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CHAPTER-1

BUSINESS

ENVIRONMENT

Ms. Meera Mody

Business Environment

Business environment

consists of all those

factors that have a

bearing on the business

Concept

Survival and success of any individual depend on

Concept  Survival and success of any individual depend on  His innate capability to cope

His innate capability

to cope with the

environment The extent to which the environment

is conducive

Definition

“ The environment include

factors outside the firm which

can lead to opportunity for and

threats to the firm”

Glueck & Lawrence

Types of Environment

On the basis of the extent of intimacy with the firm, the

environmental factors are classified Factors are classified in to two

Internal factors External factors

Micro/task/operating environment Macro/general/remote environment

Political/govt. Legal Demographic Social/cultural Technological Global

Macro

Environment

Micro factors

Financiers Suppliers Public Customers

Competitors Marketing

intermediaries

• Promoters’/shareholders’

Internal

Environments

 
 

values Mission/objectives Mgt. sturcture Internal power relationship Physical assets and facilities Co. image/ brand equity Human resources Financial capabilities Technological capabilities Marketing capabilities

• Political/govt. • Legal • Demographic • Social/cultural • Technological • Global Macro Environment Micro factors
Interna l Enviro nment Micro Enviro nment Macro Environme nt
Interna
l
Enviro
nment
Micro
Enviro
nment
Macro
Environme
nt

Macro Environment

  • Forces that shape opportunities and pose threats to the company

 Uncontrollable factors and success depends on its adaptability  Also known as general or remote
 Uncontrollable
factors
and
success
depends
on
its
adaptability
 Also known as general or
remote environment

Factors in Macro Environment

Factors included in macro environment are:

Economic environment Political or regulatory/legal environment Social/cultural environment Technological environment Natural environment Global environment

Micro Environment

  • Known as task or operating environment as it directly affect operations

Micro Environment  Known as task or operating environment as it directly affect operations  It
  • It includes co.’s immediate environment affecting performance of the firm

  • Micro factors need not necessarily affect all the firms in an industry in the same way

Factors in Micro Environment

Supplier Customers Competitors Marketing intermediaries Financiers publics

suppliers

  • These are the intermediaries who provides the raw material and components to the company.

  • Because the timely production depends on them. Honda Activa ..

  • If these services are not there than company have to block its lot of money into inventories.

customers

  • The major task of any business is to retain the existing customer and find out the new customer.

  • The company is having diff. type of customer like individual, household, industry and government.

  • The task of the company here is to satisfy its customer by price, quality and service.

  • Co. also do by the way of providing the innovation into existing product.

Competitors

  • The competitors may be from the same

industry who sells the similar product.

  • E.g. L.G. and ONIDA,

  • The competitors can be the company who fights for the market share.

  • Competition may be to create brand loyalty.

  • Competition may be from new entry also.

Marketing intermediaries

  • In includes the wholesaler, retailer, distributors, agent.

  • Who help the company in finding out the new customer.

  • These are the people who make it possible to

reach the company’s product into customer

hand.

  • Marketing agencies and transportation firms help the company in these.

financieries

  • These are the crucial factors which provides the finance to the business firm.

  • At times to cover up losses incurred by the business these group provide the finance to the business.

  • It enhances the profitability of the firm

  • It also help the firm for tax planning.

Society/people

  • These the group which is having the interest or who has the capabilities to create interest for the company.

  • Media people positive or negative

  • Citizens of the country.

Internal Environment

Internal Environment  Factors in Internal Environment  Value system  Mission and objectives  Management

Factors in Internal

Environment

Value system Mission and objectives Management structure and nature

Human resources Company image and brand equity Others

Physical assets and facilities R&D and technological capabilities Marketing resources Financial

 Human resources  Company image and brand equity  Others  Physical assets and facilities
 Human resources  Company image and brand equity  Others  Physical assets and facilities

Value system:

  • Value system: The value system of founder, or by the pioneer have a crucial impact on Mission, vision statement, business policy and practice. The extent to which the employee bound by the value are contributing to the success of the firm. Each firm’s value reflect in its mission statement.

EXAMPLE

Dabur Dedicated to the health & well being of every household”.

Coca

Cola – A coke is in arm’s reach of any customers no

matter where that customer is around the world.”

Micro Soft Corp. A computer on every desk & in every home, using great software as an empowering tool.”

MANAGEMENT STRUCTURE

  • Management structure consist of the employee at various level of the organization,

  • Starting from board of directors to the lower level manager all are part of management.

  • Two kinds of structure are there traditional structure where most of the decision taken by upper level person and that delays the decision.

  • Another one is flat structure which induce the employee to take initiatives without further delay.

INTERNAL POWER RELATION

  • Amount of support from top management.

  • Influence of the decision taken by the board of directors and implementation of it.

  • The relation between board of directors.

  • Relation of the employee at different level of

organization.

HUMAN RESOURCE

  • Skill, quality, morale, commitment of the people.

  • Ability of the employee to cope up with change.

  • The remuneration provided to the employee.

  • The welfare activities like food, clothing, cleanliness at work place.

  • Promotion and performance appraisal.

COMPANY IMAGE AND BRAND EQUITY

  • The IMAGE OF THE COMPANY IN THE MARKET.

McDonalds should be the leading provider of moderately

priced, quality food to anyone, anywhere.”

It matters when the company want to merge with someone or want to acquire new company.

At times to get timely supply from the suppliers and to have the resources on credit.

At times of timely payment of debt. At the time of having money from the shareholders.

Miscellaneous factors

  • Physical assets

  • Research and development

  • Marketing activity

  • Financial stability