Business Environment

 Nature of Business :

Business may be understood as the organized efforts of

enterprises to supply consumers with goods and services
for a profits.
Business vary in size, as measured by the number of
employees or sales volume.
The purpose of business goes beyond earning profit. It is
an important institution in society. Be it for the supply of
goods and services; creation of job opportunities; offer of
better quality of life; or contributing to the economic
growth of the country and putting it on the global map;
the role of business is crucial.
Characteristics of Contemporary Business

Transition Competition

Information Business Opportunities

Technology Globalization
 Business in Transition :
For a long time, business in India was conducted in sheltered markets
covering up inefficiencies, low productivity and high cost. Then came
1990s which lifted all protectionist measures. A typical business
person is sandwiched between the compulsions of the new business
environment and of the old practices of doing business.
 Pressure of Competition :
Competition though unwelcome to managers, is a boon to customers.
Competition –
 Defines new ways of doing business,
 Helps builds new capabilities,
 Builds new customer satisfaction standards, and
 Makes business leaders become proactive.
 Immense Opportunities :
Though Indian business faces stiff competition, it also
has plenty of opportunities which can be exploited to
one’s advantage. BPO, Call Centers, IT, wealth
management, risk management and private banking
are the new names that are doing rounds in
business.
Globalization :
Going international is yet another trend followed by
modern business houses. Production facilities are
being set – up in different countries and products are
being sold through a global network.
Technology :
Business is characterized by increasing use of technology. The
way production function is organized; the way products are
marketed; the way employees are hired and motivated; the way
finance function is carried on; and the way managers and
subordinates communicate with each other – all are influenced
by technology.
Information :
Another characteristic of contemporary business is the recognition
of and the need for information. The whole area of retrieving
and extended information, including data processing,
information system analysis and preparation of effective
records, has achieved a major status.
Business Objective :

Profit Power Quality Product

&
Services

Business Goals Challenging

Growth

Employee
Joy of Creation
Satisfaction
& Market
Development Leadership Services
Profit : making profit is the primary goal of any
business enterprise. Profit is the main incentive,
motivator, strong sustainer, judicious allocator of
resources, objective indicator of productivity and a
solid basis for growth, expansion and survival.
Growth : Business should grow in all directions over a
period of time. An enterprise which remains stagnant
for a long period is presumed to suffer from an
organic defect. The strategies adopted to achieve
growth are :
(a) Add more products/markets;
(b) Diversify into new areas;
(c) Integration – forward or backward;
(d) Increase market share;
(e) Expand markets or
(f) Cut down costs and increase productivity.
 Power : business houses have vast resources (in the
form of money, materials, men and know-how) at its
command. These resources confer enormous
economic and political power on owners and
managers of business ventures.
The late Aditya Birla used to assert that he built his
empire to get more power.
Employee satisfaction and development: Concern
for employees continue to be an important aspect of
management. Tatas are a legend in pursuing this
objective. Either in implementing labour welfare
measures, constituting safety and security measures,
or in providing training and development facilities, the
name of Tatas should be mentioned first.
 Quality product and Services : Persistent quality of
products earns brand loyalty, a vital ingredient of
success. Hindustan Unilever is flourishing mainly
because of the quality of its products. Some of its
products like Liril, Vim, Lifebuoy, Surf, Rin, Close-Up,
Lux.
 Market Leadership : To earn market leadership is yet
another objective of business. To earn a niche for
oneself in the market, innovation is the key factor.
Innovation may be in product, advertising,
distribution, finance or in any other field.
 Challenging : Business offers vast scope and poses
formidable challenges.
For Ratan Tata running business has been a challenge.
Confessed Tata in an interview thus : “I have asked
myself this quite often. I don’t have monetary
ownership in the company in which I work and I am
not given to propagating the position I am in. I ask
myself why I am doing this and I think it perhaps the
challenge. If I had an ideological choice, I would
probably want to do something more for the uplift of
people of India. I have a strong desire not to make
money but to see happiness created in a place where
there isn’t.”
 Joy of Creation : It is through business strategies new
ideas and innovations are given a shape and are
converted into useful products and services for the
benefit of customers.
What is Environment?
 Environment refers to all external forces which have
a bearing on the functioning of business.
OR
“ The environment includes factors outside the firm
which can lead to opportunities for or threats to the
firm. Although there are many factors, the most
important of the sectors are socio-economic,
technological, supplier, competitors, government,
global and natural.”
 Firm

External environment
Internal environment

Cultural Rival

Physical
New Entrants
Political-Legal
Economic Buyer
Supplier
Technological
Global Substitutes
The Process of Environment Analysis
 Environmental analysis has three basic goals -
 First, the analysis should provide an understanding of
current and potential changes taking place in the task
environment.
 Secondly, environment analysis should provide inputs
(data and information) for strategic decision making.
 Thirdly, environmental analysis should facilitate and
foster strategic thinking in organization – typically a
rich source of ideas and understanding of the context
within which a firm operates.
The Process of Environmental Analysis
 Environmental analysis is a challenging, time
consuming and expensive affair. The analysis
consist of four sequential steps :
 Scanning : being the first step in the process of
environmental analysis, scanning involves general
surveillance of all environmental factors and their
interaction in order to
(a) Identify early signals of possible environmental
change, and
(b) Detect environmental change already under way.
 Monitoring : Monitoring involves tracking the
environmental trends, sequences of events or
streams of activities. The purpose of monitoring is
to assemble sufficient data to discern whether
certain trends and patters are emerging. Thus, as
monitoring progresses, the data turn frequently
from imprecise to precise.
 Three outcomes emerge out of monitoring :
(a) A specific description of environmental trends and
patterns to be forecast;
(b) The identification of trends for further monitoring,
and
(c) The identification of area for further scanning.
These output become inputs for forecasting.
 Forecasting : Scanning and monitoring provide a
picture of what has already taken place and what is
happening. Strategic decision-making, however,
requires a future orientation. Naturally, forecasting is
an essential element in environmental analysis.
Forecasting is concerned with developing plausible of
the direction, scope, and intensity of environmental
change. It tries layout the evolutionary path of
anticipated change. For example : how long will it
take the new technology to reach the market? Are
current life-style trends likely to continue? These
kinds of question provide the grist for forecasting
efforts.
 Assessment – Scanning, monitoring and forecasting
are not ends in themselves. Unless their output are
assessed to determine implications for the
organization’s current and potential strategies,
scanning, monitoring and forecasting simply provide
‘nice-to-know’ information. Assessment involves
identifying and evaluating how and why current and
projected environment changes affect or will affect
strategic management of the organization.