Professional Documents
Culture Documents
Purvi Pujari
1 Business environment - definition, nature
and scope, distinction between internal and
external environment of business, limitations
of environmental analysis.
2 Socio-cultural environment of business:
elements of culture, the impact of culture on
business, multiculturalism
3 Political environment of business: The
State and it's branches, political ideals
including liberty, equality, fraternity and
tolerance. The politics of coalition
governments
4 Regulatory environment of business,
including the need for effective regulation
and governance as well as the ingredients
of a good system of regulation
5
6 Ecological issues and sustainable
development
7 National Income: Growth and
development. Interconnectivity between
macroeconomic variables & Business
Cycles.
The concept of Inclusive growth Subsidies,
JAM (Jandhan, Aadhar and Mobile) and the
"Make in India Campaign”.
8 Money and Banking: including money supply,
demand for money, credit creation.
9 Central Banking and Monetary Policy: instruments
of credit control, objectives of monetary policy.
Inflation: the concept, demand pull, cost push
inflation. Inflation & monetary policy
10 Budget, budgetary deficit, fiscal deficit and
fiscal policy: aims, objectives and efficacy.
11 The LPG model (Liberalisation, Privatization and
Globalisation) : genesis, features, problems and
prospects
12 Balance of Payments. International trade blocks,
IMF, IBRD, WTO. Lecture
Business environment –
definition, nature and scope,
distinction between internal and external
environment of business,
limitations of environmental analysis.
Business enterprises cannot function in isolation.
Open systems interact with their environment.
Business enterprises exist in and are surrounded
by an ‘environment’ – the business or
organisational environment
Society and business enterprises are mutually
dependent.Business enterprises satisfy societal
needs
Relationship between society and business
enterprises takes place in a changing
environment
6
Different environmental variables exist
internally and externally to the business
enterprise
Environmental variables have a positive or
negative influence on the enterprise
Business environment consists of two sub-
environments:
Internal(micro) environment
External environment
Market environment
Macro environment
Mutual relationships exist between these
environments 7
Characteristics:-
1. Business environment is compound in nature.
2. Business environment is constantly changing
process.
3. Business environment is different for
differentbusiness units.4. It has both long term
and short term impact.5. Unlimited influence of
external environment factors.6. It is very
uncertain.7. Inter-related components.
8. It includes both internal and external
environment
.
According to Keith Davis, -
“Environment of the business means the
aggregate of all conditions, events and
influences that surround and affect it”.
According to Bayard O Wheeler, business
environment refers to “The total of all things
external to firms and industries, which affect
their organisation and operation”.
According to Arthur M Weimer, “Business
environment encompasses the climate or set
of conditions, economic, social, political or
institutional in which business operations are
conducted”.
(a) Determining Opportunities and Threats: The
interaction between the business and its environment
would identify opportunities for and threats to the
business. It helps the business enterprises for meeting the
challenges successfully.
(b) Giving Direction for Growth: The interaction with the
environment leads to opening up new frontiers of growth
for the business firms. It enables the business to identify
the areas for growth and expansion of their activities.
(c) Continuous Learning: Environmental analysis makes
the task of managers easier in dealing with business
challenges. The managers are motivated to continuously
update their knowledge, understanding and skills to meet
the predicted changes in realm of business
(d) Image Building: Environmental understanding helps the
business organisations in improving their image by showing
their sensitivity to the environment within which they are
working. For example, in view of the shortage of power,
many companies have set up Captive Power Plants (CPP) in
their factories to meet their own requirement of power.
(e) Meeting Competition: It helps the firms to analyse the
competitors’ strategies and formulate their own strategies
accordingly.
(f) Identifying Firm’s Strength and Weakness: Business
environment helps to identify the individual strengths and
weaknesses in view of the technological and global
developments.
(a) SPECTACLES – Social, Political, Economic,
Cultural, Technological, Aesthetic,
Customer, Legal, Environmental and Sectoral
(b) PEETS – Political, Economic, Ecological,
Technological and Socio–demographical
(c) SLEPT – Social, Legal, Economical, Political
and Technological
(d) PETALS- Political, Economic, Technological,
Aesthetic, Legal, Social
1. Business environment is compound in nature.
2. Business environment is constantly changing
process.
3. Business environment is different for different
business units.
4. It has both long term and short term impact.
5. Unlimited influence of external environment
factors.
6. It is very uncertain.
7. Inter-related components.
8. It includes both internal and external environment.
First Mover Advantage-Early identification of
opportunities helps an enterprise to be the first
to exploit them instead of loosing them to
competitors.
Customer Focus -Environmental understanding
provide enough information regarding the need
and expectation of the customer and helps
business organisation to focus towards their
customers.
Strategy Formation - Keeping an eye on
environment provide relevant information to the
organisation in formulation of strategy.
Early Warning Signal -It makes a firm aware of
the impending threat or crises, so that the firm
can take timely action to minimise the adverse
effects.
Public Image -A business firm can improve its
image by showing that it is sensitive to its
environment and responsive to the aspiration of
public.
Continuous Learning -Enterprises that
continuously monitoring their environment and
adopt suitable business practices not only improve
their present performance, but also succeed in the
market for a longer period.
Change Agent -Business leaders act as agents
of change. They create a drive for change at
the gross root level. In order to decide the
direction and nature of change, the leaders
need to understand the aspirations of people
and other environmental forces through
environment scanning.
Technological Change-Environmental study
helps us in getting updates regarding
technological changes and helps in making
action plans to cope with such changes.
Internal Environment
External Environment
Microenvironment
Macro environment
Economic
Non Economic
Refers to all the factors that are within an
organization which impart strengths or cause
weaknesses of strategic nature.
