Business Environment

By: Dr. Vibhuti Tripathi, SMS

 What is Business???
Business may be understood as the organized efforts of
enterprises to supply consumers with goods and services for a
profit.

commercial activity.

Requires some form of investment and enough customers to

whom its output can be sold on a consistent basis in order to
make profit.

Businesses can be privately owned, not-for-profit or state-

owned. 
 
 Contemporary Business goals
• Profit (Bottom-line)
• Growth
• Market Leadership
• Customer satisfaction
• Employee satisfaction
• Quality Products & Services
• Service to Society
BUSINESS CHALLENGES
 Managing Bottom line​ Meeting stakeholders expectations

Developing and retaining top talent​

Creating a customer
responsive organization​
•Diminishing time to market​

•Market agility​

•Pricing and quality​

 What do you mean by
Business
Environment???

•The environment of any organization is

“ the aggregate of all conditions, events
and influences that surround and affect
it.”

•Characteristics of Business
Environment:
• Complex
• Uncertain
• Dynamic
• Multi-faceted
• Far- reaching impact
 Why Study Business
Environment

• Development of broad strategies to

ensure sustainability

• To foresee the impact of socio-

economic changes at the national
and international levels on firm’s
ability

• Analysis of competitor’s strategies

and formulation of effective counter
measures

• To keep oneself dynamic

 Internal
Environment

External
Types of Environment
Environment
• Macro environment
• Economic
• Non Economic
• Micro Environment
Organization and Its Environments

11
 Refers to all the factors that are
within an organization which impart
Internal strengths or cause weaknesses of
strategic nature.
Environment

Controllable factors. These include:

• Value system
• Vision, Mission and Objectives
• Management Structure and Nature
• Company Image and Brand Equity
• Physical Assets
•  Various Resources
 • Includes all factors
outside the
organization which
provide opportunities 
•  or pose threats       
 to the    organization

• Uncontrollable factors

• Consists of Micro and

Macro environment
External
Environment
 “It consists of the factors in the company’s
immediate environment that affect the
performance of the company”.

Micro also known as the task environment 

Environment

 micro environmental forces have a direct

bearing on the operations of the firm.
 Micro Environment Factors

•Suppliers

•Customers

•Marketing Intermediaries

•Competitors 

•Publics

•Financial Community
 Micro Environment of a typical car manufacturer

Potential
Supplier

Components
Supplier

Local Potential
Communities Customers

Stakeholders Customers

Car
Pressure
Manufacturer
Groups

Government Competitors Car Dealers

Potential
Dealers

For For
Customers Supplies
Macro
Environment
•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
 • 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 • Economic planning, such as five year plans,

budgets, etc.
Environment
• Economic policies for example, monetary,
industrial and fiscal policies

• Economic Problems

• Functioning of economy
 • Regulatory Environment

• Socio- Cultural
Environment
Non
Economic
Environment • Demographic Environment

• Technological Environment

• Political Environment
Weaknesses
Weaknesses—internal force that could serve as a barrier
to maintain or achieve a competitive advantage; a
limitation, fault or defect of the unit;
It should be truthful so that they may be overcome as
quickly as possible

Your list of weaknesses should be able to answer:

What can be improved?
What is done poorly?
What should be avoided?
What are you doing as an organization that you feel
could be done more  effectively/efficiently?
What is this organization NOT doing that you feel it
should be doing?
If you could change one thing that would help this
department function more effectively, what would
you change?

Examples: gaps in capabilities, financial, deadlines,

morale
lack of competitive
 •Opportunities—any favorable situation present now
or in the
•future in the external environment.

•Where are the good opportunities facing you?

Opportunities •What are the interesting trends you are aware of?
•Think of: market developments; competitor;
vulnerabilities; industry/ lifestyle trends;;
geographical; partnerships

•Examples: unfulfilled customer need, arrival of new

technologies, loosening of regulations, global
influences, economic boom, demographic shift
Competitive Forces in the Task
Environment
 •Barriers to Entry:

•Economies of scale

•Decrease in per unit costs      as 

  volume of goods/services produced
New increases
Entrants
•Product differentiation

•uniqueness in quality, price, design,

brand image, or customer service that
gives a product an edge over the
competition
 •Capital requirements

•Money needed to finance   

  equipment supplies, advertising,
New R&D, and the like necessary to
start
Entrants
•Government regulation
•May bar or severely restrict
potential new entrants to an
industry
 Substitute Goods and Services
Goods/Services that can easily replace the firm’s
goods/services

Customers
Potential Effects of Customers:

They may drive down prices

Push for more or higher-quality products

•Exhibit Bargaining Power :​

They purchase a large volume relative to

the supplier’s total sales​

They have readily available alternatives for

the same services/products​
​
 Suppliers 
Bargaining Power of Suppliers: 

Often controls how much they can :

Raise prices above their costs
Reduce the quality of goods and services

Bargaining Power is increased by patents and

copyrights 
ECONOMY 
 • National Income - total amount of money earned within
a country.
• Per Capital Income, - average
income earned per person in a given area (city, region,
country, etc.) in a specified year. 

Economic • Disposable Income - income remaining after deduction

Indices  of taxes available to be spent or saved as one wishes.

• Rate of growth of GNP - total value of goods produced

and services provided by a country during one year,
equal to the gross domestic product plus the net income
from foreign investments.
 •Distribution of Income -
equality with which income is dealt
out among members of a society. ​

Economic •Rate of savings - amount of

Indices  money, expressed as a percentage or
ratio, that a person deducts from his
disposable personal income to set
aside for future financial goals. ​
 What is an Economy
The way a nation makes economic choices about
using the resources to produce and distributes
the goods and services. 

Resources ????
Factors of production, all things used to produce
goods and services; 
Land 
Labour 
Capital 
Entrepreneurship 
 Basic Economic Choices  

What goods and services should be produced?

How should the goods and services be produced ?

Who receives and consumes these goods and

services?
 What determines which type of economy a
country has?

The type of economy is determined by the

• extent of government involvement in

economic decision making. 

• The type of economy a society has

influences how the  society/government
functions
 Market Economies
 
Capitalistic Economy 
• Resources are owned and controlled by
individuals
• Economic decisions are made by
individuals competing to earn profits
• Individual freedom is considered very
important
•Economic decisions are made by the
basic principals of supply and demand​

•Profit is the motive for increasing work rather

than quotas​
 • Cultural Environment

• Social Customs & Rituals

and practices

Non- • Lifestyle patterns

Economic
Environment
• Family structure

• Role & position of men,

women, children and aged in
family & society
 • Demographic Environment

• Growth of population

• Age Composition
Non-
Economic • Life Expectancy
Environment
• Sex Ratio

• Fertility and Mortality rates

• Inter-state migration