MBA I Semester

MMB703– Business Environment

By
Dr. T. Sowdamini
Assistant Professor
Gitam Institute of Management
Gitam (Deemed to be) University
 UNIT-1
Introduction: The concept of Business
Environment
Significance, nature and scope
Environment Scanning- Interaction between
micro environment and macro environment
SWOT analysis
PESTEL Framework
 Session Plan
Lecturer’s name: Dr T.SOWDAMINI

Date: 15/10/2020

Duration: 1 Hr

Subject/Unit: MMB703– Business Environment

Level: Post-Graduation

Aims of lesson: To create awareness about

Business Environment
Lesson objectives: Understand the meaning and
definition of Business
environment
Resources: Lecture ,ppt ,caselet
 Introduction

A business can be established, but to successfully sustain a

business, the business needs resources like finance, for
which it has to depend on financial institutions.
 Acceptance of social norms, for which it has to depend on
society
 Proper market conditions, for which it has to depend on the
market
 The sale of products/services, for which it has to depend on
the customers. The labour, for which it has to depend on
society.
 Then there are natural resources and raw material, for which
it has to depend on Nature.Also, the legal support of the
government, for which it has to depend on the government.
 There are many factors and dimensions that affect Business
Environment. These factors are many different components of
a single concept called Business Environment
 The term business environment refers to the combination of
various factors and forces which have direct and indirect
influence on the functioning and growth of individual
business. These factors may be internal or external to a
business unit
 According to Keith Davis, “Business environment is
aggregate of all conditions, events and influences that
surround and affect the business”.
 The sum total of all individuals, institutions and other forces
that are outside the control of a business enterprise but the
business still depends upon them as they affect the overall
performance and sustainability of the business.”
 Nature of Business Environment
1.Complex: Business environment is compound in nature.
Environment consists of a number of factors, events, conditions and
influences arising from different sources which impact business thus
making the business complex.
2. Interdependence: The environment of the business is made of
social, economic, legal, cultural, technological, and political factors.
These factors of the environment are inter-dependable.. A rich
country can make sufficient expenditure on the research and
development.
3.Dynamic: Business environment is constantly changing process.
Business environment is dynamic as it keeps on changing in terms of
technological improvement, shifts in consumer preferences or entry of
new competition in the market..
4.Inter-relatedness:The different factors of business environment are
co-related. For example, let us suppose that there is a change in the
import-export policy with the coming of a new government.
5. Impact: Business environment has both long term and short
term impact. Environment therefore has different effects on
different firms in the same industry, for example, drugs.
6.Uncertainty: Business environment is largely uncertain as it
is very difficult to predict future happenings, especially when
environment changes are taking place too frequently as in
the case of information technology or fashion industries.
(COVID-19)
7. Relativity: It is a relative concept since it differs from
country to country and region to region. Political conditions
in the USA, for example differ from those in China or
Pakistan. Similarly, demand for sarees may be fairly high in
India whereas it may be almost non-existent in France.
 Significance of Business Environment

 Customer Focus
 Strategy Formulation
 Public Image
 Change Agent
 Scope
 The Business Environment has a scope that is external to an
individual organization. In that sense ,Business Environment
refers to all external factors, which have a direct or indirect
bearing on business decisions and activities DSTEPIN is the
acronym used to explain the scope of Business Environment
in this sense.
 Environmental analysis is also an important area included in
the scope of Business Environment. Environmental analysis
seeks to bring FIRM – ENVIRONMENT_FIT.
 Hindustan Lever Limited (HLL) took advantage of the new takeover and
merger codes and acquired brands like Kissan from the UB group,
TOMCO (Tata Oil Mills Company) and Lakme from Tata and Modern
Foods from the government, besides many other small takeovers and
mergers.


The new moguls of the Indian business are those who predicted the changes
in the environment and reacted accordingly. Azim Premji of Wipro,
Narayana Murthy of Infosys, Subhash Goyal of ZEE, the Ambanis of
Reliance, L.N. Mittal of Mittal Steel, Sunil Mittal of Bharti Telecom are
some of them.