Controllable factors. These include:
Value system
Mission and Objectives
Management Structure and Nature
Human Resources
Company Image and Brand Equity
Other Factors
Physical Assets and Facilities
R & D and Technological Capabilities
Marketing Resources
Financial Resources
Value System: The value system of the founders
and those who are at the top has an important
bearing on the choice of business, mission and
objectives, business policy and practices. Value
system also is evaluated by many companies in
selection of suppliers, distributors ,collaborators
etc.
Core value system of Infosys states : To achieve
our objective in an environment of fairness,
honesty, transparency and courtesy towards our
customers, employees, vendors and society at
large
Vision , Mission & Objectives
Business objectives of a company are also
guided by the mission and objectives of the
company.
Ranbaxy’s thrust in foreign market is based
on the mission “to become a research based
international pharmaceutical company.”
Top Management Structure-The composition of
the board of directors is very critical factor for
the development and performance of company
as they are highest decision-maker authorities,
extend of professionalism of management as it
may be professionally managed or family
controlled, nominee of financial institutions
having large holdings in companies, the
shareholding pattern could have important
managerial implications. All these factors are of
great importance from the point of view of the
company’s internal environment.
Power Structure-
The internal power relationship between
the board of directors and senior
executive officers highly effect the
decision making process of the
organisation
Human Resources - The characteristics of human
resources like skill, quality, morale,
commitment, attitude etc. could contribute to
the strength & weakness of an organization.™
Some organizations find it difficult to carry out
restructuring or modernization because of
resistance by employees whereas some others do
it smoothly.
Company Image and Brand Equity-The
image and brand equity of the company
matters a lot in raising finance, forming joint
ventures and other alliance, choosing dealers
and suppliers etc.
Includes all factors outside the organization
which provide opportunities or pose threats to
the organization
Uncontrollable factors
Cultural Forces
Political - Legal Forces
t em
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Technological Forces
sys
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Competitive Forces
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Organization
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Dem ys tem
o gra i cS
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It comprises general trends and forces that may
not immediately affect the organization but
sooner or later will alter the way organization
operates.
Macro Environment :-
Economic
Non Economic
1) Economic Environment :
Economic environment is one components of
total business environment. It is the outcome of
economic policies. Economic events within and
outside the country also affect economic
environment. i) Economic Conditions of Public(ii)
Economic Policies of the country(iii)Economic
System(iv) Other Economic Factors:–
Infrastructural Facilities, Banking, Insurance
companies, money markets, capital markets etc
Economic stages that exists at a given time in a
country
Economic system that is adopted by a country for
example. Capitalistic, Socialistic or Mixed Economy
Economic planning, such as five year plans,
budgets, etc.
Economic policies for example, monetary,
industrial and fiscal policies
Economic Indices such as National Income, Per
Capital Income, Disposable Income, Rate of growth
of GNP, Distribution of Income, Rate of savings,
Balance of Payments etc.
Economic Problems
Functioning of economy
Regulatory Environment
Demographic Environment
Technological Environment
Political Environment
Political Environment :
Political environment refers to the
situation created by political factors and
forces. It suggests the influence exerted
by the three political institutions i.e.,
legislature, executive and judiciary, in
shaping, directing, developing and
controlling business activities
(a) Political Belief of Government(b) Political
Strength of the Country(c) Relation with
other countries(d) Defense and Military
Policies(e) Centre State Relationship in the
Country(f) Thinking of Opposition Parties
towards Business Unit
The legal environment is comparatively new
component of total business environment. Legal
environment is the net result of various laws,
rules, procedures and regulations made by the
government in regard to the formation and
operations of business enterprises.
It has a great impact on the functioning of the
organisation as it establishes codes and
procedures for various types and aspects of
business and deals with deviations or
infringement law like bribery, product
counterfeiting, gray markets, black markets,
consumer deception and tax evasions
The coverage, efficiency and efficacy of the legal
system determine adequacy, cost and speed of
economic justice and these factors are of great
importance for the growth of business. In every
country there exist specific pieces of business
legislation which together guide control and regulate
business activity, such as in India Trade Mark Act
1969, Essential Commodities Act 1955, Standards of
Weights and Measures Act 1969 and Consumer
Protection Act 1986.
Cultural environment is the result of social
forces. Society includes different social groups
i.e. customers, investors, local community and
employees. The expectations of these groups
create cultural environment for business
Social Customs & Rituals and practices
Lifestyle patterns
Family structure
Role & position of men, women, children and
aged in family & society
Demographic Environment :
Demographic environment relates to the
population and its division on the basis of age,
sex, standard of living, size of the family,
employment, etc. Market demand,
requirements of consumers, etc are based on
demographic environment. The study of
demographic environment has priority over
other areas of business environment as
business depends on people. Growth of
population-Age Composition,Life-
Expectancy,Sex-Ratio, Fertility and Mortality
rates, Inter-state migration .
Natural Environment relates to natural
resources like land, water, minerals, port
facilities, etc. Business firms are use
natural resources like water, land, iron-
ore, crude oil, etc. In doing so, two things
happen i.e. Erosion of natural resources
and pollution of resources. Business firms
should understand these two effects and
take necessary measures to control
erosion and pollution of natural
resources.
3.3
on organization are:
Growth of world economy
Distribution of world GDP
International institutions IMF,WTO, ILO
Economic relations between nations
Global human resource-nature and quality of skills, mobility of labor
Global technology and quality standards
Global demographic patterns
PEST Analysis
PESTLE
STEEPLE
S - Social
T - Technological
E - Economic
E – Environmental ( Natural)
P - Political
L - Legal
E - Ethical