Scope of business

Business is what businessmen do & it includes trade, service and

industry
Production, distribution and exchange of goods come within the
scope of business
Business has two aspect, Economic and functional
Production is an economic activity
Finance, manufacturing, marketing, HR, Research & development are
functions of business
Characteristic of business
Economic activity
 Buying and selling
Continuous process
Profit motives
Risk & uncertainties
Creative & dynamic
Customer satisfaction
Social responsibilities
Government control
 Business Environment
 The term business environment means “ the
aggregate of all forces, factors and institutions which
are external to and beyond the control of an individual
business enterprise, but which exercise a significant
influence on the functioning and growth of individual
enterprises”.
Thus, business environment means all those internal and external
factors that have an impact on business
Nature of Business Environment
Aggregative
Interrelated
Dynamic
General and specific forces
Relative
Inter Temporal
Uncertain
Objective of Business Environment
It is very important for business firms to understand their
environment and changes occurring in it
The survival and success of any enterprise depend upon its inherent
capabilities and its ability to adapt to changes
Firms which fail to adapt to environment/changing environment are
unlikely to survive in the long run
Type of Environment
Internal (controllable) External (beyond control of company)
•Vision, mission & objective •Micro - Environment
•Physical facilities •Macro - Environment
•Management structure
•Brand
•Human resources
Micro Macro
•Customer •Political/Govt
•Competitor •legal
•Suppliers •Sociocultural
•Financers •Economic
•Stake holders •Geo physical
•Trade unions •Geo political
 Coping with environmental
changes
 Buffering
- To soften the impact of environment
- Stocking of material
- Preventive maintenance
- Employee training
Anticipation
- Gathering information about probable changes in the environment
- Demand, Changes in customer needs/taste
- Competition
- Technology
- Human resources
Dominating
- Creative approach to environment involves facing the challenges and
converting threats into opportunities
- The organization attempts to control events in the environment and
reduce its dependence on them
- Multiple suppliers, multiple buyers
- Collobrations
Changing
- An organization may change itself, its operations, output,
technology…
- Change product line to meet changes in customer preferences
- Take timely action in response to environmental dynamics
Coalescing
- Entering into JV or merger
- two firms jointly can achieve what individually they can’t achieve
- Synergy
Procuring key personnel
-
Environmental analysis
Business decisions, particularly strategic ones, need a clear
identification of the relevant variables and a detailed and in-depth
analysis of them to understand their impact and implications for the
organization.
The process of environmental analysis may be divided into the
following four stages
• Scanning the environment to detect warning signals
• Monitoring specific environmental trends
• Forecasting the direction of future environmental changes
• Assessing current and future environmental changes for their
organizational implications
Scanning:
• Scanning is the process of analyzing the environment for the identification
of the factors which impact on or have implications for the business
• Identification of emerging/ensuing trends is critical. Focus has to be on
identifying precursors or indicators of potential environmental changes
• Scanning is thus aimed at alerting the organization before it has fully
formed or crystallized, allowing time for suitable actions
• Scanning is exploratory in nature & involves a very wide examination of
environment
Monitoring
• Monitoring is in depth analysis of the relevant environmental trends
(scanned/identified) and follow up
• To assemble sufficient data to discern whether certain pattern are
emerging
Forecasting
• Anticipating the future is essential for identifying the future threats
and opportunities and for formulating suitable strategy
• Direction, scope, speed and intensity of the environmental changes
Assessment
• The purpose of environment analysis is to assess the impact of the
environmental factors on the organization’s business
• It involves assessing their implications, impacts and finding solutions
Identification of relevant Environmental
variables
• The most important step in environmental analysis/forecasting is
identification of the environmental variables critical to the firm.
• All environmental variables do not have the same relevance to all
industries or firms
• It is essential to identify the critical environmental variables and to
predict their future trends
• Environmental analysis makes one aware of the environment -
organization linkage
• It helps in identifying the present and future threats and
opportunities
• Environmental analysis keeps the manager informed, alert and
dynamic
• Environmental analysis is a prerequisite for formulation of right
strategy – corporate, business and functional
Limitations of environmental analysis
• Sometime businesses face unexpected happenings/events
• It does not give any guarantee that all the events as per estimation