Even a small businessman who plans to open a small shop as a general

merchant in his town needs to study the environment before deciding where
he wants to open his shop, the products he intend to sell and what brands
he wants to stock
 CASELET
 After completing his MBA from the USA, Mr. Ajay came to
India to start a new business under the banner E-com
Creations Ltd. He launched a new product in e-learning
for senior secondary school students in the commerce
stream which already had an established market in the UK
and the USA but not in India. His business started
flourishing in India. As a result, more Indian companies
entered into the market with other subjects also.
 Identifyand quote the lines from the above paragraph
which highlight the significance of understanding business
environment.
  TYPES OF BUSINESS ENVIRONMENT

I) INTERNAL ENVIRONMENT
 Culture &Value system
 Vision-mission-objectives

 Management structure and nature

 Human resources
 Company image and brand equity
Research and development

II) EXTERNAL ENVIRONMENT

 a) micro environment
 b) macro environment
 INTERNAL ENVIRONMENT
 Culture &Value system: Organizational culture can be viewed as a
system of shared values and beliefs that shape a company' behavioral
norms. A value is an enduring preference for a mode of conduct or an end
- state. The value system of founders has a great and lasting impact on
the value system of organization. Value system not only influences the
operations and behavior it also influences the choice of business ex.
TATA COMPANY
 Vision-mission-objectives: Concepts like vision, mission and objectives
of a company plays a key role in deciding business province, preferences,
course of development, business philosophy, business policy etc.
 Ex. Create economic opportunity for every member of the global
workforce. -VISION STATEMENT-?
 To create a better everyday life for the many people-MISSION
STATEMENT-?
Management structure and nature: Structure is the way in which the
tasks and sub tasks are related. Structure is about the hierarchical
relationship, span of management relationship between different
functional areas. Structure of top management, pattern of share holding
etc.

Human resources :It deals with factors like manpower planning,

recruitment and selection, and development, compensation,
communication, and appraisal . The attributes of the employees like
soft and hard skills, eminence, self-esteem, dedication, attitude and
aptitude etc could add to the strength and weaknesses of an
organisation.

Company image and brand equity : The image of the company have a
say in doing operations like mobilization of finance, materialization of
joint ventures or other alliances, entering purchase or sales contracts,
marshalling raw materials, opening new product lines etc.
Research and development: Good research
activities undertaken by an organization is a
strong internal component that can contribute
to its prosperity as such a venture will
enhance its reputation and can exploit first
mover advantage
Activity www.Menti.com
CODE-5260110
Micro environment
The micro environment consists of the actors in the
company’s immediate environment that affect the
performance of the company. These include the suppliers,
marketing intermediaries, competitors ,consumers and the
publics. PhilipKotler.

