BUSINESSENVIRONMENT

compiled by Vusumuzi Lungelo Khanyiledepartment of education, University of Johannesburg

WHAT IS BUSINESS ENVIRONMENT ?• Business Environment is a relationship between a business’s actions and its environment. Environment is the surroundings of a business by which business influenced directly or indirectly. Where the political, economic, social and technological factors shopping a business environment are assessed by a business so as to devise future strategy.

BUSINESS ENVIRONMENT

ENVIRONMENT REFERS TO ALL FACTORS WHICH HAS A BEARING ON THE FUNCTIONING OF A BUSINESS UNIT.

IT MAY BE INTERNAL AND EXTERNAL

Environment• The environment is the result of changing

social and economic and political forces which creates challenges, opens up new opportunities and affects the strength and weaknesses of various business segment.

DEFINATION OF BUSINESS

• A business firm is an economic unit which is engaged in the production or distribution, or both the production and distribution of goods and services for the purpose of earning profits

Characteristics of Business

BUSINESS OBJECTIVES

Elements of Business Environment

Business Environment consists of all those factors that have a bearing on the business.

LEVELS OF ENVIRONMENT• INTERNAL ENVIRNONMENT

Promoters’ / shareholders’ values

Mission / objectives

Management structure

Internal power relationship

Physical assets and facilities

Company image / brand equity

Hr, Marketing, technological, financial capabilities.

Cont…….

LEVELS OF ENVIRONMENT• MICRO (TASK / OPERATING) ENV

Suppliers

Publics

Marketing intermediaries

Competitors

Customers

financiers

Cont…….

LEVELS OF ENVIRONMENT• MACRO (GENERAL / REMOTE) ENV

Global environment

Technological / natural environment

Social / cultural environment

Political environment

Demographic environment

Legal environment.

Types of Environment

Internal Environment

External Environment

Micro environment

Macro environment

Economic

Non Economic

ECONOMIC ENVIRONMENT•Recently it is complex. Determined by government, capital market, household sector, global market etc. It consists of economic conditions, economic systems, economic policies, economic growth, interest rates, currency exchange rates

ECONOMIC CONDITIONS• Determined by national income, percapita income, economic resources, distrn of income and assets, economic development etc. business cycles and economic growth are also important in the eco.conditions and in turn environment

Social Environment• The social environment of business includes social

factors like customs, traditions, values, beliefs, poverty, literacy etc.

• For example: During festive seasons there is an increase in the demand for new clothes, sweets, fruits, flower, etc.

POLITICAL ENVIRONMENT• Legislature

• Executive

• Judiciary

• Impact of defence and military policy, Political stability, President’s rule, emergency, philosophy of political parties, Foreign policy, like allignment of non allignment policy, loan from IMF, ADB, ASSEAN agreement etc.

Legal Environment• This refers to set of laws, regulations, which

influence the business organizations and their operations.

• Every business organization has to obey, and work within the framework of the law.

Eg: Factory act 1948.

Domestic Business Environment• The domestic factors that affects the firm situated in

a domestic country.

Global Business Environment

•The Global Business Environment is that the business carried on globaly.It is influenced by the World Trade Organisation, principles and agreements.

Overview of Business Environment

MACRO ENVIRONMENT

ECONOMIC Environment

MICRO ENVIRONMENT

BUSINESS

Internal Environment

Values,

Mission & Objectives. Human Resources,

Co. Image & Brand Equity

TECHNOLOGICAL FACTORS

MARKETING INTERMEDIARIES

DEMOGRAPHIC FACTORS

SOCIAL CULTURAL FACTORS

Non - Economic Environment

NATURE OF BUSINESS ENVIRONMENT Risk and uncertainty

Profit Maximisation

Competition

Technology oriented

Change

COMPONENTS OF BUSINESS ENVIRONMENT

Internal Environment• The internal factors are generally regarded as

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

Determinants of internal environment• Mission and vision of the organization

• Management philosophy and strategy

• Industrial relations

• Corporate culture and values

• Line and staff relations

• Governance standards and codes

• Quality central system

• Team spirit among employees

• Work culture and socio-economic background of employees

• Job design and coordination

• Quality of internal communication

• Compensation system and career progression of employees

• Central system of the organization

External Environment• External environment of business consist of institutions, organizations and forces operating outside the Company. All these individually as well as collectively exercise their influence on the latter. Broadly external environment of business may be classified into

• (A) Micro Environment and

• (B) Macro Environment

The most prominent performs in the micro environment are the following • Suppliers of inputs

• Workers and their unions

• Customers

• Market intermediaries

• Competitors

• Public

Micro Environment

Macro Environment

DETERMINANTS OF BUSINESS ENVIRONMENT

Economic policies : . Political Conditions Resources

Industrial Policy Political Stability

Trade Policy

Monetary Policy

Fiscal Policy

Corruption rule of law and

governance including business

law and regulations

Natural resources

Human resources

Bibliography • Ashumali Singh. (2009).business environment. Available:

http://www.slideshare.net/singhanshu21/first-chapter

• Babasab Patil (karrisate). (2012). Introduction to business environment. Available: ://www.slideshare.net/BabasabPatil/business-environment-ppt-dom-s-11362732?qid=2c2d8a8e-e4bf-4962-84c7-03b2356965cc&v=qf1&b=&from_search=6

• Jithin Clashes Zcs. (2013). Business environment basics. Available: http://www.slideshare.net/jithinclashes/business-environment-basics

• Pankaj Kumar. (2011). Elements of business management. Available: http://www.slideshare.net/birubiru/elements-of-business-environment-7051392

• R.Paul Godwin. (2013). Domestic and global business environment. Available: http://www.slideshare.net/paulpaul11/domestic-and-global-business-environment