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Business Environment Analysis

Factors /activities those surround/encircle


the business

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Learning Objectives
To understand the internal and external
environmental variables
To assess how these variable affect the
business positively and negatively

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Business Environment
Internal Envt External Envt

External Micro External Macro

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Internal Environment

Organizational Structure Production Finance Marketing R&D

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External Micro

Share Bankers / Customers/


Creditors Competitors Market Intermediaries
Holders Fin Inst Consumers

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External Macro

Social&
Technological Economic Political International Natural
Cultural

11/11/09 MCA
Social And Cultural Factors
a) Culture:-
• “ thought and behavior patterns which the
members of the society learns through
language and other forms of symbolic
interaction- customs habits beliefs and
values, the common view points that bind
them together as a social entity”
• Changes gradually- picking up new ideas
and dropping old ones
11/11/09 MCA
b) Religion:-
Play significant role in normal and ethical
standards in production and marketing of
goods and services

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c)Family system:-
Deep impact on Business
Egs:- Islamic Vs European countries
McD’s Hamburger in India

11/11/09 MCA
Technological Factors
“ systematic application of scientific or
other or organized knowledge to particular
tasks”
• Brings the globe closer
• Flows from the advanced countries to the
developing countries thru MNCs, JV’s,
Alliances- Licensing and Franchising

11/11/09 MCA
Economic Factors
• Global economy has undergone a sea change
during last 50 years:-
• Capital flow rather than trade or product flow
across the frontiers
• Establishment of production facilities in various
countries
• Technological revolution de-linked the relation
b/w the size of production and level of
employment
• The contest b/w communism and capitalism is
over

11/11/09 MCA
Political factors
• Influences business from multi angles:-
promoting, encouraging, fostering,
sheltering, directing and controlling
• The success of Business depends upon
the stable, dynamic, honest, people-
participative, secured political system in a
country
(Pakistan, Fiji, Gujrat, Rajastan etc..)

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Political Risks associated with IB
• Nationalization:- Shifting the ownership from pvt to public
(Govt)
• Confiscation:- Nationalization without Compensation
• Expropriation:- Nationalization with compensation
• Domestication:- Relinquishing the control and ownership
in favor of domestic investors ( Partly and sometimes
fully)
• General Instability:- Due to social, Political, Religious
unrest in the host countries( Riots, Coup de Tat)
• Operation Risk:- due to change of policy and imposition
of controls

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Related Interests