 Micro environment is also called Task/ Operatingenvironment

 Factors

1.Suppliers:Suppliers of the raw materials; other inputs and

components to the company. Importance of reliable sources
of supply is always felt by the company .
2. Customers: Monitoring customer sensitivity is very
essential. Customer environment is increasingly becoming
global. Depending on a single customer is too risky.
3. Competitors: A firm’s competitors are “the other firms” and
those who compete for the discretionary income of the
consumers.
4. Marketing intermediaries: Marketing intermediaries
are the firms that aid the company in promoting,
selling and distributing goods to final consumers.
Marketing intermediaries are vital links between the
company and the final consumers. Eg: Hindustan
Unilever faced major challenge when it faced
collective boycott in Kerala on the issue of trade
margin.
5. Financiers: Individual and institutional lenders.
Financing capabilities, their policies and strategies,
attitudes and activity to provide non-financial
assistance are very important.
6. Publics: Publics are the groups, which have actual
interest in the ability of an organization to achieve its
targets. Media publics, NGOs
A macro environment is a set of external conditions
that affect a business’ development efforts either
positively or negatively. These elements are
considered uncontrollable and they have an
impact in the company’s overall performance.
These factors are classified as macro because
they are realities affecting the economic system
as a whole and not just the company’s immediate
market.
Some of these elements are economic growth,
inflation, social conditions, interest rates,
government policies, technological developments
and climate changes, among others.
MACRO ENVIRONEMNT
Factors:
1.Socio-cultural : Socio-cultural environment refers to
influence of the factors which are beyond the capacity. People’s
attitude towards the role of family, marriage, role of women in
the society, cultural aspects in society, the education level of the
people, the ethical issues involved, social responsiveness etc., are
the important components of Business Environment. Australia's
largest airline Qantas, got into an alliance with Dubai-based
airline Emirates . To respect the sensibilities of its alliance
partner, and the Muslim population, pork and alcohol was
banned from all flights to/from Europe
2.Technological:Technology is understood as the application of
scientific knowledge to practical tasks. Technology reaches
people through the business. Technology changes fast.
Businessmen should always be alert to the changed technology.
What production technology and information technology does the
company employ?
How important is each technology to the firm?
 How much have other competitors in the same industry invested
in their technologies?
 Like ROBOTICS, & AI ex.ICICI BANK LOCKER SYSTEM
https://www.youtube.com/watch?v=3CZJ
Vku5ym4
HBR CASE ON TECHNOLOGICAL
INNOVATIONS
3. Economic Environment : Industrial production
agriculture, planning, basic economic philosophy, national
income, per capita income, money supply, price level,
population, savings stages in economic development, trade
cycles are the major economic factors.
Economic environment is also affected by economic policies
of Government. The industrial policy, licensing policy,
monetary policy, fiscal policy, agricultural policy, price
policy, labour policy, and Employment policy, all have
impact on economic Industrial Development.
 Political-legal Environment: This is a non-market factor but it
can still greatly impact a business. The political-legal environment
is a combination of a lot of factors such as the current political
party in power, the degree of politicization of trade and industry,
 There are three main elements of a political-legal environment.
 1] Government: This is why the type of government governing at
the centre and the state has a huge impact on the businesses. The
government decides all the fiscal policies, monetary policies, and
taxation modules as well. So the type of government in power has
a huge impact on the economy and the firms that operate and
compete in the economy. Like for example, the current
government has the Make in India initiative which is good for the
manufacturing sector.
 2] Legal: A sound legal system is essential to the success of any
business. like company law, royalties law, patent law, intellectual
property rights.
 3] Political: Political stability in a country is essential for a stable
economy and stock market. 
5.International: International / global
environment is fast emerging as a force. Due to
liberalization, Indian companies are looking at
business issues from the global angle. Business
responses and managerial practices must be fine-
tuned to survive in the global environment
6.Natural: Industrial/ business activity is
dependent upon nature. Till recently, business
units did not care for ecological effects.
Industries contaminated water and polluted air.
Much environmental damage has been caused by
industry. Natural calamities like floods,
cyclones, earthquakes cause lot of loss to
business units
7.Demographic: Size and growth rate of population, life
expectancy age and sex composition of population, work
participation rate, distribution of population, employment
status, rural-urban distribution of population, education
levels, religion, caste, ethnicity and language. ITC launched
its unique and ambitious programme called e-chaupal,
targeted at the rural market.
 CASELET
Naman and Govind after finishing their graduation under vocational stream
decided to start their own travel agency which will book Rail Tickets and
Air Tickets on commission basis. They also thought of providing tickets
within ten minutes through the use of internet. They discussed the idea with
their Professor Mr. Mehta who liked the idea and suggested them to first
analyze the business environment which consists of investors’, competitors
and other forces like social, political etc. that may affect their business
directly or indirectly. He further told them about the technological
improvements and shifts in consumer preferences that were taking place
and hence they should be aware of the environmental trends and changes
which may hinder their business performance. He emphasized on making
plans keeping in mind the threat posed by the competitors, so that they can
deal with the situation effectively. This alignment of business operations
with the business environment will result in better performance.
 
