N P Subedi @ JMC 1

BUSINESS ENVIRONMENT IN
NEPAL
10-Nov-22
 Business Environment in Nepal…Units
2

1. Introduction
2. Macroeconomic Environment
3. Political-Legal Environment
4. Socio-cultural Environment
5. Technology and Energy Management
6. Global Business Environment
N P Subedi @ JMC 10-Nov-22
 Chapter Outline: Introduction
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 Concept of business environment

 Component of business environment
 Internal environment
 External environment
 Importance of the study of business environment
 Process of Environmental Analysis
 Model of Business Environment Analysis
 Techniques of Environmental Scanning
N P Subedi @ JMC 10-Nov-22
 Concept of Business environment
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“ the aggregate of all conditions, events, and influences that

surround and affect a business”
- Keith Davis
 Business is a open system surrounded by various
forces/factors
 The environmental forces are of dynamic nature

 Changes in environmental forces lead to chance in functions

of management and organization.
 Consist of internal and external forces

N P Subedi @ JMC 10-Nov-22

 Components of Business Env.
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1. Internal Environment
- the conditions and forces within the organization that determine the
competitive strengths and weaknesses.
Also known as controllable environmental Forces consist of:
 Human Resources
 Physical and financial resources
 Organizational goals and policies
 Organizational Structure
 Corporate value, norm and culture
 Product and services
 Production operation system

N P Subedi @ JMC 10-Nov-22

 Contd….
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2. External Environment
- The conditions and forces by which a business
surrounded with and provide opportunities and threats.
- Also known as uncontrollable environmental forces
- Classified as:
- General Environment(Macro or Remote External Env. Forces)
- Task Environment (Micro or immediate External Env. Forces)
N P Subedi @ JMC 10-Nov-22
 General Environmental
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 The environmental forces that lies outside the

organization and common for all in an economy is
known as general or macro or remote environmental
forces.
 Though they are common the impact or influence may
differ to different industry and firms.
 They affect the task environment or influence the
immediate external environmental factors
N P Subedi @ JMC 10-Nov-22
 General Environment….
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 Consist of:
 Political
 Legal
 Socio-cultural
 Economic
 Technological
 Natural and
 Global

N P Subedi @ JMC 10-Nov-22

 Task Environment
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 The environmental forces that lies out side but close to the organization are known as
task environment of business.
 Also known as stakeholders of business or immediate external environment have
strong impact on day to day operation of the business. Consist of:
 Suppliers
 Competitors (rivals)
 Customers
 Distributors
 Government
 Media
 Labour union and other pressure group

N P Subedi @ JMC 10-Nov-22

 Importance of the study of business environment
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 Formulate strategy
 Forecast business perspective/outlooks
 Proactive plan
 Compete in the market
 Capitalized the opportunities and minimize the
impact of threats
 Position the strengths and eliminate the weaknesses
N P Subedi @ JMC 10-Nov-22
 Process of Environmental Analysis
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 The process by which the strategist monitor the

environmental factors to identify the Strengths,
Weaknesses, Opportunities and Threats of a business.
 Approaches of Environmental Analysis (process)
1. Scanning (information gathering)
2. Monitoring (identification the trends and area of
forecasting)
3. Forecasting (what is likely to happen)
4. Assessment (identification of key O and T)
N P Subedi @ JMC 10-Nov-22
 Model of Business Environment Analysis
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 Models /Techniques:
 PEST/PESTEL Model
 Porter's Five-Forces Model
 SWOT Model

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 PEST OR PESTEL MODEL
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 PEST MODEL – refers to the analysis of Political-legal,

Economic, Socio-cultural and Technological environmental
forces and their impact on the business activities.
 PESTEL MODEL – refers to the analysis of Political, Economic,
Socio-cultural, Technological, Ecological/Energy and Legal
factors their influences and trends.
 PEST OR PESTEL MODEL - both are the model to analyze
the key external environmental forces their potential impact
and trends which help to identify and list out the emerging
opportunities and threats for an organization and its business.
N P Subedi @ JMC 10-Nov-22
 Porter's Five-Forces Model
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 This model of environmental analysis was develop and proposed by

Michael Porter, a Harvard Professor.
 This is a systematic and scientific model focus to analyze the
immediate external environmental forces.
 It is the most powerful and widely used tool for systematically
diagnosing the principal competitive pressure in a market and
assessing the strength and importance of each of the five-forces
model of competition.
 The five forces are – rival firms, Suppliers, Buyers, Potential New
Entrants, and Substitute products

N P Subedi @ JMC 10-Nov-22

Porter’s Five-Force Model
Substitute
products

Suppliers Buyers

Potential new
entrants
 Porter's Five-Forces Model
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 this model helps to know the answers of the following key questions:
 What kinds of competitive forces are industry members facing and how strong is
each force?
 What are the driving forces for the industry?
 What market position do industry rivals occupy? Who is strongly positioned and
who are not?
 What strategic moves are rivals likely to make next?
 What are the key factors for future competitive success?
 Does the Outlook for the Industry Present an Attractive Opportunity?

