Business Environment

Session 2
Market Environment Vs Non-Market
Environment

Veena Keshav Pailwar

Professor
IMT Nagpur

Veena Keshav Pailwar 1

 Components of Business Environment

Market • Consists of Micro Economic Environment

(market structures)

Environm • Firms, suppliers and customers are the

participants
• Interactions among the participants is
governed by the market forces.

ent
• Consists of

Non-
• Macro-economic environment & Non-
economic environment
• Encompasses interactions between the firm

Market
and individuals or citizens, interest groups like
NGOs, Activists, Media, government, regulators
and the public
• Interaction among the participants are

Environme •
intermediated by public and private
institutions.
Activities in the non-market environment may

nt •
be voluntary or involuntary
Non-market environment is complex because
of the interaction among a large number of
participants
 Types of Economic Systems and Analysis

Planned (Non-market)
Market Economies Mixed Economies
Economies

* Analysis of the * Both market and * Analysis of the

market non-market analysis non-market
environment is is essential environment is
essential and * An Integrative essential and
sufficient approach is needed sufficient
 A Reading on the Automobile sector in India

On road to clean energy, auto sector eyes

election boost to sales
https://
economictimes.indiatimes.com/industry/auto/a
uto-news/on-road-to-clean-energy-auto-sector-
eyes-election-year-boost-to-sales/articleshow/6
7226698.cms?from=mdr

Identify the constituents of Non-market

environment for Maruti in this reading
 Non-Market Environment
Illustration: Maruti

• Constituents of Non-market environment for

Maruti:
– Ecological Environment: Pollution and Climate Change
– Legal Environment: Changes in government policies: :
BS-VI, FAME-II, Supreme Court Ruling on phase of old
vehicles,
– Technological Environment: Electrical vehicle
technology, clean energy technology
– Economic Environment: increase in i.r., fuel prices,
insurance cost, tight liquidity situation
– Political Environment: general election
 Why Study the Non-Market Environment?

• The non-market environment can influence the

market environment and shape business
opportunities (e.g.: changes in technological
environment led to launch of EVs in the market)

• The market environment can also influence the non-

market environment: It determines the significance
of non-market environment/ issues to the firm (e.g.:
large scale manufacturing of conventional vehicles
leading to high level of pollution)
Interrelationship between the market and the non-
market environment
Market environment Non-market environment
The market environment
determines the significance of
non-market issues to the firm

Managers

The nonmarket environment

shapes the business
opportunities in the market
place
 Why Study the Non-Market Environment?
Illustration: Maruti
• Market environment:
– Huge demand exists for Maruti’s Petrol & Deiseal cars:
Maruti is the leader in personal car market segment
– To keep the cost of running the car low, cars with petrol
and deiseal need to be manufactured
– Market activity, i.e., excessive customer centric approach
leading to increasing carbon footprints and climate
damage. Thus, the market environment or strategy has
an impact on the non-market environment .
• Non-market environment:
- Changes in the legal environment is forcing Maruti to
rethink/ redesign its market strategy.
 Frameworks for Analyzing the Business Environment

Market Environment/ Non-Market Environment

Micro-economic Environment
• Porter’s Five Forces • PESTEL Framework
– Threat of New Entrants – Political, Economic, Social,
– Threat of Substitutes Technological, Ecological & Legal
– Bargaining Power of Buyers environment
– Bargaining Power of Suppliers • David Baron’s 4I’s Framework
– Rivalry Among Existing Competitors – Issues
• BCG Matrix – Interests
⁻ Growth – Institutions
⁻ Share – Information
• Five C Framework • David Bach’s (IA)3 Framework
– Company (competitive Adv/ Assets) – Issues
– Collaborators (in supply chain) – Actors
– Customers – Interests
– Competitors – Arena
– Context – Information
– Assets
 (IA)3 Framework
Constituents (IA)3 Non-market Environment Market Environment

Issue: topic/problem/ Threats from new regulations, Threats from substitutes, established
challenge/ threat to legislation, proposed laws, court rivals, potential new entrants,
profit or opportunities judgment, public sentiments, protest, bargaining power of suppliers and
Basic unit of analysis etc. bargaining power of customers

Actors: are the parties Regulators, Govt., Citizens, NGOs, Customers, Suppliers and
who care about the issue Activists, Media, etc. Competitors
Interests: goals/ Fairness, equal opportunities, harmony, Profit, revenue, market share, or any
objectives/motives of the inclusion, sustainability, data privacy, etc. other aspect of business.
actors

Arena: The platform Regulators, legislation, courts, and other Market

where the actors meet or public Institutions; private institutions
the decision makers such as media, public advocacy groups,
NGOs, public sentiments; and
international organizations like WTO

Information: Beliefes and State research, media publications, Market research, advertisement
knowledge of the actors prejudices, rumors, reports, opinions
or interests

Assets/ Liabilities: Reputation, trustworthiness, knowledge Resources, Brand image, patents

Resources available with of committee procedures, broad network
the actors of contracts, ability to mobilize
coalitions/ association with controversial
groups
 Market Environment Vs Non-Market Environment
(IA)3 analysis from the perspective of conventional automobile manufacturers (Maruti)
(IA)3 Market Environment Non-market Environment
Issues: topic/problem/ Threats from rising oil Threat from better fuel efficiency norms
challenge/ threat to prices Threat from pollution tax
profit or opportunities Threat from electric Opportunities from technological
vehicle manufacturers advancement in vehicle manufacturing
Actors: The agents that Consumers, Suppliers Individuals or Citizens, NGOs, government
care for the issue and Competitors
Interests: goals or profit from vehicle Environment sustainability
motives of actors; they manufacturing
can be conflicting
Institutions: decision Market Pollution control board
takers and the Government
platforms where United Nations Framework Convention on
decisions are taken Climate Change
Automobile manufacturers’ Association (in
India-Society of Indian Automobile
Manufacturers)
Information: Believes Market research, State research and media, prejudices,
and knowledge of the advertisement rumors, reports
actors or interests
Assets/ Liability: Huge monetary Strong network with politicians and
Resources available resources, brand value, influence on strong automobile association-
with the actors Patent SIAM (Society of Indian Automobile