will happen
• Sometimes data may be incorrect so estimation on the basis of that
data may be wrong
• It does not eliminate the uncertainty for the organization
• Environmental analysis is not a guarantee for the organization’s
effectiveness
SWOT analysis
SWOT is acronym for strengths, weaknesses, opportunities & threats
• Strengths and weaknesses can be identified by analyzing the internal
environment, opportunities and threats can be identified by analyzing
the external environment
Strength
• Inherent capability
• Can be used to gain advantage over competitor
Weakness
• An inherent limitation or constraints
• Strategic disadvantage
Opportunity
• Opportunity is a favorable condition in the company’s external
environment, which the company can exploit to strengthen its
position
Threat
• An unfavorable condition in the company’s external environment
which may cause a damage or is risky
• SWOT analysis is helpful in the formulation of an effective strategy
that can capitalize on the opportunities and neutralize the threats
faced by the organisation
Mc Kinsey’s 7S Model
• The McKinsey 7S Model is an organizational tool that assesses the
well-being and future success of a company.
• It looks to seven internal factors of an organization as a means of
determining whether a company has the structural support to be
successful.
• The model comprises a mix of hard elements, which are clear-cut and
influenced by management, and soft elements, which are fuzzier and
influenced by corporate culture.
Hard elements
• Strategy
• Structure
• Systems
Soft Elements
• Shared values
• Skills
• Style
• Staff
Strategy
• The strategy is the plan deployed by an organization in order to
remain competitive in the industry and the market. An ideal approach
is to establish a long-term strategy that aligns with the other elements
of the model and clearly communicates what the organization’s
objective and goals are.
Structure
• The structure of the organization is made up of its corporate
hierarchy, the chain of command, and divisional makeup that outlines
how the operations function and interconnect. In effect, it details the
management configuration and responsibilities of workers.
Systems
• Systems of the company refer to the daily procedures, workflow, and
decisions that make up the standard operations within the
organization.
Shared Values
• Shared values are the commonly accepted standards and norms
within the company that both influence and temper the behaviour of
the entire staff and management. This may be detailed in company
guidelines presented to the staff. In practice, shared values relate to
the actual accepted behaviour within the workplace.
Skills
• Skills comprise the talents and capabilities of the organization’s staff
and management, which can determine the types of achievements
and work the company can accomplish. There may come a time when
a company assesses its available skills and decides it must make
changes in order to achieve the goals set forth in its strategy.
Style
Style speaks to the example and approach that management takes in
leading the company, as well as how this influences performance,
productivity, and corporate culture.
Staff
• Staff refers to the personnel of the company, how large the workforce
is, where their motivations reside, as well as how they are trained and
prepared to accomplish the tasks set before them.
• The McKinsey 7-S Model is applicable in a wide variety of situations
where it's useful to understand how the various parts of an
organization work together. It can be used as a tool to make decisions
on future corporate strategy.
• The framework can also be used to examine the likely effects of future
changes in the organization or to align departments and processes
during a merger or acquisition. Elements of the McKinsey Model 7s
can also be used with individual teams or projects.
Business cycle-meaning

• Periods of expansion and contraction in economic activity has been

called business cycles
• The fluctuations in economic activity are recurrent and have been
occurring periodically in a more or less regular fashion. Therefore,
these fluctuations have been called business cycles.
• Calling these fluctuations as ‘cycles’ means they are periodic and
occur regularly, though perfect regularity has not been observed.
Business Cycle
Business cycles have following four phases:

1. Expansion (Boom, Upswing or Prosperity)

2. Peak (Upper turning point)
3. Contraction (Downswing, Recession or Depression)
4. Trough (lower turning point)
•

      
KIRSTEN ROHRS SCHMITT
Features of Business Cycles:
• Business cycles occur periodically. Though they do not show same
regularity
Features of Business Cycles:
• Different business cycles differ in duration and intensity, they have
some common features 
Features of Business Cycles:
• Business cycles are synchronic. That is, they do not cause changes in
any single industry or sector but are of all-embracing character
Features of Business Cycles:
• Fluctuations occur not only in level of production but also
simultaneously in other variables such as employment, investment,
consumption, rate of interest and price level.
Features of Business Cycles:
•  Business cycles are international in character. That is, once started in
one country they spread to other countries through trade relations
between them.