N P Subedi @ JMC 10-Nov-22

 SWOT MODEL
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 SWOT – represents: Strengths, Weaknesses, Opportunities and

Threats.
 It is a combination of external and internal environmental forces and
ultimate output of the environmental analysis.
 This model focus on listing out the Strengths and Weakness by
diagnosing internal environmental forces and Opportunities and
Threats emerging from external environmental forces.
 It is one of the most widely used tool to conclude business’s overall
situation for strategy formulation and implemental for competitive
success.

N P Subedi @ JMC 10-Nov-22

 Environmental Scanning
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 Environmental scanning is the process of gathering, monitoring, evaluating,

recording, and disseminating information from internal and external
environments. It is the process of monitoring changes and developments in
internal as well as external environments that may influence the activities of
the organization. It is the act of anticipating and interpreting changes in
environmental factors.
 Every organization has an internal and an external environment in which
variables may affect organization decisions. To cope with the changing
business environment it is necessary for the manager to continuously
monitors the environmental factors.
 Environmental scanning is the screening of a large amount of information to
anticipate and interpret changes in the environment. “Robbins and Coulter”

N P Subedi @ JMC 10-Nov-22

 Environmental Scanning…Type of ES
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 Environmental scanning may be defined as the process by

which organization monitor their relevant environment to
identify emerging trends or developments that are taking
place and their potential impact on the business activities.
Types of environmental scanning
 Centralized scanning
 To a particular environmental component in detail way
 Comprehensive scanning
 To all relevant environmental components in micro way

N P Subedi @ JMC 10-Nov-22

 Approaches to Environmental Scanning
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 Systematic approach
 Systematic method or technique is used
 All relevant information are collected regarding to all relevant
environmental components
 Ad-hoc approach
 Periodic scanning for specific purpose like any project’s feasibility,
investment decision or developing strategy in any particular area
 Processed form approach
 Gathering secondary data from internal and external sources that are
helpful in decision making and planning

N P Subedi @ JMC 10-Nov-22

 Techniques of Environmental Scanning
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A manager can apply various methods/techniques of environmental

scanning to collect environmental data. Following are the important
environmental scanning methods:
 Executive opinion method  Cross impact matrix
 Expert opinion method  Delphi technique
 Extrapolation method  Survey method
 Intuitive reasoning  Brainstorming
 Scenario building  Historical analogy
N P Subedi @ JMC 10-Nov-22
 Techniques of Environmental Scanning…
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Executive Opinion Method
 It is also called the executive
judgment method. Under this,
the climate is projected based
on the opinion and views of
top executives. A panel is
formed consisting of these
executives.
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Expert Opinion Method
 Under this method,
environment forecasting has
based on the opinion of
outside experts or specialists.
The experts have better
knowledge about market
conditions and customer tastes
and preferences. This met is
similar to the executive
opinion method. However, it
uses external experts.
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 Techniques of Environmental Scanning…
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Delphi Technique
 This method is an extension of
the expert opinion method. It
means establishing a panel of
experts and interviewing each
member of the panel about the
likely environmental trend. Later,
the responses are summarized
and returned to the members for
assessment. This process
continues till an acceptable
consensus is achieved.
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Brainstorming
 Here at first, a group is
formed, the new ideas are
gathered through group
discussion. They are formed to
resolve new problems that will
occur in the future. All
members share their ideas,
view, creativity, experience, in
a group and they conclude
mutual consent.
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 Techniques of Environmental Scanning…
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Extrapolation Method
 Under this method, based on
records and information, the
future situation is estimated. The
management assumes that the
same types of events will happen
in the coming year as the
previous year. Time series,
regression analysis, trend
analysis, and forecasting
techniques are used in this
method.
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Intuitive Reasoning
 Intuitive reasoning is the just
opposite of the extrapolation
method of environmental
scanning. Here the manager
estimates the future situation
ignoring or without considering
the past events. The manager
estimates the future situation
based on his ideas and logic. It is
a type of intellectual guesswork
where the manager assumes the
future without any biases.
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 Techniques of Environmental Scanning…
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Historical Analogy
 Under this, the environmental
trends are analyzed with the
help of other trends that are
parallel to the historical trend.
For example, today’s economic
situation of a developing
country can be forecasted by
making a comparison with an
economic situation of a
developed country on a similar
developing stage of the past.
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Cross Impact Matrix
 Under this, two conflicting
trends of the environment are
studied to see their potential
impact on each other. A Cross
impact matrix is employed to
evaluate the internal
consistency of the estimates.
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 Techniques of Environmental Scanning…
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Scenario Building
 Here a scenario is built for the
estimation of different probable
events and their outcomes are
assumed or estimated. For example,
Farmers use scenarios to predict
whether the harvest will be good or
bad, depending on the weather.
Similarly, units of electricity demand in
the country can be estimated based
on its consumption trend for household
and business purposes.
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Survey Method
 To anticipate the environmental
information a field survey is
conducted. Customers, experts,
suppliers, leaders, competitors,
etc, opinions are collected and
analyzed based on which the
future is forecast. In surveys, both
quantitative and qualitative
information is collected.
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Thank You

N P Subedi @ JMC 10-Nov-22