Business Environment

DR
KAVITA
PATIL
Business Environment
Environmental Appraisal

Environment is the sum of various external and some internal

forces that affect the functioning of business.
Objectives of Environmental Appraisal :
1. To understand the current and potential changes taking place
2. To obtain necessary inputs for strategic decision making.
3. To facilitate and foster strategic thinking in organisations
Characteristics of Business Environment :
Environment is complex
Environment is Dynamic
Environment is multi-faceted
Far-reaching impact
Carries risks, uncertainties & opportunities
Environmental Appraisal
⚫ Micro Environment

Micro-environment is related to small area or immediate periphery of the

organisation. It influences the organisation regularly and directly.

Decisions affected by Micro-Environment

⚫ • Employees, their characteristics, attitudes and profiles.
⚫ • The customer base
⚫ • Methods and sources of finance
⚫ • Vendors/ suppliers and the relationships
⚫ • The local community
⚫ • Direct competition
⚫ Macro Environment
⚫
Macro Environment consists of broad, indirect factors which affect the
overall business environment in a country or region, across all industries.
https://www.toppr.com/guides/commercial-knowledge/business-environment/elements-of-micro-environment/
Environmental Scanning

⚫ Businesses are mainly affected by social, economic, legal,

technological and international factors. Environmental analysis is a
study of these various influencing factors. Environmental scanning
refers to collecting and utilizing the information about prominent
trends, patterns, occasions and relationships that can adversely
impact the business to determine future opportunities or threats.

⚫ Definition
⚫ According to William.F.Glueck, “Environmental Scanning consists
of identifying and analyzing environmental influences individually
and collectively to determine their potential effects on an
organization and the consequent problems and threats.”
⚫
 Characteristics of
Environmental Scanning
⚫ Continuous Process- The analysis of the environment is a
continuous process rather than being sporadic. The rapidly
changing environment has to be captured continuously to be on
track.
⚫ Exploratory Process- Scanning is an exploratory process that
keeps monitoring the environment to bring out the possibilities
and unknown dimensions of the future. It stresses the fact that
“What could happen” and not ”What will happen”.
⚫ Dynamic Process- Environmental scanning is not static. It is a
dynamic process and depends on changing situations.
⚫ Holistic View- Environmental Scanning focuses on the
complete view of the environment rather than viewing it
partially.
Components of Environmental
Scanning
⚫ Internal Environmental Components- The
components that lie within the organization are internal
components and changes in these affect the general
performance of the organization. Human resources, capital
resources and technological resources are some of the
internal environmental components.
⚫ External Environmental Components: The
components that fall outside the business organization are
called external environmental components. Although the
components lie outside the organization, they still affect the
organizational activities. The external components can be
divided into micro environmental components and macro
environmental components.
◦ Micro-environmental components include competitors,
consumers, markets, suppliers, organizations, etc.
◦ Macro-environmental components include political, legal,
economical, cultural, demographic and technological factors.
 Techniques of Environmental
Scanning
⚫ SWOT Analysis- SWOT analysis is an acronym for Strengths,
Weaknesses, opportunities and threats analysis of the environment.
Strengths and weaknesses are considered as internal factors whereas
opportunities and threats are external factors. These factors determine
the course of action to ensure the growth of the business.
⚫ PEST Analysis- PEST stands for Political, economic, social and
technological analysis of the environment. It deals with the external
macro-environment.
⚫ ETOP- ETOP stands for the Environmental Threat Opportunity profile. It
helps an organization to analyze the impact of the environment based on
threats and opportunities.
⚫ QUEST- QUEST stands for the Quick Environmental Scanning technique.
This technique is designed to analyze the environment quickly and
inexpensively so that businesses can focus on critical issues that have to be
addressed in a short span.
 Process of Environmental
Analysis
⚫ Scanning- The process of analyzing the environment to spot
the factors that may impact the business is known as
Environmental Scanning. It alerts the enterprise to take suitable
strategic decisions before it reaches a critical situation.
⚫ Monitoring- The data is gathered from various sources and is
utilized to monitor and find out the trends and patterns in the
environment. The main sources of collecting data are spying,
publications talks with customers, suppliers, dealers and
employees.
⚫ Forecasting- The process of estimating future events based
on previously analyzed data is known as environmental
forecasting.
⚫ Assessment- The stage in which the environmental factors
are assessed to identify whether they provide an opportunity
for the business or pose a threat.
Importance of Environmental Scanning
⚫ Goal Accomplishment: The objectives of an organization cannot be fulfilled
unless it adapts itself to the environmental changes. One has to adjust the strategies
to fit in the changing demands of the environment.
⚫ Threats and Weakness Identification: For an organization to grow, it must
minimize its threats and identify the weaknesses. This is made possible with the help
of environmental scanning with which better strategies can be developed.
⚫ Future Forecast: Environmental changes are often unpredictable. An organization
cannot anticipate all the future events but based on the analysis, it can make better
strategic decisions in the future. Hence, environmental analysis helps to forecast the
prospects of the business.
⚫ Market Knowledge: Every organization must be aware of the ongoing changes in
the market. If it fails to incorporate strategic changes due to changing demands, it
will not be able to achieve its objectives.
⚫ Focus on the Customer: Environmental scanning and analysis make an
organization sensitive towards the changing needs and expectations of the customer.
⚫ Opportunities Identification: With the analysis of the current environment an
organization will be able to identify the possible opportunities and take necessary
steps.
 Business Model

A Business Model is a document describing the operations of a business

including the components of the business, the functions, and design.
It is the plan implemented by a company to generate revenue and make a profit
from operations.
Magretta defines Business Model as ‘Stories that explain how enterprises
work’.
A Business Model depicts the content, structure and governance of transactions,
designed so as to create value through exploitation of business opportunities.
A Business Model is the ‘logic’ of the firm, the way it operates and how it
creates value for its stakeholders. A business model is how a company operates
and a strategy is how a company competes. Strategies cannot be formulated
without first understanding the fundamental elements of a business model.

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nmental-appraisal.html
Business Model Canvas Examples
These are some of the biggest and most striking business models because of their disruptive power.
1. Facebook Business Model Canvas Example The Facebook business model is continually changing. The
ecosystem of services has now expanded to include its first major product launch the portal.
Company name: Facebook Inc
Mark Zuckerberg, Eduardo Saverin, Andrew McCollum, Dustin
Founders:
Moskovitz and Chris Hughes.
Annual revenue: 2019: $70.7 Billion

Profit | Net Income: 2019: $18.49 Billion

Market Cap: (April, 2020): $203.9 Billion

Year founded: 2004

Company CEO: Mark Zuckerberg
Headquarters: Menio Park, California, USA
Link: Facebook

Number of employees: (Dec, 2019) 44,942

Type of business: Public

Ticker symbol: FB

Facebook, Instagram, Whatsapp, Oculus,

Products And Facebook Business, Facebook Games,
Services: Facebook Live, Facebook Marketplace,
Facebook Messenger, Facebook Portal