1. Identify and state the component of business environment highlighted in
the above Para.
2. State any two features of business environment as discussed by
Professor Mehta with Naman and Govind.
 Environmental scanning
 The purpose of the scan is the identification of
opportunities and threats affecting the business for
making strategic business decisions. As a part of the
environmental scanning process, the organization
collects information regarding its environment and
analyzes it to forecast the impact of changes in the
environment. This eventually helps the management
team to make informed decisions
The environmental scanning is a study or activity which helps an
organization to identify the opportunities and threats in its
ecosystem to create new strategies and objectives that improve its
performance in the industry. As a part of the environmental
scanning process, the organization collects information regarding
its environment and analyzes it to forecast the impact of changes
in the environment. This eventually helps the management team
to make informed decisions.
Factors to be Considered for Environmental Scanning
 Events are important and specific occurrences taking place in
different environment sector.
 Trends are the general tendencies or courses of action along
which events takes place.
 Issues are the current concerns that arise in responses to events
and trends.
 Expectations are the demands made by interested groups in the
light of their concern for issues
 Approach’s to environmental scanning
 1. Systematic approach – In this approach information for
environmental scanning is collected systematically. Information
related to markets and customers, change in legislation and
regulations etc. have a direct impact on the business therefore it is
continually monitored for relevant facts. This approach is
beneficial for strategic management and operational activities.
 2. Ad-hoc approach -An organization may conduct a special
survey related to specific environmental issues from time to
time… such studies may be undertaken when an organization has
to take up new projects or update existing strategies. Changes and
unforeseen developments may be investigated which affect the
organization
 3.Processed form approach-The organization under this
approach uses information in a processed form available from
both internal and external environment.eg. Information supplied
by government agencies, private institutions, it uses secondary
data method..
Scanning techniques
 SWOT ANALYIS
 PESTEL ANALYSIS
 INDUSTRY ANALYSIS (Porter’s Five
Forces of Competitive Position
Analysis)
 SWOT ANALYSIS
 It is an important form of business environment analysis, which is accepted
all over the world. A SWOT analysis (alternatively SWOT matrix) is a
configured planning method used to assess the strengths, weaknesses,
opportunities and threats involved in a project or in a business venture.
 It is not feasible for an organization to exploit all the opportunities present
in the environment due to the short of strengths and abilities..
 A firm’s strengths are its resources and abilities that can be used as a
foundation for expanding competitive advantage
 weaknesses include those zones where the firm is not strong. For
instance,high cost structure and inefficient production processes may keep
a firm weak
 Opportunities are the factors which open doors to profitability and
expansion for a firm, and are present in the external environment of a
business
 The vibrant external environment can challenge the prosperity of an
enterprise by throwing threats against it. Such threats include, a new
policy of regulation by government, steeply increasing cost of raw
materials
Merits of SWOT analysis

 It is a source of information for strategic

planning.
 Maximize organization’s response to
opportunities.
 It helps in identifying core competencies of
the firm
 It gives a clear picture of the past, present and
future aspects of the organization.
The Taste of India
 SWOT analysis of
STRENGTHS OPPORTUNITIES
Very high market share in ice cream Export
Excellent brand equity Concentrate more on chocolate
Excellent quality management market
Strong distribution network
Good product portfolio
Strong Supply chain(Amul is known for
the white revolution in India.)
Theme based exclusive Advertisements

WEAKNESS THREATS
Cost of Operations Increasing competition in Ice
Chocolates cream segment(Kwality walls,
Naturals, London dairy, Havmor,
Arun ice cream,)
 PESTLE
 In business PESTLE analysis role is very important. PESTLE
analysis is a useful tool for understanding the “big picture” of the
environment, in which you are operating, and the opportunities and
threats that lie within it A PESTLE analysis is a business
measurement tool, looking at factors external to the organization.
PESTLE MEANS
P----Political
E----Economic
S----Social
T----Technological
L----Legal
E----Environmental

