Environment

ENVIRONMENT

Environment includes all the conditions, circumstances and influences surrounding and affecting the total organisation or any of its part. There are many forces in the environment which influence the working of the organizations. • Economic Environment • Legal Environment • Political Environment • Technological Environment • Sociological Environment • Cultural Environment etc.

Environment includes all the conditions, circumstances and influences surrounding and affecting the total organisation or any of its part. There are many forces in the environment which influence the working of the organizations. • Economic Environment • Political - Legal Environment • Technological Environment • Socio-cultural Environment • Competitive Environment etc.

Economic Environment: • • • • • • • • • •

Economic System: National Income and its Distribution Monetary Policy Fiscal Policy Natural Resources Infrastructural Facilities Raw Materials and Supplies Plant and Equipment Financial Facilities Manpower and Productivity

Economic System: • Capitalistic, Mixed Economy, Socialistic Economy • Economic system puts certain restrictions over the functioning of the organizations. • Protection

National Income and its Distribution: • Determines the purchasing power of people • Demand for the products.

Monetary Policy: • Financial facilities for the growth of industries. • Control and measures to generate employment.

Fiscal Policy: • Tax Structure • Government Expenditure

Natural Resources: • Availability of natural resources – land, minerals, fuel etc. • Exploitation and use of natural resources.

Infrastructural Facilities: • Transportation, Communication, banking services, financial services, insurance and so on. • Government emphasis on the development of backward areas.

Raw Materials and Supplies: • Price of Materials • Frequency of Materials • Regularity of supply • Terms and Conditions

Plant and Equipment: • Availability of Plant and Equipment. • Technological Development in the country

Financial Facilities: • Sources of finance – share capital, banking and other financial institutions, unorganized capital markets.

Manpower and Productivity: • Availability of factors of production. • Level of the productivity.

POLITICAL-LEGAL ENVRIONMENT: • Provisions of various facilities. • Incentives protecting the market. • Roles in the development of the business. • Laws, regulations and court decisions. • Political Stability – impact of changes in the form and structure of government administration. • Approaches of the government towards business. • Restrictions in importing technology, capital goods and raw materials. • Restriction on pricing and distribution of goods.

TECHNOLOGICAL ENVIRONMENT: • Includes inventions and techniques • Designing, Producing and Distributing • Level of technological development in the current.

COMPETITIVE ENVIRONMENT Potential Development of Substitute Products

Bargaining Power of Suppliers Rivalry among competing firms Bargaining of Consumers

Potential energy of new competitors

Competition among Organisations: Example : Coca-Cola and Pepsi

• • • •

This leads to rivalry among organisations. Demand for industry declines Price Cutting becomes common Merger and Acquisitions are frequent

Possible entry of new competitors: Identify potential new firms entering the market, to monitor their strategies, to counterattack as needed and to capitalize on existing strengths and opportunities.

Possible development of alternative products: ü Identify new firms which can produce the substitute products in other industries. ü Example: Plastic producers can get into production of disposal glass.

Bargaining Power of Suppliers: Best Interest of both suppliers and producers to assist each other with reasonable prices, improved quality and development of new services, in time deliveries and reduced inventory cost, thus enhancing long term profitability for all conerned.

Bargaining Power of Consumers: Bargaining powers of consumers is also higher when the products being purchased are standard or undifferentiated.