IB ENVIRONMENT

 As a student dealing with business, it is

necessary to acquire full knowledge about the
behaviour of the economy. The international
business system determines the operational
conditions under which the business operates.
 Therefore right decisions can be taken by
understanding and adapting to the changes in
the international business environment.
•Objectives
 Knowledge about the national and international
issues/happenings.
 Impact of the government’s decisions/ policies on
business.
 How the business operates in the general and
institutional framework of the whole economy.
 To equip the students with analytical tools to
understand the global economic situation.
 To evaluate critically the emerging economic
problems & their implications for trade and
commerce.
 Business Environment
 The survival & success of a firm depend on two sets of factors
i.e. the internal factors - the internal environment and the
external factors - the external environment.

 The external environment has broadly two components i.e.

business opportunities and threats to business. Similarly, the
organizational environment has two components: Strengths &
weaknesses of the firm/organization.
 Strategy formulation is properly putting the organizational
factors (the internal environment) against the opportunities &
threats in the external environment. In other words, business
decisions are conditioned by two broad sets of factors i.e. the
internal environment and the external environment.
 
 Formulation of strategy is sometimes defined as establishing a
proper firm-environment fit. The mission/goal/ objectives
themselves should be based on an assessment of the external
environment & the organizational factors (i.e. the internal
environment).
 BUSINESS ENVIRONMENT

External Environment
Internal Environment

Promoters/Shareholders’
values MICRO (Task/Operating) MACRO ( General
Mission/Objectives Environment /Remote) Environment
Management Structure Customers Economic factors
Internal power relationship Suppliers Social/cultural
Co. image/Brand equity Competitors Demographic
Physical assets/facilities Financiers Political/Govt.
R & D and technological Marketing Natural
capabilities intermediates Technological
Human Resources Global
Marketing capabilities

• The internal factors are generally regarded as controllable factors.

• External factors which have a direct & intimate impact on the
firm are classified as Micro environment.
• Many of the times, Business Environment is confined to the
External Environment.
MISSION & OBJECTIVES
The business domain of the company, priorities, direction of
development, business philosophy, business policy etc. are guided
by the mission and objectives of the co.
Ranabaxy’s thrust into the foreign markets and development have
been driven by its mission:
“To become a research based international pharmaceutical
company”
Arvind Mills’ Mission – “To achieve global dominance in select
businesses built around our core competencies through continuous
product and technical innovation, customer orientation and focus on
cost effectiveness.”
Environmental Analysis And Strategic Management
Where Raymond wants to be?
Raymond has been a well-known fabric brand in India. The
Raymond Ltd. overtime had made significant, investments in
process oriented business such as Cement, steel & polyester fibre,
besides textiles.
Gautam Hari Singhania, who took over from Vijaypat Singhania as
Chairman & Managing Director in 1998, sought to put Raymond on
a strong footing, restructuring its business portfolio based on a
SWOT analysis. So, in early 1999, says Singhania, “We started
looking at our business portfolio, and decided where we wanted to
be as compared to where we are today. We decided there were three
areas that the company didn’t want to be in, in our long-term
strategy. One was filament yarn, the second was cement and the
third steel.”
These business were either not giving adequate returns or were
making losses. The company also didn’t have the expertise to run
these units. Raymond, therefore, pulled out of these business and
decided to focus on the core business of dressing (textiles and
readymade apparel).

The divestment of these three businesses brought in about Rs.

1100 crore. Out of this, 291 cr. was used to repay outstanding
debt and this helped to substantially reduce the interest burden.
The company also spent around 158 cr. for buying back shares
and this increased the Singhania’s share in Raymond from 27 to
31 percent. The company has been left with large amount for
investment – for developing existing core business or entering
new businesses.
 
In Singhania’s vision, Raymond must turn itself into a lean and
efficient company, before striking out to conquer new territory
overseas. While Raymond claims to be among the top three fabric
brands in the world in integrated worsted (wool-blended) fabrics,
it certainly isn’t a household name anywhere except South Asia.
“THE ENDEAVOUR IS TO MAKE IT A TRULY GLOBAL
BRAND,” says the Chairman.
 A look at the Decision Making Process would make the
importance of the external-internal factors nexus more clear.

It has been defined as unified, comprehensive, and integrated plan

relating the strategic advantages of the firm to the challenges of
the environment. It is designed to ensure that the basic objectives
of the enterprise are achieved.
Decision Making Process
Determination Evaluation and Control
of Mission

Establishment of Implementation
Objectives

SWOT Analysis Choice of Strategy

Consideration of Strategic
Alternatives
 GLOBAL ENVIRONMENT
• Globalisation and the increasing global business interdependence make the
fortunes of companies, sometimes even of national economies, dependent on
the economic conditions in other countries.

• The slowdown in the US economy during 2000-01 has sent its shock waves to
India too. The IT sector in US was very badly hit by the economic slowdown
as it forced US firms to sharply reduce their IT spends and defer projects that
weren’t critical.

• The IT cos. seriously affected by the recession resorted to massive lay offs
(during Feb.-March, 2001, CISCO laid off 8000, lucent 10,000 & Intel 5000
people). Besides, massive numbers have been benched - people currently
without work in the co. (but not retrenched) waiting for projects. The revenue
warnings by the tech firms sent their stock prices deep down.
As the US IT firms were major clients of Indian IT majors, companies like

Infosys, WIPRO, HCL and many others were hit hard. The American tech flue

thus affected the business of the Indian firms, their share prices, the nation’s

export earnings and the lucrative employment market.

 SE Asian Crisis
The Thai Melt Down
Appreciation of Yen Cheap Thai Labour High Return in Thailand

Japanese FDI Portfolio Short-term

Investment
funds

Overheating of Thailand Economy

Over-building Rise in labour Indiscriminate

Of industries cost lending
These resulted in:
1.INFLATION 2.REAL ESTATE BUBBLE
+ Cheap Chinese
exports

Exports suffer & Real estate crash

Imports rise Bank failures

Large current A/c

Deficit PANIC

Run on Baht Depreciation of Baht.