Business Environment

The combination of internal and external

factors that influence a company's operating situation.

Macro environment

Micro Environment

Internal
Environment
 TYPES OF ENVIRONMENT

INTERNAL BUSINESS EXTERNAL

FACTORS DECISION FACTORS
Internal Environment
Value System

Mission and Objectives

Management Structure and Dimensions

Internal Power Relationship

Human Resources

Company Image and Brand

EXTERNAL ENVIRONMENT

Micro Macro
Environment Environment
MICROENVIRONMENT
Suppliers

Market
Publics
Intermediaries

Customers Competitors
MACROENVIRONMENT
Economic Environment
The totality of economic factors, such
as employment, income, inflation, interest
rates, productivity, and wealth, that influence the buying
behaviour of consumers and institutions.
Economic environment can be divided into three parts. We
shall now study their effect on business. They are as under:
(i) Economic system
(ii)Economic policies
(iii) Economic conditions
(i) Economic System:
It is necessary to know about the economic system prevailing
in a country in order to understand the economic
environment. Economic system influences the freedom or
openness of business. Economic system is mainly of three
kinds:

(a) Socialistic Economic System

(b) Capitalistic Economic System
(c) Mixed Economic System.
(ii) Economic Policies:
Economic policies deeply influence the business of a country.
The economic policies are laid down to direct the economic
activities.
Economic activities include import-export, employment, tax
structure, industry, public expenditure, public debt, foreign
investment, etc. In order to direct all these economic
activities, the following economic policies are laid down:
For example, under the import-export policy, restrictions on
imports will benefit the indigenous industry.
(iii) Economic Conditions:

Economic conditions are those conditions which are related

with the possibilities of economic development of a country.
On the basis of the economic conditions the government
starts various programs for the welfare of the people.
Political Environment
Political environment is the outcome of a combination of
various ideologies advocated by different political parties.

Factors connected with the activities of the government are

included in it, e.g., the type of government (single-party
government or multi-party government), the attitude of the
government towards different industries, progress in passing
different laws.
TECHNOLOGICAL ENVIRONMENT
Technological environment in 1990s
The success or failure of any business is highly dependent
on the type of technology in use, the level of technological
developments, the speed with which new technologies are
adopted and diffused, the type of technology that are
appropriate etc.

For many years in the past, India did not have a favorable
attitude towards latest technology to meet foreign
standards. The reservation of products for the small scale
sector sometimes comes in the way of adoption of modern
technology if it involves capital investment higher than the
specified limit.
Technological environment in 1990s
It is only after the introduction of liberalization and
globalization of Indian economy drastic changes have come
in the technological standards in India. Also very high duty
structure made the import of latest technology not only
expensive but also almost impossible.

Today, the scenario has changed. Free availability of

foreign exchange, welcoming foreign collaborations, FDI,
JVs, and setting up of MNCs have led to development of
various R & D centers in many firms. Even the
development taken place in the infrastructure has also
facilitated the technological development
Legal Environment
Many Acts are passed from time to time in order to control
and regulate business activities.

The sum total of all these Acts creates legal regulatory

environment. Acts are mossy passed to regulate such business
activities as sale-purchase, industrial disputes, labour,
regulating partnership business, regulating company business,
foreign exchange, etc.
What is Social Environment?

Social environment is the totality of conditions which concern

in the effecting of the activity feature of a human being. Those
conditions promote or hinder, motivate or restrain, the
characteristic activities of a living being.
Cultural Environment
The cultural environment mean a environment which affect
the basic values, behaviours, and preferences of the society-
all of which have an effect on business decisions. Socio-
cultural environment.

All companies often include an examination of the socio-

cultural environment prior to entering their markets.
Thank You