Business Environment

Business Environmen t Business Environment

What is Business ? “Business comprises of diverse set of activities to be carried out in planned manner and with a purpose like to earn profit by selling goods and services, to satisfy customers’ need/ want/ demand, to discharge obligation to employees and stakeholders, to return something worth to the society” “Business covers complex activities of industry and commerce involving organizing production, delivering product to customer with ultimate objective of profit maximization” “5 Ms” Business Environment

Business Environment ? if not totally beyond the “Comprises of the complex factors, largely control of management in which a particular enterprise operates”

“ Consist of set of internal factors and of external factors which affect an enterprise and its management”

•Internal environment •External environment  Micro  Macro Business Environment

firm Internal env. Micro env. Macro env.

Business Environment

Internal Environment • Generally regarded as the set of controllable factors, because a good management can alter or modify such factors. • A no. of such Internal factors influence the organizational decision. • Could be the potential source of differentiation.

Business Environment

1.Value System Value system of founders and directors affect a business firm in following ways•Nature of business •Policies •Objectives •CSR

2.Mission & Objectives These guide Priorities, Philosophy, Policies Business Environment

3. Management Structure & Nature -Organizational Structure -Responsibilities of BoD (Including Independent directors)

-Extent of professionalism -Share holding pattern

4.Internal power relationships -Level of support enjoyed by the top management -BoD relationships Business Environment

5.HR -- Quality

-- Quantity

6.Misc. -R&D capabilities -Marketing resources -Financial resources

Business Environment

MICRO ENVIRONMENT •Consists of the factors in firm’s immediate external environment affecting performance of that firm.

Suppliers -

If uncertainty (regular supply, quality, price) about suppliers exists, high inventory cost. JIT, WalMart Suppliers as partners Vertical integration

Public -

Media, Consumer action groups, NGOs, Citizens Business Environment

Customers -

Profile

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Customer switching

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Relationship marketing

Competitors -

Mono/Duo/Oligopoly/Perfect competition

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Desire/Generic/Product form/Brand competition

Marketing Intermediaries -

Distribution channels

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Logistics, Warehouse

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Business Environment

Ad agencies, Market research firm, Consultancy

Micro Env.is…. •More controllable than the macro environment •May be firm specific •More intimately linked with firm than the macro environment

Business Environment

MACRO ENVIRONMENT •

•

Part of external environment mainly responsible for creating opportunities as well as threats for the firm, and is more uncontrollable than micro environment. Elements  Economic  Sociocultural  Politicolegal

Natural Technological International

Business Environment

ECONOMIC ENVIRONMENT Economic conditions •Stage of economic cycle •National Income-GDP, GNP •Per capita Income •Income distribution •Inflation- CPI, WPI •Growth rate Economic policies •Exim policies •Monetary policies- availability and cost of credit •Fiscal policies- taxation, public expenditure •SEZ policies Business Environment

Economic system •Free market/ capitalist economy -USA, Japan, UK •Controlled/ socialist economy -China •Mixed economy-India

Socio-cultural Environment “Customs, ethics, ethos, values, language, tastes, preferences, habits, education, occupation, beliefs, religion, caste system, family” Directly affects buying and consumption behavior. Very deep impact on businessOrganizational culture, CSR, Employee relations, Competition, Employee attitude

Business Environment

Business Environment

CocaCola- china Chevrolet Nova- Spain Medimix- UP & Kerela Shariyat Banking- Islamic nations

Bonding – Japan America - Individualism Business Environment

Technological Environment •Rate of tech change •Techno Infrastructure •Technical know how •Strong driver of demand, especially replacement demand – GM strategy, Electronic goods •Cost reduction – Ford •Consumerism – Hamara Bajaj to 280 cc

Business Environment

Political Environment • Political system (forms of govt)- Pure democracy, Republic, Theocracy, Totalitarianism • Political philosophy- LPG • Regulations and laws for general conduct of business • Govt. policies • Political stability • Institutions Business Environment

SIGNIFICANCE OF BUSINESS ENVIRONMENT

• In-cashing business opportunities • Affect internal control • Optimize scare resources

• Market relevant technology development • Avoiding threats • Competitors analysis, Sustainable competitive advantage • Monitoring and forecasting • Strategy formulation • Power relationships and lobbying • International trade Business Environment