Unit II

Environm-ental scanning – what ? Why it is required ?

Type of Environment – Micro / Immediate ( Internal /Organizational ); Macro /External

IBM (1980S) ( Infosys and Wipro (IT) )and KFC ( 1999-2000S) – Failed to do Environment scanning

Yakult – In the process of environment scanning

Whirlpool – Successful in doing the Environmental scanning

External Environment: TYPES, Environmental Appraisal, Techniques and tools

1. Demographic – Study of Population

A) Population Growth - India and China are best market with regards to huge population
/Volume .Eg . SIX Pocket Syndrome .( one child in Family ) - Six pockets ( 2- Parents , Each
parents is again single child ; 2 More pockets grandparents and 2 from maternal
grandparents )-------- Toys Industries ,Insurance , Banking , Confectionaries .

B) Population Age Mix- Birth Rate, Death Rate ……. Less old age population if death rate is
high ; Death Rate is low , more old age population

Eg: Japan – More number of Older population on the contrary Mexico is having more
number of Young Population ( 25-40 )---Call centers , India – 18-30 Years – growth of IT
related companies )
C) Education Group- Amount , level of education …….. Engineering ,Medical
………..professional courses …….new types of courses ,
D) Ethnic and other Market – US ( Asians. Africans , Americans, Europe………Japan( mostly
Japanese )

Orissa/Rajasthan………………….Mumbai ( much more ethnic mix )

E) Household Pattern -----Joint vs Nuclear family ; SSWD ( Single, Separated, Widow or

Divorced ): Pattern of increase in CAFEs , Pubs , Bars , Restraurant , Take aways .

PEST Analysis (Political , Economic , Social and Technological )

2. Socio- Cultural Environment == Culture and Society

A ) Concerns /Socio- Cultural ---
Use of mass media – (North Korea , Pakistan , China )……… India
Consumerism – Johnson & Johnson ,
Religious sentiments - Mc Donald’s Beef Case,
Environmental concerns –Plastic bags, (banned), post purchase behavior .Not
green ( muslim Sentiments )
Corruption / commission – Walmart, (EDLP ) 100 % FDI for retail ., ( tie up in
the form of EASYDAY )
 B ) Attitude and Values –Beliefs , Rituals , --- Diwali sale ( Amazon , Cars sale :
Wednesday ;Rakshabandhan ---- Cadbury ( Celebrations ) .,
Banking System – Akshaytritya , Dhanteras …..Purchase gold ;
Saving ---Future marriage expenses, education , medical , old age…..Gold purchase , Mutual
funds , Insurance, bonds ,
Banking system : loans ………………………Credit card , EMI
C) Lifestyle – Principle oriented –Godrej , Maruti ,Samsung --- Brand Loyal
Socio cultural oriented- Adaptors ; Hyundai Santro ----- I10------i20: Brand Switchers
Adventure oriented: Innovators , First movers ( mobile Apple )

D) Role of Members of Society: (Man (financial investment decisions), women (Household

expenditures) , Child( part of buying process )
Initiator – already satisfied customers
Influencer- Brand ambassador
Decision maker – who decides for final purchase
Buyer – to shop to explore the option and features
User – uses the product

3. Economic Environment-
A) Economic policies – Fiscal , monetary policies , Balance of Payment , FDI ( Retail ,
weapons ) , FII (Foreign Institutional Investment ) , GST , Demonetisation , EXIM policies ,
Repo Rate . IKEA ( furniture )
B) Economic system - Capitalist, Socialistic and Mixed economy
C) Economic Conditions – i) Nature of Economy- Agriculture ( Agro Tech ) Industrial (SEZs),
Service
ii) Income Distribution – Upper class (apple , Samsung ), middle class
( Micromax ) , poor and BPL eg . Nokia 1100 (truck drivers)- torch , charging : ( windows
( Nokia Lumia ) into Android )
III) Credit Facilities – Various types of loans availability,
For start ups : Govt. , incubation centres , Venture Capitalist , Angel investors: MSMEs
4. Technology Environment :
EG : software companies , mobile apps, Electronics
CaSe study: Kerala : Ayurvedic tourism ( with the help of
marketing through technology )
Indian Pharmacy: Record of maximum patents (R & D with
Technology)
Car manufacturing Companies: Rising fuel prices; Adjusting the
technology in production )
 5. Political Environment :
A) Funding political parties : Election system Eg : NRI ( Gujarat :
NRI Summit , Rajasthan Diwas invites NRI), Cyberabad
( Hyderabad) – lot of IT companies
B) GOvt. Policies : Business friendly , Stability Govt.
Make in India (Export favorable)
Levi’s Jeans: Button, Zip , Cloth of Stitching material made in
India ( Subsidies provided by Govt. )
Jio : free service of net
C ) Share market fluctuations