The PESTLE analysis headings are a framework for reviewing a

situation, and can also be used to review a strategy or position,
direction of a company, a marketing proposition, or idea.
ABOUT UBER
CEO Dara Khosrowshahi 
PESTLE Analysis of Uber analyses the
brand on its business tactics. Uber PESTLE
Analysis examines the various external
factors like political, economic, social,
technological (PEST) which impacts its
business along with legal & environmental
factors. The PESTLE Analysis highlights the
different extrinsic scenarios which impact
the business of the brand.
PESTLE analysis is a framework which is
imperative for companies such as Uber, as it
helps to understand market dynamics &
improve its business continuously. PESTLE
analysis is also referred to as PESTEL
analysis.
Here
is
the
PESTLE
analysis
of
Uber
 POLITICAL FACTORS
 Uber has always faced endless debates globally. Most of the
government are worried about the guideline of the sharing
economy.
 Rising of Uber had a troublemaking effect on the business of
traditional taxi services which lead to a rise in disapproval
against them at several stages.
 Even government and law are concerned if they need to make
new commandments for the service providing companies like
Uber.
 Political discussions about drivers being companies
employees, not contractor have led to face a lawsuit in
California, US. And this issue not limited to the US only, Uber
is facing the same issue in South Africa.
 The South African government initiated seizing the uber cars
because the driver didn’t hold a taxi permit.
 Economic Factors
 Sharing economy is based on the physical and intellectual
resources by Uber. The sharing economy has generated
employment for people in large numbers.
 A large number of employment opportunities for drivers was
created by this shared economy in the case of Taxi services. Uber
is also providing taxi services at a lower price which, causing
worry for the other taxi drivers.
 Traditional taxi services had to cut down their rate to remain the
competition. As people would opt for cheaper products and
services in the economic downturn, when it comes to economic
recession uber does not get affected deeply as compared to other
industries.
 The development of Uber has been exceptionally quick even when
they have had a challenge of low prices put up by the normal taxi
drivers maintaining the incredible care they provide.
 Social Factors
 One good thing about Uber is that customers have mostly been
happy about the service provided by them. Smart phones have
made it even easier and friendlier for the people to get a picking
point, pick-up time a, dropping time, even people can track their
routes.
 The price has been less as compared to other taxis and this has
lured many. Awareness has been spreading by ads, social media
and mostly by word of mouth.
 So with all this fame, the prices of the rides have also increased
especially in the urban areas which is good for Uber but not
taken up well by the customers.
 But even after everything clients pick Uber only most of the
times due to its usability. Due to its availability people have been
inclined to Uber greatly.
Technological Factors

 Innovation is at the foundation of everything enormous

in the 21st century and development doesn’t work
without innovation.
 The ride sharing business for Uber has been an incredible
innovation as well as an incredible experience for riders
as well as drivers and this could only have been possible
through the technological advancement and innovation.
 Uber has coordinated a few unique highlights into its
application to give a remarkable encounter. Geolocation
being one of them, message pop-ups being another, Uber
has it all. In this way, innovation is one of the significant
components driving Uber's quick development.
 Legal Factors

 Companies have to abide by the law or else they have to

pay fines and Uber being in the transportation industry,
has great fines if not complied by the laws.
 Uber has been put on a platform where it is being charged
on by the customary administrations about the laws
applied to it.
 It is in legitimate trouble where a driver complained about
low wages being paid to them which has put them in a fix.
The human asset value is being challenged at Uber.
 Thus, In 2015, California state controllers decided that
Uber must regard its drivers as workers and not as
temporary workers. In France as well, Uber was hit with
fines over unlawful driving without appropriate grants.
 Environmental Factors
 Sustainability has been a concern for most of the businesses thus
Uber has also given importance to it. Traffic congestion and fuel
consumption have increase, believed by many.
 But studies haven’t shown an increase in the traffic due to the use
of Uber cabs people may have used Uber instead of public
transport.
 Uber Green has been launched as its pilot project to take
sustainability into consideration. The project takes riders requests
of a green ride at a couple of buttons.
Uber will charge its customers in London an extra 15p per mile on
every trip to help its drivers buy electric cars.
The ride-hailing app hopes to create a £200m fund from the levy to
encourage almost half of its 45,000 drivers to use fully electric
vehicles by 2021. The firm hopes its London fleet will be fully
electric by 2025.
 conclusion
 Uber is a big-shot in the shared economy. It’s known for
its cheapness, ease of use, and controversies. Countries
around the world have been open about whether they
support or don’t support Uber. The company has been
banned and restricted in many parts of the world.

