BUSINESS ENVIRONMENT

1
st
Semester BBM
2011 - 2012

Lecturer: Ramya Rajagopal

SYLLABUS
1. Business and its Environment
Meaning Scope and Characteristics
Significance for economic policies and decisions in
Organisation
2. Global Environment
Nature of Globalisation Manifestations of
globalisation Challenges of international business
Strategies for going global India, WTO and
trading blocks.
3. Technological Environment
Meaning features Impact of Technology
Technology and Society Management of
Technology




4. Political Environment
Political institutions Legislature Executive
Judiciary The Constitution of India The Preamble
The fundamental rights Rationale and extent of state
intervention Role of Government in business.
5. Economic Environment
Characteristics of Indian Economy, Factors affecting
economy, Economic resources (natural, industrial and
technological)
Impact of Liberalisation, Privatisation and
Globalisation on Indian Business.

6. Government Policies:
Impact of Fiscal, Monetary, EXIM policy and
Industrial policy on Business (Latest policy
measures).
7. Natural Environment:
Meaning and influence on business.
Chapter 1
Business & its Environment An Introduction
Nature of Business
Purpose of Business
Scope of Business
Characteristics of Contemporary business
Business Objectives
Critics of Business
Meaning of Environment
Objectives & uses of Business environment study
The process of Environmental Analysis
Limitation of Environmental analysis


Meaning
Business may be understood as the organised efforts of
enterprises to supply consumers with goods and services for a
profit.
Purpose of Business
All businesses share the same purpose: TO EARN PROFITS
But other purposes are:
Supplying goods and services to the society; creating job
opportunities; offer of better quality of life; contributing to
the economic growth of the country.
Scope
Activities starting from bringing raw materials to the factory
and selling the products at the market
Characteristics of Contemporary Business
1. Business in Transition: A typical business person is sandwiched
between the compulsions of the new business environment and the
old practices of doing business.
2. Pressure of Competition: Indian businesses are facing
competition, both from within and from foreign business.
Competition though unwelcome to managers, is a boon to
customers.
3. Immense Opportunities: Indian business has plenty of
opportunities which can be exploited to one's advantage.
4. Globalisation: Modern business necessitates globalisation.
Internationalisation or globalisation is fast becoming imperative for
modern business due to technological innovations; crumbling trade
barriers; global flow of capital and technology; information
explosion; intensity of market competition; changing life styles &
the demand for new products.

5. Technology: Business is characterised by increasing
use of technology. The impact of technology on
business is pervasive.
6. Information: Another characteristic of contemporary
business is the recognition of and the need for
information. The whole area of retrieving & extending
information, including data processing, information
systems analysis & preparation of effective records &
reports, has achieved a major status.
Business objectives
Before we describe business objectives, it is
desirable to be clear about related concepts, viz.,
Vision
Mission &
Objectives

VISION: A Vision is a broad explanation of why
the firm exists and where it is trying to lead.
A vision gives the organisation a sense of purpose
and a set of values that unite employees in a
common destiny.
Business Vision
Creating the Vision
Establishing Goals
Visioning
One of the most important things to do in the
preparation stage is to VISUALIZE things in your
mind.

Mayor Rudolph Giuliani
Visioning vs. Planning
Planning
process that
provides specific
direction and
meaning to the day-
to-day activities.

strategic planning
places the strategic
vision into motion.

Visioning
proactive plan
for the future.



It is a view of
the future that
everyone can
believe in.
A Vision Statement
Says what you want out of Business.
Details principles and beliefs.
Gives you the power to create and design your
business around your values.
In Summary
You have to have a plan for success!
It starts with a vision.
You get the vision by reaching each goal.
You reach goals by hard work, dedication, and
perseverance.
Mission
A Mission statement outlines the fundamental
purpose of the organisation.
A Mission statement incorporates four elements:
1. Customer needs, or what is being satisfied.
2. Customer groups, or who is being satisfied.
3. The companys activities, technologies, and
competencies, or how the firm goes about
creating and delivering value to customers and
satisfying their needs.
4. The companys concern for survival, its
philosophy, its self-concept and its concern for
public image.



Our Mission
Dayananda sagar Institutions
VISION
To be a centre of excellence in education,
research & training and to produce human
resource of exceptional leadership quality to
serve national needs
MISSION
To achieve our objectives in an environment that
enhances creativity, innovation and scholarly
pursuits within the stated values.




