BUSINESS ENVIRONMENT

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WHAT IS A
BUSINESS

• A business can be described as an

organization or enterprising entity that
engages in professional, commercial or
industrial activities.
• There can be different types of businesses
depending on various factors. Some are
for-profit, while some are non-profit.

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• https://www.youtube.com/watch?v=eec0OLOvVMU

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BUSINESS
ENVIRONMENT

• The business environment refers to the set of

external and internal factors that affect the
operation of a business.

• It encompasses a complex web of conditions,

influences, and circumstances within which a
business operates and seeks to achieve its
goals.
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SCOPE

• Micro Environment
• Macro Environment

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COMPONENTS

Internal Environment
• Organizational Culture
• Management and Leadership
• Employees
• Organizational Structure
• Resources

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COMPONENTS

External Environment
• Economic Environment
• Political and Legal Environment
• Socio-cultural Environment
• Technological Environment
• Environmental and Ecological
Factors
• Global Environment

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POLITICAL FACTORS
• Political factors explore to what degree a government can influence,
change, and impact your industry.
• This could be through:
• Foreign trade policy
• Political stability
• Labor laws
• Trade restrictions
• Environmental laws
• Corruption
• Tariffs
• Government policy also impacts areas such as healthcare,
and education so will also need to be taken into consideration if related
to your industry.

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ECONOMIC FACTORS
• These are factors that directly impact the economy’s performance (and
indirectly, your business).
• Some examples are:
• Inflation rates
• Interest rates
• Economic growth
• Unemployment rates
• GDPR
• Median household income
• Stock market trends
• Budget deficit
• Changes or fluctuations to any one of these factors could impact a
company’s purchasing power, product pricing, and market supply
and demand.

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SOCIAL FACTORS
• Social factors focus on the cultural norms, customs, and
values of a specific demographic where a company operates.
• Potential social factors include:
• Education standard
• Cultural trends
• Lifestyle
• Age distribution
• Population growth rates
• Health and safety policies
• Buying habits
• Religion
• Racial equality
• Fully understanding the social environment within which you
operate helps you identify both risks and opportunities
perhaps missed by your competitors.

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TECHNOLOGICAL FACTORS
• Technological factors determine the level of innovation, research, and
development within an industry and the potential impact it could have.
• This could be identified by changes in:
• Mobile technology
• R&D capacity
• Digital technology
• Internet and communication infrastructure
• Manufacturing technology
• Distribution methods
• Levels of automation
• Most businesses tend to focus heavily on the impact of digital
technology. However, while clearly important, development in heavy
industry, manufacturing, and distribution networks shouldn’t be
overlooked either.

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LEGAL FACTORS

• Businesses must be aware of the “laws of the land”

where they operate. It’s also vital to remain abreast of
any upcoming legislation changes and whether or not it
impacts your business.
• Some potential legal factors include:
• Taxation laws
• Consumer protection laws
• Health and safety regulations
• Employment laws
• Copyright and patent laws
• Labor laws
• Data protection laws

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ENVIRONMENTAL
FACTORS
• Finally, you’ll need to look at the potential impact
environmental factors could have on your business.

• With consumers increasingly judging brands against

their CSR (corporate sustainability responsibility)
and the rise of global warming, these factors are
typically ecological, and can include:

• Climate
• Weather
• Ethical product sourcing
• Regional NGO (non-profit organization)
pressure
• Environmental offsets
• Renewable energy availability
• Natural resources

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 MARKET SIZE
TAM – Total Addressable
Market or Total Available
Market
SAM – Serviceable Addressable
Market

SOM – Serviceable Obtainable

Market

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BUSINESS ENVIRONMENT

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HOW TO USE THE
PESTLE
FRAMEWORK

1. Identify the relevant factors

2. Analyze the impact of each factor

3. Develop a plan

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IMPORTANCE
Strategic Planning
Risk Management
Opportunity Identification
Adaptability
Regulatory Compliance
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CONTOURS OF
INDIAN BUSINESS
ENVIRONMENT

• Mixed Economy

• Regulatory Landscape

• Demographic Dividend

• Infrastructure Challenges

• Technological Advancements
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ECONOMIC CONTOURS

• Growing economy
• Monetary policy and inflation
• Demonetization and GST

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SOCIAL AND
DEMOGRAPHIC
CONTOURS
• Rising middle class
• Digital and mobile revolution
• Diversity and regional
variations

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POLITICAL AND
REGULATORY CONTOURS

• Government policies and reforms

• Ease of doing business
• Geopolitical landscape

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TECHNOLOGICAL
CONTOURS

• Startup ecosystem
• Technological advancements
• Cybersecurity concerns

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EMERGING
CHALLENGES AND
OPPORTUNITIES

• Sustainability and environmental

concerns
• Skill gap and talent management
• Social entrepreneurship and
inclusive growth

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