 But its popularity continues to grow. Even when the

prices rise, it still stays competitive against taxis.
Consumers enjoy using the app to book rides and may
even choose it over public transportation because of the
experience. But how much or little the company hurts
the environment requires more investigation
 Industry analysis
 Porter’s Five Forces analysis is a framework that helps analyzing
the level of competition within a certain industry. It is especially
useful when starting a new business or when entering a new
industry sector. According to this framework, competitiveness does
not only come from competitors. Rather, the state of competition in
an industry depends on five basic forces: threat of new entrants,
bargaining power of suppliers, bargaining power of buyers, threat
of substitute products or services, and existing industry rivalry.
 The collective strength of these forces determines the profit
potential of an industry and thus its attractiveness. If the five forces
are intense (e.g. airline industry), almost no company in the
industry earns attractive returns on investments. If the forces are
mild however (e.g. soft drink industry), there is room for higher
returns. Each force will be elaborated on below with the aid of
examples from the airline industry to illustrate the usage.
The Five Forces of Competition
Threat of new entrants
 New entrants in an industry bring new capacity and the desire to
gain market share. The seriousness of the threat depends on the
barriers to enter a certain industry. The higher these barriers to
entry, the smaller the threat for existing players. Examples of
barriers to entry are the need for economies of scale, high
customer loyalty for existing brands, large capital requirements
(e.g. large investments in marketing or R&D), the need for
cumulative experience, government policies, and limited access
to distribution.
 Example
 The threat of new entrants in the airline industry can be
considered as low to medium. It takes quite some upfront
investments to start an airline company (e.g. purchasing
aircrafts). Moreover, new entrants need licenses, insurances,
distribution channels and other qualifications that are not easy to
obtain when you are new to the industry (e.g. access to flight
routes).
Bargaining power of suppliers
 This force analyzes how much power and control a company’s supplier
(also known as the market of inputs) has over the potential to raise its
prices or to reduce the quality of purchased goods or services, which in
turn would lower an industry’s profitability potential. The concentration
of suppliers and the availability of substitute suppliers are important
factors in determining supplier power. The fewer there are, the more
power they have. Businesses are in a better position when there are a
multitude of suppliers. Sources of supplier power also include the
switching costs of companies in the industry, the presence of available
substitutes, the strength of their distribution channels and the uniqueness
or level of differentiation in the product or service the supplier is
delivering.
Example
The bargaining power of suppliers in the airline industry can be
considered very high. When looking at the major inputs that airline
companies need, we see that they are especially dependent on fuel and
aircrafts. These inputs however are very much affected by the external
environment over which the airline companies themselves have little
control.
Bargaining power of buyers
 The bargaining power of buyers is also described as the market of
outputs. This force analyzes to what extent the customers are able to
put the company under pressure, which also affects the customer’s
sensitivity to price changes. The customers have a lot of power when
there aren’t many of them and when the customers have many
alternatives to buy from. Moreover, it should be easy for them to
switch from one company to another. Buying power is low however
when customers purchase products in small amounts, act
independently and when the seller’s product is very different from
any of its competitors. The internet has allowed customers to become
more informed and therefore more empowered. Customers can easily
compare prices online, get information about a wide variety of
products and get access to offers from other companies instantly. 
 Example
 Bargaining power of buyers in the airline industry is high. Customers
are able to check prices of different airline companies fast through the
many online price comparisons websites such as clear trip, goibibo
,and Expedia,skyscanner
Threat of substitute products
 The existence of products outside of the realm of the common
product boundaries increases the propensity of customers to
switch to alternatives. In order to discover these alternatives one
should look beyond similar products that are branded differently
by competitors. Instead, every product that serves a similar need
for customers should be taken into account. This will ultimately
affect an industry’s profitability and should therefore also be
taken into account when evaluating the industry’s attractiveness.
 Example
 In terms of the airline industry, it can be said that the general need
of its customers is traveling. It may be clear that there are many
alternatives for traveling besides going by airplane. Depending on
the urgency and distance, customers could take the train or go by
car. future competition from Elon Musk’s Hyperloop concept in
which passengers will be traveling in capsules through a vacuum
tube reaching speed limits of 1200 km/h
Rivalry among existing competitors
 This last force of the Porter’s Five Forces examines how intense the
current competition is in the marketplace, which is determined by the
number of existing competitors and what each competitor is capable of
doing. Rivalry is high when there are a lot of competitors that are
roughly equal in size and power, when the industry is growing slowly
and when consumers can easily switch to a competitors offering for
little cost. A good indicator of competitive rivalry is the concentration
ratio of an industry. The lower this ratio, the more intense rivalry will
probably be. When rivalry is high, competitors are likely to actively
engage in advertising and price wars, which can hurt a business’s
bottom line. In addition, rivalry will be more intense when barriers to
exit are high, forcing companies to remain in the industry even though
profit margins are declining.
 Example
 When looking at the airline industry in the United States, we see that the
industry is extremely competitive because of a number of reasons which
include the entry of low cost carriers, the tight regulation of the industry
wherein safety become paramount leading to high fixed costs and high
barriers to exit, and the fact that the industry is very stagnant in terms of
growth at the moment.
 Process of Environmental Analysis

