Introduction
• Business: Business may be understood as the
organized efforts of enterprises to supply
consumers with goods or services for a profit.
• Business Environment: Business Environment
means a collection of all individuals, entities and
other factors, which may or may not be under the
control of the organization, but can affect its
performance, profitability, growth and even
survival. Every business organization operates in
a distinctive environment, as it cannot exist in
isolation. Such an environment influences
What is a Macro Environment?
A macro environment is the condition that
exists in the economy as a whole, rather than
in a particular sector or region. In general,
the macro environment includes trends in the
gross domestic product (GDP), inflation,
employment, spending, and monetary and
fiscal policy. The macro-environment is
closely linked to the general business cycle as
opposed to the performance of an individual
business sector.
Macro Environment Analysis:
Environmental Analysis is described as
the process which examines all the
components, internal or external that has
an influence on the performance of the
organization. The internal components
indicate the strengths and weakness of
the business entity whereas the external
components represent the opportunities
and threats outside the organization.
Macro Environment Analysis:
Macro Environment Analysis:
Environmental scanning is necessary
because there are rapid changes taking
place in the environment that has a great
impact on the working of the business
firm. Analysis of business environment
helps to identify strength weakness,
opportunities and threats. SWOT analysis
is necessary for the survival and growth of
every business enterprise.
Importance of environmental scanning:
1. Identification of strength: Strength of the business firm
means capacity of the firm to gain advantage over its
competitors. Analysis of internal business environment
helps to identify strength of the firm. After identifying
the strength, the firm must try to consolidate or
maximize its strength by further improvement in its
existing plans, policies and resources.
2. Identification of weakness: Weakness of the firm means
limitations of the firm. Monitoring internal
environment helps to identify not only the strength but
also the weakness of the firm. A firm may be strong in
certain areas but may be weak in some other areas. For
further growth and expansion, the weakness should be
identified so as to correct them as soon as possible.
Importance of environmental scanning:
3. Identification of opportunities:
Environmental analyses helps to identify the
opportunities in the market. The firm should
make every possible effort to grab the
opportunities as and when they come.
4. Identification of threat: Business is subject to
threat from competitors and various factors.
Environmental analyses help them to identify
threat from the external environment. Early
identification of threat is always beneficial as
it helps to diffuse off some threat.
Importance of environmental scanning:
5. Optimum use of resources: Proper environmental
assessment helps to make optimum utilization of
human, natural and capital resources. Systematic
analyses of business environment helps the firm to
reduce wastage and make optimum use of available
resources. Without understanding the internal and
external environment, resources cannot be used in an
effective manner.
6. Survival and growth: Systematic analyses of business
environment help the firm to maximize their strength,
minimize the weakness, grab the opportunities and
diffuse threats. This enables the firm to survive and
grow in the competitive business world.
Importance of environmental scanning:
7. To plan long-term business strategy: A business
organization has short term and long-term objectives.
Proper analyses of environmental factors help the
business firm to frame plans and policies that could
help in easy accomplishment of those organizational
objectives. Without undertaking environmental
scanning, the firm cannot develop a strategy for
business success.
8. Environmental scanning aids decision-making:
Decision-making is a process of selecting the best
alternative from various available alternatives. An
environmental analysis is an extremely important tool
in understanding and decision¬ making in all situation
of the business. Success of the firm depends upon the
precise decision making ability. Study of
environmental analyses enables the firm to select the
best option for the success and growth of the firm.
Characteristics of Contemporary Business
The following are the important
characteristics of a business:
1. Economic activity
2. Buying and Selling 7. Customer satisfaction
3. Continuous process 8. Social Activity
4. Profit Motive 9. Government control
5. Risk and 10. Optimum utilization
Uncertainties of resources
6. Creativity and 11. Globalization
Dynamism 12. Competition
Importance of Business
Environment
Business Environment presents threats as well as
opportunities for any business. A good business manager
not only identifies and evaluates the environment but also
reacts to these external forces. The importance of the
business environment can be neatly understood if we
consider the following facts:
Environmental analysis is a strategic tool. It is a process
to identify all the external and internal elements, which
can affect the organization’s performance. The analysis
entails assessing the level of threat or opportunity the
factors might present. These evaluations are later
translated into the decision-making process. The analysis
helps align strategies with the firm’s environment.
