Business, Government &

Society
Session 1

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The term ‘entrepreneurship’ comes from the French words entre, which means ‘between’ and prendre,
which means ‘to take’ . This term was used to represent people who ‘take on the risk’ between buyers
and sellers or who ‘undertake’ a task such as launching a new venture. In the words of Coulter (2003),
entrepreneurship is ‘the process of producing something unique and valuable by committing the
necessary time and effort, accepting the associated financial, psychological, and social risks, and
reaping the monetary and personal rewards’ .

Startup India initiative - 2016

Every firm functions in an environment (Essien, 2014) and is influenced by a variety of elements that
make up what is known as the business environment (Cherunilam, 2021). The business environment is
typically composed of various macro- and micro-environments. Because it is outside the control of the
company’s management, the macro-environment comprises factors that are difficult to govern.

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 Micro and Macro environment
The microenvironment is made up of the factors in the company’s
immediate environment that have an impact on its performance

• Micro - Suppliers, customers, competitors, marketing intermediaries, financiers

and public
• Macro - Global, Political/ Govt, Demography, Social/ Cultural, Technological,
Legal

The macro-environment is made up of bigger social elements

that have an impact on all factors in the company’s micro-
environment

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Micro environment factors
• Customers – Create and sustain customers. Monitor their sensitivity is a pre-requisite. Individual / industry/ commercial
establishments/ government. Implication: Having only one customer reduces bargaining power.. Consumers are on global shopping
trend.
• Suppliers – Input providers/ Vendor development/ Vertical integration-Backward and forward/ Indigenous stocks/Stocking time/
Have multiple sources/
• Competitors – within industry/ across industries. Generic/ Product form/ Brand competition. Note that India post liberalization is
undergoing a sea change. Implication: Companies restructure their portfolios and strategies keeping in mind the emerging of a
buyer market.
• Marketing intermediaries – Firms that aid promoting, selling and distributing their products/ services to buyers. Stockists/
Warehouses(C&F), Advertising agencies, market research firms, media firms, consulting firms and financial intermediaries(risks,
insurances etc). Implication: link break in the intermediaries can be heavy on firms. HLL stockists boycott.
• Financiers – Financial ability being prime, other aspects are their policy, strategy, attitudes towards risks, ability to provide non-
financial assistance.
• Publics – Group of people who have potential interest in a firm’s performance. Media public, Citizen action public and local public.
TV campaigns/ NGOS. Implication: public outcry/ media campaigns could work for society’s betterment and as a caution for firms
to adhere to discipline.

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 Global Environment
WTO Principles and agreements , sanctions
International conventions/ treaties/ agreements/ protocols/ declarations
Economic conditions of other countries – Recession/ import threats like dumping (Antidumping Act,2015)
International political factors between nations – Wars/ Political tensions/ Strained political relationships
Development of ICT – impacts cross-border spread of cultures – influences tastes, aspirations, preferences, customs,
tradition and values

Implication: Liberalization (mandated by WTO ) has changed Indian export and import scene. India proved nuclear power
dominance to safeguard national security interests. US sanctions on India denying space technology enabled India to make
indigenous space crafts. COVID vaccines manufactured in India

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Five forces driving
industry competition

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Threat of entry

1.Government policy – regulations such as industrial licensing, MRTP (1969) regulations (Monopolistic
& Restrictive Trade practices), pre-liberalization policies such as reservation of industries / products
2. Economies of scale – cost advantages that a firm reaps out of efficient production( Reliance Marts)
3. Cost advantage independent of scale – Proprietary product technology, learning or experience curve,
favourable access to raw materials, favourable location, government subsidies (Special Economic Zone)
4. Product differentiation – Characterized by brand image, customer loyalty, product attributes
5. Monopoly elements - Proprietary product/ technology, monopolisation/ effective control over raw
material supplies, distribution channels etc ( BHEL, HAL, Alibaba, Facebook)
6. Capital requirements – High capital-intensive units and high risk takers. (Reliance Marts over Royal
mart)

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 Rivalry
among
existing
firms

Includes price changes, promotional measures, customer service, warranties, new product
introduction, product improvement, channel promotion etc (Domino’s Pizzas)

Factors that influence intensity of rivalry

1. No. of firms, their market share, competitive strength (Nokia/Samsung)

2. State of growth of industry – decline or stagnation of a particular industry, leads to competition
in a firm to increase market share
3. Fixed or Storage costs – Firm to sell more to reduce storage costs and improve capacity
utilization
4. Indivisibility of capacity augmentation – Capacity enhancement and economies of scale to
influence efforts for increasing sales
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5. Product standardisation – price, distribution, after-sales, warranties influence
competition.
6. Strategic stake – High stake firms sacrifice profitability for expansion and also
are threatened by competitors who are seeking to reduce their market
7. Exit barriers – Sunk costs, labor compensations for layoffs, writing off assets,
losing customer goodwill, exit regulations etc
8. Diverse competitors – Diverse origins (foreign cos), diverse strategies, diverse
personalities and relationships to parent companies make the firm creative,
productive, better market performer, better problem solver
9. Switching costs – Cost incurred by consumers to switch from one
product/service to another (Apple products have a high SC)
10. Expected retaliation – Discouraging reaction to the new entrants

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 Threats of
substitutes

Substitutes are the products that cater to one economic need belong to one industry
but with different product technicalities / properties/ ingredients/ selling points

Coke and Pepsi Χ Coke and Sport drink (quench thirst /beverage industry)
PC and Smartphone √ (voice, text, internet/ telecom industry)
Beer and Wine √ (intoxication/ alcoholic beverage industry)

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 Bargaining
power of
Buyers

They are potential competitors. They may integrate backwards. They are the ones to force down prices,
bargain for quality, more services and playing competitors against each other (Eaton- Manipal Group)

Factors that enable bargaining

Purchase volume versus sale volume of the seller
Importance of the product in terms of total cost of the product to the buyer
Extent of standardization / differentiation of the product
Switching cost
Profitability of the buyer
Potential for backward integration by buyer
Extent of buyers’ information
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 Bargaining
Extent of concentration and domination in the supplier industry power of
Importance of the product to the buyer (Eaton high range) Suppliers
Importance of the buyer to the supplier (Manipal)
Extent of substitution of product
Switching cost
Extent of differentiation/ standardization of product
Potential of forward integration by suppliers (downstream vertical integration)

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GROUP ACTIVITY
Start up Details Name, Location, Logo (optional), Owners,
Firm type
Statutes GST No.: 29AACCG0530G1ZZ
UDYAM-KR-02-0009559
Shop & Establishment

Type of Industry Manufacturing/ Retail/ Service

Product Specify
Target Customer
Government/ Industry/ End Consumer

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