Business Envt I

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    Business Environment consists of all those

    factors that have a bearing on the business CA

    Francis

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    The term business environment of a company isdefined as a pattern of all external influences that

    effect its life and development.

    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

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    The survival and success of a firm, thus, dependon two major factors, viz,- the internal factors &

    the external factors.

    Business Environment relates to External Factors

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    A SWOT analysis i.e analysis of strengths andweaknesses of the organisation and opportunitiesand threats in the environment.

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    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.

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    The external environment has two components:

    Opportunities and Threats to business.

    External factors such as economic factors, socio-cultural factors, govt and legal factors,

    demographic factors, geo-physical factors etc are

    uncontrollable factors.

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    Business Environment at 2 levels:

    Micro/task/operating environment

    Macro/general/remote environment

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    Micro Environment:

    Suppliers

    Customers Competitors

    Marketing intermediaries

    Financiers

    Publics

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    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

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    Competitors

    Other firms in the same industry or type of business that

    provide goods & services to the same set of

    customers.

    In todays environment most competitors are

    cooperating to achieve common goals.

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    Market Intermediates

    Types of Market Intermediates Middlemen

    Marketing Agencies

    Financial Institution

    Physical Intermediates

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    PUBLICS

    Media Publics

    Local Publics

    Citizen action publics

    NGOs

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    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 intogoods and services and then send them back to

    the environment.

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    Business and its external environment interact in the

    following ways.. Exchange of information

    . Exchange of resources.

    . Exchange of influence and power.

    For incorporating dynamic behaviour of environment

    Complete knowledge of internal environment

    To understand international events, pressures& impact

    Economic policies of the govt.

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    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

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    Macro Dimensions of Business Environment:

    The main macro dimensions elements of business

    environment are as follows:-

    Economic environment

    Political and regulatory environment

    Social and cultural environment

    Demographic environment

    Technical environment

    National environment

    Global environment

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    Economic Environment: The economic environmentcomprises of the factors and forces concerned with means

    of production and distribution of wealth. It refers to Economic system: the countrys economic model (socialist,

    capitalist, mixed)

    Economic policies: Budgets, 5-Year Plans, industrial laws andpolicies, statutory regulations, various Acts and Legislations,

    export-import restrictions, wage and price controls, publicdistribution system, rural economic upliftment programs etc.

    Economic growth: Economic performance and growth ofdomestic industry is heavily dependent on the growth of theeconomy as a whole. Boom encourages business activity while

    recession retards it. Organisation of capital and money markets

    Economic indicators: Interest rates, Currency exchange rates,income level ,price level

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    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 towardsbusiness ,government ,centre state relations

    ,public opinion, law and order etc.

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    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.

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    The 3 pillars of the Government are: Legislature: enacts legislation i.e. creates laws by means of statutes and

    Acts

    Executive: entrusted with implementing these statutes

    Judiciary: adjudicates on issues arising from non-compliance of thesestatutes

    All business activity are legally and morally bound to conform to it.

    The political and legal environment exerts its influence on business

    through: Legal obligations which determine business decisions and actions

    Political and ideological stand of the nation have a bearing on thebusiness

    Internal strife by aggrieved sections of society that hamper economicactivity and development

    Political philosophies that stabilize or disrupt the economic progress Reaction times of the 3 pillars of democracy in responding to the issues

    that cripple progress

    Foreign policy initiatives that strengthen the nations economy

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    Socio-Cultural Environment

    Social and Cultural environment refers to theinfluence exercised by certain social factors which

    are beyond the companys gate. Such factors

    include, among others, attitude of people to work,attitude to wealth, family, marriage, religion,

    education, ethics and social responsibility of

    business.

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    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.

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    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

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    International Business

    When business activities are performed on aninternational level, these can be termed as

    international business.

    Basic functions, processes and techniques ofinternational business are essentially the same as

    those involved in domestic business.

    What is different is the environment within whichthese functions are performed and processes are

    carried out.

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    International Business environments are

    unfamiliar and different from the domesticenvironment

    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.

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    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