Importance of Business
Environment
The most used detailed analysis of the environment is the
PESTLE analysis. This is a bird’s eye view of the business
conduct. Managers and strategy builders use this analysis to find
where their market lies currently. It also helps foresee where the
organization will be in the future.
PESTLE analysis consists of various factors that affect the
business environment. Each letter in the acronym signifies a set
of factors. These factors can affect every industry directly or
indirectly.
The letters in PESTLE, also called PESTEL, denote the following
things:
• Political factors
• Economic factors
• Social factors
• Technological factors
• Legal factors
• Environmental factor
Importance of Business
Environment
Often, managers choose to learn about political,
economic, social and technological factors only. In that
case, they conduct the PEST analysis. PEST is also an
environmental analysis.
It is a shorter version of PESTLE analysis.
STEP, STEEP, STEEPLE, STEEPLED, STEPJE and
LEPEST: All of these are acronyms for the same set of
factors.
Some of them gauge additional factors like ethical and
demographical factors.
P FOR POLITICAL FACTORS
The political factors take the country’s current political
situation. It also reads the global political condition’s
effect on the country and business. When conducting this
step, ask questions like “What kind of government
leadership is impacting decisions of the firm?”
Some political factors that you can study are:
• Government policies
• Taxes laws and tariff
• Stability of government
• Entry mode regulations
E FOR ECONOMIC FACTORS
Economic factors involve all the determinants of the
economy and its state. These are factors that can conclude
the direction in which the economy might move. So,
businesses analyze this factor based on the environment.
It helps to set up strategies in line with changes.
• The inflation rate
• The interest rate
• Disposable income of buyers
• Credit accessibility
• Unemployment rates
• The monetary or fiscal policies
• The foreign exchange rate
S FOR SOCIAL FACTORS
Countries vary from each other. Every country has a
distinctive mindset. These attitudes have an impact on the
businesses. The social factors might ultimately affect the
sales of products and services. But some of the social
factors you should study are:
• The cultural implications
• The gender and connected demographics
• The social lifestyles
• The domestic structures
• Educational levels
• Distribution of Wealth
T FOR TECHNOLOGICAL FACTORS
Technology is advancing continuously. The advancement is
greatly influencing businesses. Performing environmental
analysis on these factors will help you stay up to date with
the changes. Technology alters every minute. This is why
companies must stay connected all the time. Firms should
integrate when needed. Technological factors will help you
know how the consumers react to various trends.
Firms can use these factors for their benefit:
• New discoveries
• Rate of technological obsolescence
• Rate of technological advances
• Innovative technological platforms
L FOR LEGAL FACTORS
Legislative changes take place from time to time. Many of
these changes affect the business environment. If a
regulatory body sets up a regulation for industries, for
example, that law would impact industries and business in
that economy. So, businesses should also analyze the legal
developments in respective environments.
• Product regulations
• Employment regulations
• Competitive regulations
• Patent infringements
• Health and safety regulations
E FOR ENVIRONMENTAL
FACTORS
The location influences business trades. Changes in
climatic changes can affect the trade. The consumer
reactions to particular offering can also be an issue. This
most often affects agri-businesses.
Some environmental factors you can study are:
• Geographical location
• The climate and weather
• Waste disposal laws
• Energy consumption regulation
• People’s attitude towards the environment
There are many external factors other than the ones
mentioned above. None of these factors are independent.
They rely on each other.
How to conduct environmental analysis
If you are wondering how you can conduct environmental
analysis, here are 5 simple steps you could follow:
1. Understand all the environmental factors before
moving to the next step.
2. Collect all the relevant information.
3. Identify the opportunities for your organization.
4. Recognize the threats your company faces.
5. The final step is to take action.
Steps Involved in the Process of Environmental
Analysis
Identifying: First of all, the factors which
influence the business entity are to be identified,
to improve its position in the market. The
identification is performed at various levels, i.e.
company level, market level, national level and
global level.
Scanning: Scanning implies the process of
critically examining the factors that highly
influence the business, as all the factors
identified in the previous step effects the entity
with the same intensity. Once the important
factors are identified, strategies can be made for
its improvement.
