Business Environment

What is Business?


According to the Chambers Dictionary, the word business means employment, trade, profession, or occupation, a task, commercial activity, a industrial concern, etc.

All economics activities related to production and exchange of goods or services for money or economic return.

Business System/Process
Business Enterprise

Organization of Factors of Production

Marketing of Output

Processi ng Logistics

Business Sectors


There are two main sectors, 1. Industrial sector and 2. Services sector. Industrial Sector Manufacturing activities and Construction.

Services sector Insurance, professions, transport, repairs, maintenance. The contribution o this sector to GDP is more than 60% in developed economies and nearly 50% in developing economies.

Environment


Environment means the surroundings, external objects, influences or circumstances under which someone or something exists. The environment of any organisation is the aggregate of all conditions, events and influences that surround & affect it.

COMPONENTS OF THE BUSINESS ENVIRONMENT



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 subenvironments:
Internal (micro) environment External environment
 

Market environment Macro environment

Mutual relationships exist between these environments

Internal Environment

Business

External Environment

Internal Environment


Cultural and value system: organizations are the system of shared values and beliefs that shape a company. Missions & Objectives: they guide the priorities, direction of development, business philosophy and business policy

Internal Environment


Management Structure and Nature: it is concerned with the hierarchical relationship and the relationship between the management of different functional areas liker the structure of the top management and the pattern of share holders. Human Resource: it concerns with the factors like manpower planning, recruitment and selection, compensation, communication and Cont.. appraisal.

Internal Environment


Company image and brand equity: image of the company matters while raising finance, forming joint ventures or other alliances.

Cont..

Nature of Business Environment

     

Aggregative Inter-related Relative Inter-temporal Uncertain Contextual

Significance of Business Environment

      

First Mover Advantage Early Warning Signal Customer Focus Strategy Formulation Change Agent Public Image Continuous Learning

External Environment
Elements of External Environment Two major components

Micro Environment

Macro Environment

External Environment ( Micro Environment)

Financiers

Micro Environment

(1) Suppliers: They are the persons who supply raw material and required components to the company. They must be reliable and business must have multiple suppliers i.e. they should not depend upon only one supplier. (2) Customers: - Customers are regarded as the king of the market. Success of every business depends upon the level of their customers satisfaction. Types of Customers: (i) Wholesalers (ii) Retailers (iii) Industries (iv) Government and Other Institutions (v) Foreigners

(4) Competitors: - Every move of the competitors affects the business. Business has to adjust itself according to the strategies of the Competitors.

(5) Public: - Any group who has actual interest in business enterprise is termed as public e.g. media and local public. They may be the users or non-users of the product.

External Environment ( Macro Environment)

      

Political and Legal Environment Social and Cultural Environment Economic Environment Financial Environment Technological and Physical Environment Natural Environment Global Environment

Macro Environment


Political and Legal Environment Environment

Social and Cultural

Micro Environment
Customers

Internal Environment Culture Mission &Objectives Management Structure Business Firm Power Structure Company Image &Brand Equity Human &other Resources
Marketing Intermediaries Technological and Physical Environment Financial Environment
Competitors

Financiers

Natural Environment

Economic Environment

Publics

Suppliers