 Environmental analysis is a challenging, time-consuming and

expensive affair. The analysis consists of four sequential steps: (i)
scanning, (ii) monitoring, (iii) forecasting, and (iv) assessment
 Scanning - Being the first step in the process of environmental
analysis, scanning involves general surveillance of all
environmental factors and their interactions in order to
 (a) identify early signals of possible environmental change, and
 (b) detect environmental change already under way
 Monitoring - Monitoring involves tracking the environmental
trends, sequences of events, or streams of activities Three
outcomes emerge out of monitoring:
 (a) a specific description of environmental trends and patterns to
be forecast;
 (b) the identification of trends for further monitoring, and
 (c) the identification of areas for further scanning. These outputs
(particularly the first) become inputs for forecasting
Forecasting: Forecasting is concerned with
developing plausible projections of the
direction, scope, and intensity of
environmental change. It tries to draw a
layout for the evolutionary path of anticipated
change. For example, how long will it take
the new technology to reach the marketplace?
Are current lifestyle trends likely to continue?
Assessment: Assessment involves identifying
and evaluating how and why current and
projected environmental changes affect or
will affect strategic management of the
organization.
Relation between internal and external environments
 Business decisions are dependent on the influence of external factors.
 Socio-cultural environment exerts considerable influence on business
activities. The variety of goods purchased, the type of people it gets and
its social obligation depends on the cultural environment in which the
firm operates.
 Technological factors exercise considerable influence on business.
Businessmen always alert to the changed technology. Technology
reaches people through the business.
 Global environment is fast emerging as a force. Business-responses and
managerial practices must be fine-tuned to survive global environment.
 Internal and external environment pose threat to business and provide
immense opportunities for market exploitation. The business enterprise
formulates effective strategies to combat threats posed by the external
environment.
 Business decisions in general and strategies in particular are moulded by
the business environment. External factors like economic, political,
regulatory, social, demographic, technological and natural factors of
resources, internal power relationships decide the strengths and
weaknesses of the firm.
 conclusion
 So it is quite obvious that success in a business depends
upon better understanding of the environment. A successful
organization doesn't look at the environment on an ad hoc
basis but develops a system to study the environment on a
continuous basis to try and protect the organization from
every possible threat and to take the advantage of every
opportunity. Some times better and timely understanding
of the environment can even turn a threat into an
opportunity.
 The relation between a business and an environment is not
a one way affair. The business also equally influences the
external environment and can bring about changes in it.
Powerful business
lobbies for instance, actively work towards changing
government policies.
 Assignment for unit-1

 Presentation team based (12 mnts,3mnts

Q&A)
 SWOT analysis (2 Teams)
 PESTEL analysis (2 Teams)
 Porter Five forces model(Industry analysis) (2Teams)