Steps Involved in the Process of Environmental
Analysis
Analyzing: In this step, a careful analysis of all
the environmental factors is made to determine
their effect on different business levels and on
the business as a whole using benchmarking or
other tools.
Forecasting: After identification, examination
and analysis, lastly the impact of the variables
is to be forecasted. Environmental analysis is an
ongoing process and follows a holistic approach
that continuously scans the forces effecting the
business environment and covers 360 degrees
of the horizon, rather than a specific segment.
Environmental Factors in the context of
Bangladesh
The following set of ten most urgent actions could form a
package in environmental governance and contribution to
sustainable development that supports rapid economic
growth and the human development suitable to
Bangladesh in a climate change world.
1. Converting population to human fertility
resource 7. Increasing the efficiency of
2. Light for all resource use
3. Clean and free rivers 8. Better institutionalization of
4. Transfer of the tanneries and climate change management and
pollution management governance
5. Effective implementation of 9. Strengthening local government
Environmental Impact and community based adaptation
Assessment (EIA) 10.Planned urban-rural continuum
and spatial management
6. Improving the quality of soil
Converting population to human resource
Bangladesh has been a role model for several aspects of
development. The greatest resource of Bangladesh is its people.
But the population density in Bangladesh is one of the highest in
the world. Though there has been significant reduction in the
population growth rate, it remains most urgent to continue all
efforts to reduce the rate of population growth by aggressive
family planning, educating and investing in the health and welfare
of the women as well as the new generations. The burgeoning
population must be part of a national plan to generate new and
worthwhile jobs and livelihoods. To achieve this there has to be an
aggressive employment generating and entrepreneurship enabling
strategy and plan. Appropriate vocational training and productive
man power based education and empowerment of this population
deserve greatest attention. This will greatly improve the emerging
garments and associated industries, quality of manpower export
and greater agricultural productivity. The synergies are evident
but investment time horizon is indicated and must be reinforcing.
Light for all
Electricity is the major source of power for most of the country’s
economic activities. The largest energy consumers in Bangladesh
are industries and the residential sector, followed by the
commercial and agricultural sectors. According to the Bangladesh
Power development Board in July2018, 90% of the population had
access to electricity. However per capita energy consumption in
Bangladesh is considered low. Bangladesh will need an estimated
34,000MW of power by 2030 to sustain its economic growth of
over 7 percent. Problems in Bangladesh’s electric power sector
include high system losses, delays in completion of new plants,
low plant efficiency, erratic power supply, electricity theft,
blackouts, and shortages of fund for power plant maintenance.
Overall, the country’s generation plants have been unable to meet
system demand over the past decade. However, technology is
available, financial and social mechanism will have to be evolved.
This is within the reach of the common people. Political will is the
need of the hour.
Clean and free rivers
Rivers have been occupied by the powerful
people where flow of rivers has been
restricted. Many rivers have been silted up.
Further industrial and domestic pollution
have severely contaminated many rivers
particularly around the cities. There is an
urgent need to free the rivers both from
illegal encroachment situation, pollution and
self-loading. This is urgent to establish rule of
law, government ownership of common
property resources and principle and
environmental governance.
Transfer of the tanneries and pollution
management:
Urgent and immediate implementation of
the tanneries with effective central
effluent treatment plant must be
undertaken immediately. Simultaneously
the garment, textile, ship breaking, brick
making and other polluting industries
must be made compliant of the procedures
and law of the country.
Effective implementation of Environmental Impact
Assessment (EIA)
Environmental Impact Assessment is obligatory
under the Bangladesh Environmental act. It is an
effective tool to protect the natural resources and
for making policies, projects and infrastructure
environmentally sound. But its implementation is
very weak. To ensure that EIAs are assessed fairly
and professionally it is of utmost importance to
have an independent panel of experts to review the
EIAs and ensure rigorous people’s participation.
This will enable effective use of this important tool
for good environmental management practices and
ensure a key step of environmental governance
and institutional development.
