Indian Business Environment 1st Unit

UNIT -I

Definition: According to Androse “The term

business environment of a company is defined as a pattern of all external influences that effect its life and development.

Business environment consist of all those factors

that have a bearing on the business. The survival of a business firm depends on its

innate strength resources at its command and its adaptability to the environment and the extent to which the environment is favorable to development of the firm

The survival and success of a firm, thus, depend

on two major factors, viz,- the internal environment - the external environment. 

A SWOT analysis i.e analysis of strengths

and weaknesses of the organisation and opportunities and threats in the environment.

•

The internal environment has two components: strengths and weaknesses of the organisation.

• The internal factors are generally regarded as

controllable factors because the company has control over these factors: it can alter or modify such factors as its personnel, physical facilities, organisational and functional means, such as marketing mix, to suit the environment.

The external environment has two components:

opportunities and threats to business.The external factors such as economic factors, socio-cultural factors, govt and legal factors, demographic factors, geo-physical factors etc are uncontrollable factors.

Business Environment at 3 levels: Internal environment cro/task/operating environment Macro/general/remote environment

Customers Those people & organizations in the environment who acquire goods or services from the business are customers. As recipients of the business’ output, customers are important because they determine the business’ s Types of Customers  Industrial Customers  Institutional Customer  Foreign Customer

• Retail Customer • Multiple Customer • Globalization • Customer Segmentation

Competitors Other firms in the same industry or type of business that provide goods & services to the same set of customers. In today’s environment most competitors are cooperating to achieve common goals.

Suppliers The people & organizations who provide the raw

material the business uses to produce its output. The relationship among them must of cooperative

in nature in order to save money, maintaining quality, and speeding products to market. Reliability Multiple Supplier

Market Intermediates Types of Market Intermediates Middlemen Marketing Agencies Financial Institution Physical Intermediates

PUBLIC Media Publics Local Public

Significance of Business Environment: There is a mutual interdependence between business and its environment. A business enterprises is an open system. It continously interacts with its environment. Business takes inputs raw materials, capital, labour, energy etc. from its environment, and transform them into goods and services and then send them back to the environment.

 Business and its external environment interact in the

following ways. . Exchange of information . Exchange of resources. . Exchange of influence and power.  For incorporating dynamic behavior of environment  Complete knowledge of internal environment  To understand international events, pressures& impact  Economic policies of the govt.

Economic policies of the govt. To face business problems &challenges Vigilant regarding dangers Administrative system Optimum utilization of resources Market conditions Scientific & industrial advancement Development & success of business

Dimensions of Business Environment: The main dimensions elements of business Environment are as follows:Economics Environment: The economics environment comprises of the factors and forces concerned with means of production and distribution of wealth. It refers to the nature of economic system ,organisation of capital and money markets, income level ,price level, economic policies of the country etc.

Social Environment: This environment includes

social factors such as attitudes of people ,social customs and traditions ,education level, size of population ,trade unions, occupational structure etc.  Political Environment: Political environment

refers to the country's political system, type of government, government policies towards business ,government ,centre state relations ,public opinion, law and order etc.

 Legal/ Regulatory environment:

Legal environment of business includes all the laws, legal system and judiciary system of the country. A business has to work within framework of country's laws and regulations.

Socio-Cultural Environment Social and Cultural environment refers to the

influence exercised by certain social factors which are ‘beyond the company’s gate.’ Such factors include, among others, attitude of people to work, attitude to wealth, family, marriage, religion, education, business.

ethics

and

social

responsibility

of

LEVELS OF CULTURE: Four levels  National Culture: National culture is the dominant culture

within the political boundaries of a country.  Business Culture: Business culture guides everyday

business transaction.  Organisational Culture: It refers to the philosophies,

ideologies, values, assumptions, beliefs, expectations, and norms that knit an organisation together and are shared by its employees.

Occupational Culture: Different Occupational

groups such as physicians, lawyers, accountants, professors, and crafts people have distinct cultures- called Occupational cultures.

Technology: Includes scientific and technological

advancements in a specific industry as well as in society at large. E.g. Computer industry, etc. Technological advances can change the rule of the

game; thus every business must be ready to respond.

Legal and Political The legal-political element includes the legal and

governmental systems within which a business must function. a. Business must operate within the general legal

framework of the countries in which they do business. b. Businesses are subject to an increase in lawsuits filed

by customers or employees. c. The political issues which affect businesses include

those which influence the extent of government regulation.

Natural Environment  Climatic & weather condition.  Availability of Natural resources.  Topographical factors: Physical features of place.  Pollution Control

Demographic Environment  Age Composition  Sex Composition  Education Level  Family size & structure  Urban-rural population

Business Environment

International Business When business activities are performed on an international

level, these can be termed as international business. Basic functions, processes and techniques of international

business are essentially the same as those involved in domestic business. What is different is the environment within which these

functions are performed and processes are carried out.

International Business environments are unfamiliar

and different from the domestic environment These variations may need adaptation for business

success. International Business Environment In the context of a business firm, environment can be defined as various external actors and forces that surround the firm and influence its decisions and operations.

The two major characteristics of the environment as pointed out by this definition are: these actors and forces are external to the firm these are essentially uncontrollable. The firm

can do little to change them

Concept of Globalisation: Globalisation means " to make global ,that is world wide or effecting or taking into consideration the whole world or all people ".Globalisation is a process of integration of business activities and growing economic interdependence between countries in the world economy.

Factors that lead to globalisation: Growing similarities of countries in terms of available infrastructure. Globalisation exposes firms to international competition. Employment opportunities wil be increase over a period of time. Widening of competition.