UNDERSTANDING THE BUSINESS

ENVIRONMENT AND THE

MARKET
 BUSINESS ENVIRONMENT

The term Business Environment is composed of two

words business and environment
• The word Business in its economic sense means
human activities like production, extraction or
purchase or sales of goods that are performed for
earning profits.
• Environment refers to the aspects of sorroundings.
 BUSINESS ENVIRONMENT

Business environment may be defined as the set of

external and internal factors which affects the
decisions of business
Comprises of the complex factors, largely if not
totally beyond the control of management in which a
particular enterprise operates.
The firms success and survival is dependent on its
inter-linkages, synergy and its adaptability to the
environment
 Nature of Business Environment

Dynamic
Uncertain
Opportunity & Threat
Internal and External factors
Economic and Non Economic factors
 Business Environment

We can divide business environment into two parts:

Internal Environment
External Environment
Ifluencing Business Environment
 The Micro Environment

These are powers which are deeply related with

company and company can control these type of
environment by improving its capacity and
efficiency
 Micro Environment

Suppliers- are the persons who supply raw materials to

company
Customers- are the persons who buy goods from
company
Market intermediaries- are those person who helps
company to sell its products. (distributor, logistics,
warehouse, ad agencies, market research firm,
consultancy)
Financial intermediaries- are those institutions who
provide loan, credit and advance of company (banks,
agencies)
 Micro Environment

Competitors- are those who also sell same product as

the company (mono/duo/oligopoly/perfect
competition)
Public- is that group of people who can buy or who
can show their interest to buy the products of
company (media, citizen, NGO’s, local public)
 The Macro Environment

Macro environment of business means all external

factors which affects company and its business and
there is no control of company on these factors
 Macro Environment

Demography
• Size of population
• Growth rate
• Family size
• Educational level
• Age composition
• Sex composition
 Macro Environment

Economic- we can introduce economic environment

as all the factors which affect business due to
changing the economic policies, economic system
and economic conditions
(stage of economic cycle, growth rate)
(national income-GDP & GNP, per capita income,
income distribution)
(inflation-CPI,WPI)
 Macro Environment

Geographic, Ecological and Environmental Factors-

everything that affects the natural environment is
considered an environmental or ecological factor.
Some components can be seen, while others are
invisible. Environmental factors include water, air,
climate, natural vegetation and landforms
 Macro Environment

Sociocultural Factor- include consumer’s lifestyles,

buying habits, education, religion, beliefs, values,
demographics, social classes, sexuality and attitudes.
These factors determine the suitability of an
organisation’s products and services for its
customers’ needs.
 Macro Environment

Political Environment- it also affects business with

different business laws. These laws controls all the
activities of business.
(political system (forms of gov’t)-pure democracy,
republic, theocracy, totalitarianism
(political philosophy- LPG, Political stability,
institutions)
(regulations and laws for general)
(code of conduct of business, gov’t.policies)
 Macro Environment

Technological Environment
• Efficiency of infrastructure including; roads, ports,
airports, rolling stock, hospitals, education,
healthcare, communication etc
• Industrial productivity
• New manufacturing processes
• New products and services of competitors
• New products and services of supply chain partners
• Only new technology that could impact the company