Improving the quality of soil
fertility
Bangladesh soils are under stress. They need to
enhance organic matter and some micro
nutrients. Proper monitoring and matching of
crop-soil-micronutrient combinations
identification and their appropriate application
will reduce fertilizer use and enhance food
productivity. All soils need to be enriched with
more organic matter by using sustainable
agriculture practices. Integrated pest
management, more efficient fertilizer and water
use and diversification of crops and vegetables,
afforestation of deforested areas will help in soil
quality improvement.
Increasing the efficiency of resource use
Bangladesh needs to increase its efficiency in use of water,
energy, waste, food items and through better post-harvest
technologies, monitoring water needs for irrigation and
fertilizer use, and particularly encouraging use of fertilizing
pellet available and use of improved safe drinking water is
essential particularly in vulnerable areas. Wide use of
improved cook stoves and reduction of line loss of
electricity, gas and piped water supply would save significant
amount of energy. Better management of urban traffic will
also reduce fuel waste. Recycling of plastics, polythene,
polystyrene, electronic and other wastes will save resources
from wastage. Increase efficiency of chemical dosing in dye
applications, fuel in brick kilns are examples of better use of
resources. Use of 3R (reduction, reuse and recycle)
principles and recycling of water, energy and chemicals will
improve efficiency.
Better institutionalization of climate
change management and governance
There has been significant progress and many important initiatives have
been undertaken in climate change. But climate change is complex, and
multifaceted. It involves largely environmental and even greater and
increasing developmental challenges. It encompasses many sectors and
deep involvement of many actors. The real strengths in achieving climate
change risk reduction are integration of climate change into all relevant
sectorial and rational policies. These include local government agencies
and above all the communities. Further, as the Green Climate Fund is
emerging Bangladesh must claim huge and significant funding from it. It is
of utmost importance to nominate a set of independent agencies to be the
National Implementation Entity (NIE) under the supervision of the
appropriate National Designated Authority. The discourse and activities on
this should be initiated soon. The principles of MRV (Measurable,
Reportable and Verifiable) activities and demonstrable transparency and
accountability are essential for fund mobilization, fund management under
this mechanism. This will also enable Bangladesh to mobilize its well-
deserved claims to large global fund by setting these institutions with
accountability and transparency.
Strengthening local government and
community based adaptation
Most climate change related activities and adaptation responses
will be addressed at the local level. Bangladesh's credibility and
claim to global funds will largely depend on its capacity to reach
the funds to the climate vulnerable and affected poor. This will
be best served by strengthening the local government and its
capacity to deliver development and environmental services to
the poor, both rural and urban. Hence it is of utmost importance
to strengthen and enhance efficiency of service delivery of the
local government. It may be helpful to make a policy declaration
that large proportion of all climate funds, say 70 percent, should
reach the most vulnerable and the poor. It is also important to
use this framework to enhance community based adaptation
(CBA) which is to be delivered to the communities as well as
develop decision making processes ensuring the participation of
the communities. This will be a great contribution of
Bangladesh to environmental democracy and climate change
governance.
Planned urban-rural continuum and
spatial management
Bangladesh still remains a largely rural country with population moving towards
rapid urbanization. This urbanization is happening with a rapid population increase
in major cities such as Dhaka and Chittagong. There is a second phenomenon of
urbanization associated with emergence of small towns at district levels. The third
phenomenon is the access to urban services at the peri-urban areas at the two above
levels. In Bangladesh rapid urbanization is a part of the rural-urban continuum.
Through the socio-economic network, continuity of resource mobilization and
demographic transitions from rural to urban migration remains a continuum. This is
more significant amongst the poor residing in urban slums; many of them have often
been displaced by extreme events, frequently connected with climate change
induced events and the phenomenon of frequent river bank erosions or floods. This
is also continued amongst the middle class.
The urban and rural populations in Bangladesh are connected in a continuum; it is
important to set the framework for rural spatial planning also. It is worthwhile to
consider multi storied buildings with low energy needs to save agricultural land
from occupation by housing. Cities spatial planning will also need to include land
use and natural resource planning integrated with energy – water – food nexus for
the urban population along with other services. Availing the urban services in the
rural areas will make spatial planning more manageable. The elements to consider
in urban and rural spatial planning will need to be (a) Innovation and Planning (b)
Investment and Infrastructure (c) Participation and Information and (d) Good
Governance.