6. Physical Environment
A ) Natural Environment: Vaseline ( , Iron & steel – Scrap ( bolts ,
nuts ), Mico Bosch , NBC ( National Bearing Corporation )
B ) Climate: Ethopia ( Flower industry )tied with airlines
C) Energy: gas, solar , atomic power, wind
D) Topography: location aspects of business , local market eg : Batic
printing , handloom : Tourism , Textiles , Handicrafts , Gems &
jewellery
E) Ecology: electricity , transportation , water supply , road facility ,
Natural environment is the ultimate source of many inputs such as
raw materials, energy which business firms use in their productive
activity. In fact, availability of natural resources in a region or country
is a basic factor in determining business activity in it. Natural
environment which includes geographical and ecological factors such
as minerals and oil reserves, water and forest resources, weather and
climatic conditions, port facilities are all highly significant for various
business activities.

For example, the availability of minerals such as iron, coal etc. in a

region influence the location of certain industries in that region. Thus,
the industries with high material contents tend to be located near the
raw material sources. For example, steel producing industrial units are
set up near coal mines to save cost of transporting coal to distant
locations.

Besides, certain weather and climatic conditions also affect the

location of certain business units. For example, in India the firms
producing cotton textiles are mostly located in Bombay, Madras, and
West Bengal where weather and climatic conditions are conducive to
the production of cotton textiles.

Natural environment also affects the demand for goods. For example,
in regions where there is high temperature in summer there is a good
deal of demand for dessert coolers, air conditioners, business firms set
up industrial units producing these products. Similarly, weather and
climatic conditions influence the demand pattern for clothing,
building materials for housing etc. Furthermore, weather and climatic
conditions require changes in design of products, the type of
packaging and storage facilities.

It may however be noted that resource availability is not a sufficient

condition for the growth of production and business activities. For
instance, India through rich in natural resources remained poor and
underdeveloped because available resources had not been put to use
due to lack of adequate capabilities of Indian business class. Thus, it is
not the availability of natural resources alone but also the technology
and ability to being them into use that determines the growth of
business and the economy.

Ecological Effects of Business:

Until recently businesses had generally overlooked the serious
ecological effects of its activities. Driven purely by the motive of
maximizing profits, they cause irreparable damage to the exhaustible
natural resources, especially minerals and forests. By their careless
attitude they caused pollution of environment, especially air and water
which posed health hazards for the people.
By creating external detrimental diseconomies they imposed heavy
costs on the society. Thanks to the efforts by environmentalists and
international organisations such as World Bank, the people and the
governments have now became conscious of the adverse effects of
depletion of exhaustible natural resources and pollution of
environment by business activity.

Accordingly, laws have been passed for conservation of natural

resources and prevention of environment pollution. These laws have
imposed additional responsibilities and costs for business firms. But it
is socially desirable that these costs are borne by business firms if we
want sustainable economic growth and also healthy environment for
human beings.

7. Regulatory Environment : ( legal)

Policies related to – Contract act, pricing of products,
distribution, company Law
Labour Acts
Foreign Exchanges (FERA ACT)
Role of Licensing: Telecom Operators license in circle wise. (2G
SCAM )
EXIM Policies: Subsidies . TAX, Custom duty charges
Consumer Protection Act , Env . Protection Act,
Regulatory bodies : RBI penalty, TRAI, ASCI , IRDA , Censor ,
SEBI , FSSAI , NHAI ,UGC , AICTE , CBSE, RBSE, State Boards .
( nirav Modi , ICICI Chanda Kochar )
 8. Global Environment – Process of internationalization, Global
competition., International business , EG : , Local / Regionally
confined / State , Domestic Company, International
company(SBI) , MNCs( Nestle India Division ; Maggi ), Global
Companies ( Coco Cola )
Factors of production -

Techniques of Environment Search and Analysis

1)Information Gathering
 International Publications: UNESCO, ILO,
UNDP , WHO , World Bank reports , IMF ,
MOODY’s Ranking .(80s)
  Information from Indian Govt.- 5 years plans, ,
Economic Survey , NS Reports , Census , RBI
reports , ministries of information annually
published.
 Institutional publication : BSE
directory ,ASSOCHAM, NCAER ( NATIONAL
COUNCIL OF APPLIED Economic RESEARCH ) ,
Centre for monitoring Indian Economy
 Periodicals and Magazines ( business Today,
Outlook )
2)Spying: collect information from competitors , AI
3)Forecasting : market research report , economic
analysis reports : EG : KPMG .PWC , Mc Kinsey $
company , BCG , Deloitte , E & Y