Professional Documents
Culture Documents
Learning Objective
What is Business
What is Environment
Business Environment- Nature, Objective
Types of Business Environment
Interaction between Internal and External
Environment
Importance of Business Environment
Business:
Business is a human activity carried out by
the unified efforts of different categories of people, to
produce the wealth through production and distribution of
the goods and services.
According to Malvin Anshen :
“ Business is the way by which men make
their living.”
According to Bayard O’Wheeler :
“ Business is an institution organized and
operated to provide goods and services to society under
the incentive of private gain.”
Environment:
The birth, growth and continuous
development of organization are influenced by a wide
range of variables like employees, customers, suppliers,
producers, competition etc.
Business Environment:
Business Environment refers to those aspects
of the surroundings of business enterprise, which affect
or influence its operations and determine its
effectiveness.
Complex:
Environment consists of a number of factors, events, conditions
arising from different sources which impact business thus making the
business complex.
Interdependence :
Factors affecting business environment like social, economic, legal,
cultural etc are inter dependent.
E.g. A rich country can make sufficient expenditure on the research and
development.
Dynamic:
Business environment is dynamic as it keeps on changing in terms of
technological improvement, changes in consumer preferences, entry of
new competitors.
Uncertainty:
Business environment is largely uncertain as it is very difficult to
predict future happenings.
Relativity:
Business environment is a relative concept as it differs from
country to country and region to region.
e.g. Demand of saree is high in India comparative to other countries.
Basis of Decision:
It contains all the information which is needed for taking good
decision.
e.g. If a business knows about its competitors, suppliers and customers
they take decision about price, purchase, salary etc.
• Financial Resources
• Physical and Micro Environment Macro Environment
human Resources
• Objectives of
Business
• Work Environment
• Corporate Image
• Labour management
• Relationship
7) Technological
Capabilities
Internal Environment:
Internal environment refers to factors existing within a business
firm.These factors are generally regarded as controllable factors
because the company has control over these factors.
Financial Factors:
Factors like financial policies, financial procedures and capital structure
are also important internal environment affecting business performance,
strategies and decisions.
Objectives of Business:
The business domain of the company, direction of development,
business policy etc., are guided by the objectives of the company
Work Environment:
The organisational structure, company policies, extent of
professionalism in management etc., are important factors influencing
business decisions.
Marketing Intermediaries:
These are the firms that aid the company in promoting , selling and
distributing its goods to final buyers. They are the vital links between the
company and the final consumers.
Public:
A public is any group that has an actual or potential interest in or
impact on an organization's ability to achieve its interest. Some
companies are seriously affected by such public.
E.g. Media
Macro Environment
Macro environment means general environment of business. Macro
forces are uncontrollable in comparison to the micro forces of
environment. The growth and survival of business depends upon its
adaptability to macro environmental factors.
The important macro environment are:
1)Economic Environment
2) Non Economic Environment
Economic Environment:
To know the economic environment of a country or a business one has
to understand the economic policies of the nation. These policies put
direct impact on the working and success of the business. Economic
conditions, economic policies (Industrial policies, monetary and fiscal
policy etc) and the economic system are the important factors that
constitute economic environment of the business.
Non Economic Environment
Socio cultural Environment:
The socio-cultural environmental factors consist of human relationship
and the development. Some of the important factors in the social
environment are the buying and consumption habit of people, their
languages, beliefs and values, custom and traditions, etc that effeccts
the business.
Legal Environment:
Every country follows its own system of law. The companies operatiing
in the global market have to take into account the provisions with rspect
to the legal environment prevalent in the countries which thy do
business. These law and regulations affect the day-to-day operations of
business.
International Environment:
The international environment is particularly important for industries
directly depending on imports or exports.
E.g. Import export policies of various countries.
Political Environment:
The political environment consists of factors related to the management of
public affairs that have a considerable impact on the business of an
organization. It impacts the legislations and government rules and
regulations under which business organizations operates in a country.
Technological Environment:
Technological environment comprises both machines (hard technology)
and scientific thinking (soft technology) used to solve problems and
promote progress. It also represents the degree of advancement of goods
and services that are prevalent in a country or a region.
Natural Environment:
Geographical factors such as natural resources endowments, weather and
climatic conditions, location aspects in the global context, port facilities
etc., are all relevant to business.
Significance of Business Environment
First Mover Advantage:
Awareness of environment helps an enterprise to take advantage of early
opportunities instead of loosing them to competitors.
E.g. Maruti Udyog became leader in small car
Customer Focus:
Environmental understanding makes the management sensitive to the
changing needs and expectations of the consumers.
E.g. Apps in mobile
Strategy Formulation:
Environmental monitoring provieds relevant information about the
business opportunities on the basis of which firms makes their
stratrgies.
e.g. ITC in travel and tourism sector
Public Image:
A business firm can improve its imageby showing that it is sensitive to
its environment and responsiveas per the need of customers.
Continuous Learning:
Environmental analysis serves as broad and ongoing education for
business executive so that they can react in an appropriate manner to
the changing scenario and therby increase the success of their
organization.
Environment Scanning
The word scanning means to look carefully into or to examine. The
term Environmental Scanning in business means to “Carefully
analyze the various factors influencing the business”.
Designing Profiles
6 Designing Profile:
After analyzing the environmental factors they are recorded into the
profiles. Such profile record each component or variable into left
side and their positive, negative or neutral indicators including their
statement in the right side.
Internal areas are recorded in Strategic Advantage Profile (SAP)
and external areas are recorded in Environmental Threat and
Opportunity Profile (ETOP).
Strength, Weakness, Opportunity and Threat (SWOT) profile can be
designed combining both of these two profiles into one.
7Strategic Position and Report Writing:
After preparing the profiles strategists prepare formal report that
describes the business environment. The report might present
issues and best strength of business environment. Based on this
report future strategies can be made effectively.
SWOT Analysis
A SWOT analysis is structured planning method
used to evaluate the strengths, weaknesses,
opportunities and threats involved in a project or in
a business venture. It involves specifying the
objective of the business venture or project and
identifying the internal and external factors that
are favorable and unfavorable to achieve that
objective.