Growth has no limit at Reliance. I keep
revising my vision.
Only when you can dream it, you can
do it.
Dhirubhai H. Ambani
Founder Chairman Reliance Group
December 28, 1932 - July 6, 2002
Objectives
Objectives render mission statements more
concrete.
Mission statements seek to make a vision more
specific and Objectives are attempts to make
mission statements more concrete.
Objectives therefore, represent the operational side
of an organisation.
1. Profit: Profit is the main incentive, motivator,
strong sustainer, judicious allocator of resources,
objective indicator of productivity and a solid basis
for growth, expansion and survival.
Profits enables a businessman to realise his other
objectives too.
2. Growth: Business should grow in all directions
over a period of time. The strategies adopted to
achieve growth are:
(a) add more products/markets;
(b) diversify into new areas;
(c) increase market share;
(d) cut down costs and increase productivity.





3. Power: Business houses have vast resources at
its command. These resources confer enormous
economic and political power on owners and
managers of business ventures.
4. Employee satisfaction & Development:
Concern for employees continues to be an
important aspect of management.
5. Quality products & services: Those who
insisted on and persisted in quality survived
competition and stayed ahead of others in the
market. Persistent quality of products earns
brand loyalty, a vital ingredient of success.




6. Market Leadership: To earn market
leadership, innovation is the key factor.
Innovation may be in product, advertising,
distribution, finance or in any other field.
7. Challenging: Business offers vast scope and
poses formidable challenges.
8. Joy of creation: It is through business
strategies new ideas and innovations are given a
shape and are converted into useful products
and services for the benefit of customers.

9. Service to society: Business is a part of
society and has several obligations towards it.
10. Good Corporate citizenship: It implies that
the business unit complies with the rules of the
land, pays taxes to the government regularly,
discharges its obligations to society and cares
for its employees and customers.

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The Four-Step
Pyramid of
Corporate Social
Responsibility
CRITICS OF BUSINESS
Specific criticisms are the following:
1.Business activity has a corrosive effect on a
range of cherished cultural values.
1. Business dehumanises and expolits workers
2. Business harms interests of consumers.
3. Business degrades nature and the environment.
4. Business has destroyed handicraft and
rendered artisans jobless.



There are five groups of Critics
1. Activist Reformers
2. Liberal Intellectuals
3. Marxists
4. Radical Non-Marxists.
5. Reactionaries.
Meaning of Environment
Environment refers to all external forces which have
a bearing on the functioning of business.
Environment of a Firm
1. Technological Environment
2. Economic Environment
3. Political Environment
4. Global Environment
5. Social and Cultural Environment

Business Environment
Business environment refers to all those internal
and external factors that have a bearing on the
business.
Keith Davis defines business environment as the
aggregate of all conditions, events and influences
that surround and influence it.

Three different levels of Business Environment
are as follows:
Internal Environment
Micro Environment
Macro Environment

INTERNAL ENVIRONMENT
The important internal factors which have a
bearing on the strategy and other decisions are:
1. Value system
2. Mission & Objectives
3. Management Structure & Nature
4. Internal Power relationship
5. Human resources
6. Company image & Brand equity

Miscellaneous factors
1.Physical assets and facilities
2.R & D and Technological capabilities.
3.Marketing resources
4.Financial factors.
EXTERNAL ENVIRONMENT
The external business environment consists of
Micro environment and
Macro environmet

MICRO ENVIRONMENT
The micro environment consists of the actors in the
companys immediate environment that affect the
performance of the company.
Suppliers: Suppliers are the important force in the task
environment of a business.
Multiple sources of supply often help to reduce risks.
Customers: To succeed in capturing customers, a
business must try its best to know what people want
and will buy.
Labour: The labour force is organised in the form of
trade unions. The trade unions interact with the
management & pressurise the management for the
fulfilment of their demands.

Competitors: Competitors play a vital role in
running the business enterprise. There are
various types of competitions:
Desire competition: Under this type of
competition the primary task is to influence the
basic desire of the customer.
Generic competition: The competition among
alternatives which satisfy a particular category
of desire is called generic competition.
Product form competition: In this type of
competition, the consumer has to choose
between different forms of the product.




Brand competition: The competition between
different brands of the same product.
Taking into consideration these different factors
every marketer should strive to create primary
and relative demand for his product.
Regulating agencies: The regulators include
government departments and other
organizations which monitor the activities of
business.
MACRO ENVIRONMENT
The macro forces are, generally, more uncontrollable
than the micro forces.
Important macro environment factors includes:
Economic environment
Political and Regulatory environment
Social/Cultural environment
Demographic environment
Technological environment
Natural & Global environment

ECONOMIC ENVIRONMENT
The survival & success of a business enterprise is
finally decided by the economic environment
& various market conditions. The important
external factors that affect the economic
environment of a business are as follows:
Economic conditions
Economic system
Economic policies

Economic growth
Interest rates
Currency exchange rates.
POLITICAL & LEGAL
ENVIRONMENT

Political environment refers to the influence
exerted by the three political institutions:
Legislature
Executive
Judiciary
It provides a framework within which the
business is to function & its existence
depends on the success with which it can face
the various challenges contructed out of
political & legal framework.

