PRASANTH

V E N PA K A L

BUSINESS
ENVIRONMENT
B U S I N ES S E N V I R O N M EN T
MEANING OF BUSINESS
ENVIRONMENT
Business environment can be defined
as “the forces, factors and institutions
with which the businessman has to deal
with to achieve its objectives”. In general
words we can say business environment is
the surroundings in which business exists.
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TOTALITY OF
EXTERNAL FORCES
 TOTALITY OF
EXTERNAL FORCES

Business environment is the sum

total of all the forces/factors
external to a business firm.
SPECIFIC AND
GENERAL FORCES
 SPECIFIC AND GENERAL FORCES
Business environment includes both specific and
general forces. Specific forces include investors,
competitors, customers etc. who influence
business firm directly while general forces
include social, political, economic, legal and
technological conditions which affect a business
firm indirectly.
 INTER-RELATEDNESS
All the forces/factors of a business
environment are closely interrelated.
For example, increased awareness of
health care has raised the demand for
organic food and roasted snacks.
DYNAMIC
Business environment is dynamic in
nature which keeps on changing
with the Material downloaded from
change in technology, consumer’s
fashion and tastes etc.
UNCERTAINTY
Business environment is uncertain as it is
difficult to predict the future environmental
changes and their impact with full accuracy.
COMPLEXITY
Business environment is complex
which is easy to understand in parts
separately but it is difficult to
understand in totality.
RELATIVITY
Business environment is a relative
concept whose impact differs from
country to country, region to region
and firm to firm.
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 IMPORTANCE OF BUSINESS
ENVIRONMENT
• Identification of opportunities to get first mover
advantage.
• Identification of threats
• Tapping useful resources
• Coping with Rapid changes
• Assistance in planning and policy formulation
• Helps in Improving performance
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ECONOMIC ENVIRONMENT
ECONOMIC ENVIRONMENT
It has immediate and direct economic impact
on a business. Rate of interest, inflation rate,
change in the income of people, monetary policy,
price level etc. are some economic factors which
could affect business firms. Economic environment
may offer opportunities to a firm or it may put
constraints.
SOCIAL ENVIRONMENT
SOCIAL ENVIRONMENT
It includes various social forces such as
customs, beliefs, literacy rate,
educational levels, lifestyle, values etc.
Changes in social environment affect an
organization in the long run.
TECHNOLOGICAL ENVIRONMENT
TECHNOLOGICAL ENVIRONMENT
It provides new and advance
ways/techniques of production. A
businessman must closely monitor the
technological changes taking place in the
industry as it helps in facing competition
and improving quality of the product.
POLITICAL ENVIRONMENT
POLITICAL ENVIRONMENT
Changes in political situation also affect business
organizations. Political stability builds confidence
among business community while political
instability and bad law & order situation may bring
uncertainty in business activities. Ideology of the
political party, attitude of government towards
business, type of government-single party or
coalition government affects the business
LEGAL ENVIRONMENT
LEGAL ENVIRONMENT
It constitutes the laws and legislations
passed by the Government, administrative
orders, court judgements, decisions of
various commissions and agencies.
Businessmen have to act according to
various legislations and their knowledge
is very necessary.
P R I VAT I S AT I O N ,
L I B E R A L I S AT I O N
AND
G L O B A L I S AT I O N
GLOBALIZATION
GLOBALIZATION
Integrating the economy of a country with
the economies of other countries to facilitate
free flow of trade, capital, persons and
technology across borders. It leads to the
emergence of a cohesive global economy.
PRIVATIZATION
PRIVATIZATION
Refers to the reduction of the role of the public
sector in the economy of a country. To achieve
privatization in India, the government redefined
the role of the public sector and Adopted a policy
of planned disinvestment of the public sector
LIBERALIZATION
LIBERALIZATION
Liberalizing the Indian business and industry from
all unnecessary controls and restrictions. That is
relaxing rules and regulations which restrict the
growth of the private sector and allowing the
private sector to take part in economic activities
that were earlier reserved for the government sector.
 I M PA C T O F
GOVERNMENT
POLICY CHANGES
ON BUSINESS AND
INDUSTRY
INCREASING COMPETITION

De-licencing and entry of foreign

firms Indian market is increased the
level of competition for Indian firms.
MORE DEMANDING CUSTOMERS

Now customers are more aware and they

keep maximum information of the market as the
result of which now market is customer/buyer
oriented, Now, products are produced keeping
in mind the demands of the customers.
RAPID CHANGING
TECHNOLOGICAL ENVIRONMENT

Rapid Technological advancement has

changed/improved the production process
as a result of which maximum production is
possible at minimum cost but it leads to
tough challenges in front of small firms.
NECESSITY FOR CHANGE
After New Industrial Policy the market forces
(demand & supply) are changing at a very fast rate.
Change in the various components of business
environment has made it necessary for the business
firms to modify their policies & operations from
time to time.
NEED FOR DEVELOPING
HUMAN RESOURCES
The changing market conditions of today
requires people with higher competence and
greater commitment, hence there is a need for
developing human resources which could
increase their effectiveness and efficiency.
MARKET ORIENTATION
Earlier selling concept was famous in the market
now its place is taken by the marketing concept.
Today firms produce those goods & services which
are required by the customers. Marketing research,
educational advertising, after sales services have
become more significant.
 REDUCTION IN BUDGETARY
SUPPORT TO PUBLIC SECTOR
The budgetary support given by the
government to the public sector is reducing
thus the public sector has to survive and
grow by utilising their own resources
efficiently.
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D E M O N E T I Z AT I O N
 HISTORY OF
DEMONETIZATION IN INDIA
• In 1946, the Reserve Bank of India had
demonetized Rs. 1,000 and Rs. 10,000 currency
notes which were then under circulation.
• In 1954, the Government introduced new currency
notes of Rs. 1,000, Rs. 5,000, and Rs. 10,000.
• In 1978, the Moraji Desai Government
demonetized Rs. 1,000, Rs. 5,000, and Rs. 10,000
to curb illegal transactions and anti-social activities.
DEMONETIZATION IN INDIA
ON 9 NOVEMBER 2016
On 9 November 2016, the Government of India announced
the demonetization of all ₹500 and ₹1,000 banknotes of
the Mahatma Gandhi Series. It also announced the issuance of
new ₹500 and ₹2,000 banknotes in exchange for the demonetised
banknotes. The Prime minister of India Narendra Modi claimed that
the action would curtail the shadow economy and reduce the use of
illicit and counterfeit cash to fund illegal activity and terrorism
 BENEFITS OF DEMONETIZATION

• INCREASED SAVINGS – As a result of demonetization, people

will tend to deposit their cash in the bank rather than at home.
This will help them save more.

• LOWER LENDING RATES – With currency demonetization,

money moves from people to banks and financial institutions.
Thus, there is a better circulation of money. This will lead to a
lower cost of funds which translates into lower lending rates.
BENEFITS OF DEMONETIZATION
• BETTER ECONOMY – As more cash is with the
banks, there is a higher circulation of money in the
economy. The government receives more taxes and
can undertake more development projects. This leads
to a better-performing economy.
BENEFITS OF DEMONETIZATION
• CURBING ANTI-SOCIAL ACTIVITIES – Usually, cash is the mode
of transaction for anti-social activities. Thus demonetization curbs
these activities. It also forces anti-social units to find ways to get rid
of the old notes. As a result, there is better control over the
unaccounted money in the economy.

• REDUCING COUNTERFEIT CURRENCY NOTES – Banks check

if the old notes are genuine or counterfeit before accepting them.
Thus, this allows the government to weed out counterfeit notes from
the market.