BUSINESS ENVIRONMENT UNIT 1

Meaning of Business Environment Consist of all those factors that have a bearing on the business. Environment refer to all external forces which have a bearing on the functioning of business The survival and success of a business firm depends on its innate strength resources at its command, including physical resources, financial resources, human resources, skill & organization & its adaptability to the environment and the extent to which the environment is favorable to the development of the org. The survival and success of a firm, thus, depends on two sets of factors viz the internal factors the internal environment and the external factors the external environment

Internal Environment

Business Decision

External Environment

Characteristics of Contemporary Business

Transition

Competition

Information

Business

Opportunities

Technology

Globalization

Business Objectives

Business Decisions

Business Internal Factors

Business External Factors

Nature of Business Environment Direct relationship with the policy of business enterprise Impose several constraints on the enterprise income, supply and demand, price of products, fashion taste and preference, habit, season, government policies, rules and regulation, competitors strategy. The success of an enterprise depends to a very large extent on its adaptability to the environment. Shape opportunities and possess threats to the company. It changes frequently and affect the business of any organization

Significance of BE

To develop its broad strategies and long term policies

To analyze its competitors strategies and thereby formulate effective counter strategies.

To keep organization dynamic in approach.

To for see the impact of the socio economic changes at the national and international level on its stability.

To make the executives to adjust to the prevailing conditions and thus influence the environment in order to make it congenial to the business. Development of action plans to deal with technological advancements.

Scope and its relevance to Business Decision Making

To understand current and potential changes taking place in the task environment Provide inputs for strategic decision making. Facilitate and foster strategic thinking in organization

Challenging the current wisdom by bringing fresh view points into the organization.

The interaction Matrix of different environmental factors Micro Environment Customers Public Competitors Suppliers Marketing Intermediaries

Macro Environment Economic Environment Political Environment Socio Cultural Environment Natural Environment Global Environment Technological Environment

Environmental Analysis It is tracing of an opportunity or threat to its source. It involves breaking a whole into its parts to find its nature, function and relationship EA and diagnosis give strategists time to anticipate opportunities and to plan to take optional responses to these opportunities. It also helps strategists to develop an early warning system to prevent threats or to develop strategies which can turn a threat to the firms advantage.

Need for EA Due to constant change in environmental factors To cope up with recent changes in relation to production of goods and services. Opportunities and Threats Provide necessary and very useful picture of the important factors which influence the business Technological Forecasting Contribution in identification of risk Formulation of right strategies Modification in strategies Managers informed alert and often dynamic

Limitation of EA

Fails to for see future accurately Does not guarantee organizational effectiveness Potential of EA is often not realized because of how it is practiced Too much reliance on analysis makes a manager become complacent

Process of Environmental Scanning Environmental Analysis

Strategy Formulation

Strategy Implementation

Further Analysis for change evaluation and control

Process of Environmental Analysis Scanning Monitoring Forecasting Assessment

Basic Philosophies of Capitalism and Socialism Capitalism Stress the basic concept and philosophy of individualism believing in private ownership. Socialism - Here the tools of production are to be organized, managed and owned by the government with the benefits accruing to the public