SOCIO-CULTURAL
ENVIRONMENT
It is very comprehensive because it may include
the total social factors within which an
organisation operates.
Socio-cultural environment may include
expectations of the society from business,
attitudes of society towards business & its
management, views towards achievement of
work, views towards structure, responsibility
& organisational positions, views towards
customs, & labour mobility & level of
education.
NATURAL ENVIRONMENT
It includes geographical & ecological factors.
Almost every aspect of business depends
upon natural environment.
Manufacturing depends on physical inputs.
Mining depends on nature
Agriculture depends on nature.
Trade between two regions depends on
geographical factors.
Topographical factors may affect the demand
pattern.
DEMOGRAPHIC
ENVIRONMENT
It includes:
Size, growth rate, age composition, sex
composition etc., of population
Family size
Caste, religion,
Educational level...etc

TECHNOLOGICAL
ENVIRONMENT
Business has to adopt technological changes from
time to time. Every business enterprise has
two basic functions i.e.,
Marketing &
Innovation.
Technological environnment also includes
research base decisions.
The fast changes in technology also create
problems for enterprises as these render
plants and products obsolete quickly.
International Environment
Implications of global or international
environment are as follows:
Indian companies are forced to view business
issues from a global perspective.
Safe & protected markets are no longer there.
Learning of foreign languages is a must for
every business manager.
Acquiring familiarity with foreign currencies
is also a must.
Thus, business is the product of the technological,
political-legal, economic, socio-cultural, global
& natural factors amidst which it functions.


Environmental Analysis

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Environmental Analysis
Environmental analysis is the process by` which
strategist monitors the Environmental sectors to
determine opportunities for threats to their firms.
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Conducting Environmental Analysis
Identifying threats and opportunities
Gathering of information about competitors
intelligence
Forecasting future direction of environmental
changes
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Key Environments
Marketing Environment
The actors and forces that
affect a firms ability to
build and maintain
successful relationships
with customers.
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Key Environments
Aspects of the marketing
environment:
Microenvironment:
Actors close to the
company
Macroenvironment
Larger societal forces
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Actors in the
Microenvironment

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Figure 4-2:
Major Macroenvironmental
Forces

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The Macroenvironment
Key Demographic Trends
World population
growth
Now 6.2 billion
Projected to
reach 7.9 billion
by 2025
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The Macroenvironment
The Economic Environment
Affects consumer
purchasing power
and spending
patterns.

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The Macroenvironment
The Political Environment
Includes laws,
governmental
agencies, and
pressure groups
that impact
organizations and
individuals.
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The Macroenvironment
The Cultural Environment
Is composed of institutions and
other forces that
affect a societys
basic values,
perceptions,
preferences,
and behaviors.
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The Macroenvironment
Core beliefs are
persistent
Secondary cultural
values change and
shift more easily

Societys cultural values
are expressed through
peoples views of:
Themselves
Others
Organizations
Society
Nature
The Universe
The Cultural Environment
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Techniques of environmental scanning
Send the researchers, technicians, engineers to international and
national conferences and trade shows

Visit the global competitors in trade fairs and exhibitions.

Systematically gather data on the result of government funded research
in other nations.

Carefully review technical and scientific journal and newspaper
published in another country and home country.

Developing management information system in each and every
department and ultimately for the whole organization.

Develop a strategic management information system at all levels of
management in collaboration with customers, peers (office people),
suppliers, and other middleman, sales officers.
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NEED FOR ENVIRONMENTAL ANALYSIS
Increases managerial awareness of environmental
changes.

Increases understanding of the context in which
industries and markets functions.

Increases understanding of multilateral settings;

Improves resource allocation decisions;

Facilitates risk management;

Focuses attention on the primary influences on
strategic changes;

Acts as an early warning system to anticipate
opportunities and threats and devise appropriate
strategies.
This analysis is a valuable mechanism for increasing
strategic awareness of managers.
The Process of Environmental
analysis
Environmental analysis is a challenging, time
consuming and expensive affair. The analysis
consists of four sequential steps:
1. Scanning
2. Monitoring
3. Forecasting
4. Assessment

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Five stages of environmental analysis



Audit of environmental influences
Assessment of the nature of the environment
Identification of the key environmental forces
Identification of the principal Os and Ts
Strategic Position
SIGNIFICANCE OF BUSINESS
ENVIRONMENT
The significance of business environment is that
business decisions in general and strategies in
particular are moulded by the business
environment.
The importance of environmental analysis from the
fact that strategy is some times referred to as a
proper firm environment fit. An analysis of the
strengths and weaknesses of the organisation and
opportunities and threats in the environment
(SWOT analysis) is, in fact, one of the first steps in
the strategic management process.