1bm Session 1 2 Sem1

Business Environment Environment

Surroundings

Why we do Business ? To Earn Profit. Profit = SP – CP Present Era of Competition – To Increase / Maintain Dr. Ratnesh Chaturvedi, BE, Class - 1

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We increase Profit by two ways : 1. By increasing Sales Price 2. By Reducing Cost.

Depends on Mission, Objective & Goal of the Business

Decision Making Based on Environmental Analysis Business Environment consists of all those factors that have a bearing on the business. Dr. Ratnesh Chaturvedi, BE, Class - 1

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Decision Making

Internal Environment / Factors

- Resources - Capabilities - Goodwill - Inter Power

Environment

Relationship

Controllable S&W Dr. Ratnesh Chaturvedi, BE, Class - 1

O&T

External Environment / Factors

- Economic - Political - Legal - Social - Demographic - Technological - Natural

Uncontrollable 3

A SWOT analysis is one of the first steps in the Strategic Management process : Decision Making Based on On the basis of the extent of intimacy with the firm the environmental factors may be classified as follows : 2. Internal Factors / Environment 3. External Factors / Environment - Micro Environment / Task / Operating - Macro Environment / General / Remote Dr. Ratnesh Chaturvedi, BE, Class - 1

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Internal Factors : 1. Value System

Founders & Members – JRD Tata, Acceptability and Success, Ethical Standard ---- Goodwill. In the selection of Suppliers, Distributers, etc.

2. Mission & Objectives

Priorities, Direction of development, Business Policy, etc. RANBAXY : “To become a research based international pharmaceutical company.” Usha Martin Ltd. : “In our chosen business, we shall retain market leadership in India and shall be globally competitive through customer orientation and excellence in quality, innovation and technology.

3. Capabilities Dr. Ratnesh Chaturvedi, BE, Class - 1

Management Structure & Nature, Company Image 5

Internal Factors : 4. Internal Power Relationship 5. Resources

Support to Top management from employees, shareholders & BOD Relationship between CEO & BOD RM, Physical Assets & Facilities, R&D & Technological Capabilities, Marketing Resources, Financial Resources Human Resources

External Factors : Micro Environment : Dr. Ratnesh Chaturvedi, BE, Class - 1

Direct impact on business 6

External Factors : Micro Environment : 1. Supplier :

2. Customers :

Dr. Ratnesh Chaturvedi, BE, Class - 1

Direct impact on business Who supply the inputs. -Reliable sources of supply - Risky to depend on a single supplier - Vendor development process Who purchases the outputs. - To create and sustain customers - Different types of customers – individuals, industries, Govt., etc. - Risky to depend upon a single customer. - Choice of customer – relative profitability, dependability, stability of demand, growth prospect and the extent of competition. 7

External Factors : Micro Environment :

Direct impact on business

3. Competitors :

Generic Competition & Brand Competition

4 . Marketing Intermediaries :

Firms that aid to the company in promoting, selling and distributing its goods to final buyers e.g. agents, etc. Company – MI – Final customers

5 . Financiers :

Capacity, policies, attitude, ability to provide non financial assistance.

6 . Public :

A public is any group that has an actual or potential interest in an organisation e.g. media public, local public. 8

Dr. Ratnesh Chaturvedi, BE, Class - 1

Environmental Analysis and Strategic Management : 1. 2. 3. 4. 5. 6.

Formulation of Mission & Objectives SWOT Analysis Strategic Alternatives and Choice of Alternatives Implementation Evaluation Feed back & Continuous Effort

Competitive Structure of Industries : 2. Rivalry among existing firms. 3. Threat of new entrants. 4. Threat of Substitutes 5. Suppliers & Buyers Dr. Ratnesh Chaturvedi, BE, Class - 1

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Competitor Analysis : 1. 2. 3. 4. 5.

Who are the competitors of the firm ? What are the current strategies of the competitors ? What are their future goals and likely strategies ? What drives the competitors ? How are the competitors likely to respond to the strategies of others ?

Dr. Ratnesh Chaturvedi, BE, Class - 1

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Environmental Analysis & Forecasting Steps in Forecasting : 1. Economic 2. Social 3. Political 4. Technological

Dr. Ratnesh Chaturvedi, BE, Class - 1

1. Identification of environmental variables 2. Selection of forecasting techniques 3. Collection of Information – Verbal & Written information, Search & Scanning, Spying 4. Monitoring

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