controlling business activities.

           Culture creates people Culture and globalization Culture determines goods and services People¶s attitude to business and work Caste system Sprit of collectivism and individualism Education Family and marriage Ethics in business Social responsibility Corporate governance .Social and Cultural Environment: refers to the influence exercised by the certain factors which are beyond the company gate.

Mining and drilling depends on natural deposits Agriculture depends on Nature Trade between two regions depends on geographical factors Transport and communication depend on geographical factors .Natural Environment:      Manufacture depends on physical inputs.

Growth and speed of MNCs. Barriers of international trade & investment. Political condition & system in different countries. . Role of multinational economic institution. International economic cooperation.Determinants of International Environment for Business          State of world economy. International economic laws .agreement codes. International market structure and competition. Technology growth & transfer.

Significance of Business Environment     Facilitates operations of the organization. Form the basis of long term policies. Help organization in identifying & understanding its competitors. . plans and strategies of organization. Help the firms to expand & grow.

  Environment Scanning Strategy Formulation Strategy Formulation Evaluation and Control . Environment analysis should facilitate and foster strategic thinking in organizations-typically a rich source of ideas and under standing of the context within which a firm operates.Objective and uses of environment study: Environment analysis has three basic goals:  Analysis should provide an understanding of current and potential changes taking place in the environment. Environment analysis should provide inputs for strategic decision making.

To keep oneself dynamic. Development of action plans to deal with technological advancement.Benefits of environment study:      Development of broad strategies and long term policies of the firm. Analysis of competitor¶s strategies and formulation of effective countermeasures. . To foresee the impact of socio-economic changes at the national and international levels on the firms stability.

Nature of Business Environment:      Dynamic Uncertain Opportunity & Threat Internal & External factors Economic and Non Economic factors .

Types of Business Environment Risk  Legal Risks Regulatory Risks Political Risks Social Risks Natural Risks     .

its policies & programs.   . Aimed at conditions improvement of the company.Environment Scanning Environmental scanning is a process of gathering. The environmental scanning process entails obtaining both factual and subjective information on the business environments in which a company is operating or considering entering. analyzing. and dispensing information for tactical or strategic purposes. Important step towards corporate planning & business policy decision.  Strategic planning in which manager try to determine best fit b/w organization and its external environment.

Linkage among Stages Monitoring Scanning Forecasting Assessment .

scope & intensity of environment changes Assessment: Identifying & evaluating how & why current and projected environment changes will affect strategic management of organization . Monitoring : Tracking environmental trends events. Forecasting: Developing plausible projections of direction.Process of Environment Analysis : Scanning : General surveillance of environmental factors & their interactions.

analyses. External Scanning: Acquisition. analyses. SWOT analysis . use of information about events & establishing the relationship of business with its environmental variables. use of information from within the organization that will help the mngt in determining future course of action of business.Internal Scanning : Acquisition.

Important Information :        The size and type of sectors represented How many people they currently employ Business expansion initiatives Employee shortages Skills required Business growth opportunities Gaps in the business sector .

Studies done on a regular schedule (e.There are three ways of scanning the business environment:  Ad-hoc scanning .Short term. infrequent examinations usually initiated by a crisis Regular scanning . once a year) Continuous scanning (also called continuous learning) continuous structured data collection and processing on a broad range of environmental factors   .g.

List Strengths: Develop a list of all of the internal strengths of the agency incorporating feedback from the team members. emails and surveys. Threats: external conditions which could do damage to the objective. Discuss the strengths and clarify any questions or confusion. . Examples of strengths could include an experienced staff or good employee training program.SWOT analysis Strengths: attributes of the person or company that are helpful to achieving the objective. Weaknesses: attributes of the person or company that are harmful to achieving the objective. Opportunities: external conditions that are helpful to achieving the objective.

Identify Weaknesses Weaknesses are internal factors that may impact workforce planning negatively. . It is possible that a strength could also be a weakness.. Examples of weaknesses could include an absence of procedural manuals or lack of an employee mentoring program. For example. but may be a weakness because it might indicate a workforce close to retirement. long-time employees could be a strength because of their experience.

Again it is possible that an opportunity may also be perceived as a threat. Identify Threats: Threats are also external factors.List Opportunities: Opportunities are external factors. but also threaten staffing levels. Opportunities could include new relevant training programs at educational institutions or an emerging diverse workforce. new technology tools might be an opportunity. For example. Establish Priorities . Threats could have a negative impact on your workforce planning and could include a projected increase in the cost of employee health insurance or an expected reduction in government funding. as opposed to the internal factors of strengths and weaknesses.

SWOT Analysis Strengths What does your community do well? What unique resources do you have? What do others see as your strengths? Weaknesses L What could you improve? Where do you have fewer resources than other communities? What do others see as your weaknesses? Opportunities What good opportunities are available to you? What trends would you take advantage of? How can you turn your strengths into opportunities? Threats What trends could affect you negatively? What are competing communities doing? How would a weakness be potential threat? .

this is only successful where you have some control over the environmental variable in question adaptation strategy .try to turn the new influence into an advantage .Responses        When an issue is detected.quick response can give you a competitive advantage redeployment strategy .redeploy your assets into another industry contingency strategies .study the situation further . there are generally six ways of responding to them: opposition strategy .no response .try to influence the environmental forces so as to negate their impact .determine a broad range of possible reactions find substitutes passive strategy .adapt your marketing plan to the new environmental conditions offensive strategy .

Forecasting. careful analysis & interpretations of business environment. Integrating economic theory with practical business environment. future planning & formulating future business strategy.Role of Business Economists:  To provide economic logic & perspective for managerial decision making.    . Monitoring. scanning.

Thank You .

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