Accounting Masterclass

~ ~ usiness Environment
► It is the Sum Total o all Individual , Institution and
Other Factor that are Outside The Control of a
business enterprise, but they Affect its performance.

► Ex-Change in Government Economic policies, rapid

Technological Development , Taste of consumers
Political uncertainty , changes in fashions and
increased competition influence the working of a
business enterprise in important way.
I ~tffMEIWironrnfnt I External Envionment
• Value System
• Mission and
Objectives '
• Organisational Miao Envionment Macro Environment
Structure
• Corporate Cultu"
I
• Organization • Economic
• ~ity of Hll'l\an • Customefs • Political • Legal
• Competitors Technolgical
Resources
• Mmt • Gobal
• Labour Unions • Suppliers • Socio · Cultural
• Physical Resources
andTechnological • Intermediaries • Demographic
Capabilities
Accounting Muterclau

~ Featu1,e / C~ racteristic
n Specific & General Forces
2) Totality Of External Forces.

3) Inter-Relatedness
4) Dynamic Nature
s) Uncertainty
6) Relativity
1) Complexity
Accounting Masterclass

Importance Of Business. Environment

~ Helps the firm to identify threats and early
warning signal.
2) In enables the firm to identify opporunities and
getting the first mover advantage.
3) Helps in improving performance.
4) He Ip s in assisting i n p Ian n i n g and po Ii cy
formulation.
AccountlnglluterclusD i mension / Elements Of ~s iness
Environment
--
~
~ Political ~
~ ocial [egal
Technological Environment
e I II • I Environment Environment
Environment
Describe
Describe Describe the Describe broad political Describe
forces which characteristic characteristic of condition& framework of
have of society in technology in nature of laws and
economic which government legislations
which business
impact on business firm firm operate. intervention in within business
business. operate. business. firms operate.
Accounting lluterclus

d .Economic Environment
....

► It refers to all those force that have Economic

Impact on the business activities.

► Interest rate, inflation rate , changes in

disposable income of people , stock market
indices and value of rupee ( factors)
Essential Aspects of the
Economic Environment

Here are some of the essential aspects of

an economic environment.

• Role of the public and private sector

• Balance of trade and payment

• International debt

• Savings and investment rate

• Rate of growth of GDP, GNP, and Per

Capita Income

• Money supply in the economy

 Economic Environment Components

Ecooomi<: System Economic Policies Economic Conditions

!
C1pi111i11 ecoaomie Socialist Fmnomie Mi.xed Economic Co.mmuniit Economic
System System Sy11em System

Public Sector Privau: Sec1or Mixed Sector Co-operative

Sector

Source: Owlgen
Accounting lluterclus

~ 2. Social Environment
► It represents the Customs and Tradition , Value ,
Culture , Social , Trends, Beliefs , Norm- and
Ethicsof a society in which business enterprise
operate.

► Analysis & Understanding social environment is

important as it determines the products, service
and standard of conduct that are acceptable to
society.
Essential Aspects of the Social
Environment

Here are some of the essential aspects of

the social environment.

• Quality of life

• Literacy rate

• Birth and death rates

• Population

• Consumption habits

• Place of women in the workforce

• Traditions and customs of people

Accounting Masterclass

A .Technological Environment
► It include forces Relating to Specific
Improvement & Innovation which provide New
Ways of Producing Goods and Service and New
Methods and Techniques of operating a
business.

► Ex- Electronic Payment Service ( all utility bills )

instead of going manually to office for payment.
Essential Aspects of the
Technological Environme1 nt

Here are some of the essential aspects of

a techno logical environment:

• Innovations and inventions

• Developments in the IT sector

• Import and export of technology

• Scientific improvements
Accounting lluterclus

~ 4. Political Environment
► It includes Political Conditions such as general
Stability and Peace 1n the country and specific
Attitudes that elected government representative
hold toward business.

► A Stable Government build up Confidence

among the business people to invest in the Long
Term Proiects.
Essential Aspects of the Political
Environment

Here are some of the essential aspects of

the political environment:

• Country's constitution

• Current political system

• Gover nment's foreign policies and

interventions

• Cultural values and va lue system of

political parties and political leaders
Accounting lluterclus

~ s.Legal Environment
► It includes the Various Legislations passed by the
administrative orders issued by Government
Authorities , Court Judgement as well as the decision
rendered by Various Commissions and agencies at
every level of government.

► In India, Every business enterprises must have

working knowledge about various laws like
Companies Act, industrial ( Development &
Regulation ) act , FEMA , Factories Act , Trade Union
Consumer Protection Act , Com petiton Act etc.
Essential Aspects of the Legal
Environment

Here are some of the essential aspects of

a legal environment.

• Laws and Legislative Acts

• Advertisements Laws

• Foreign Exchange Regulation and

Management Act

• Legal Policies about Foreign Trade and

Licensing

• Statutory Warnings
• Environmental scanning is the process of gathering information about events and
their relationships within an organization's internal and external environments.
• The basic purpose of environmental scanning is to help management determine
the future direction of the organization.
• Factor of Environmental Scanning includes Events, Trends, Issues,
Expectations.
• It is a Continuous & dynamic process,
Techniques of Environmental Scanning
• SWOT

Strengths Weaknesses
Characteristics of a Characteristics of a
business which give it business which make it
advantages ov er it s disadvantageous relativ e
co mpetitors to competitors

Threats
Elements in the external
extcr
environment that could
illlu

-=-------
endanger the integrity and
irnp
profitabi lity of the business
inc ..
Techniques of Environmental Scanning
• PESTEL

- Economic Population Technol08'( Discrimina

- Government growth growth rate incentNes tion laws
policy - Exchange Age Lewi of - Environmen- Antitrust laws
Political rates distribution innovation tal policies Employment
stability - Interest rates Career Automation Climate laws
Corruption Inflation rates
Foreign trade
attitudes R&D activity change Consumer
policy
Disposable
income
Safety - Technological - Pressures protection
emphasis change fromNGO's laws
Tax policy
Unemploy- Health Technological - Copyright and
- Labour law
ment rates conscious- awareness patent laws
Trade
restrictions ness Health and
- Lifestyle safety laws
attitudes
Cultural
barriers
Techniques of Environmental Scanning

• ETOP : ETOP analysis (environmental threat and opportunity profile) is the process by
which organizations monitor their relevant environment to identify opportunities and threats
affecting their business for the purpose of taking strategic decisions.
o It was developed by glueck.

• QUEST : pioneered by Burt Nanus and Selwyn Enzer in the early 1980s.
o QUEST The Quick Environmental Scanning Technique, is a scanning procedure design
to assist, executers and planners to keep side by side of change and its implications for
the organizational strategies and plans.