The Business Environment

Meaning, Concept, Significance & Nature

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Business Environment
The factors and forces outside business/marketing that affect marketing managements ability to develop and maintain successful transactions and relationships with its target customers.

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INTRODUCTION
Business enterprises cannot function in isolation y Open systems interact with their environment y Business enterprises exist in and are surrounded by an environment.
y

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INTRODUCTION
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Society and business enterprises are mutually dependent

Business enterprises satisfy societal needs

Relationship between society and business enterprises takes place in a changing environment

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COMPONENTS OF THE BUSINESS ENVIRONMENT

Different environmental variables exist internally and externally to the business enterprise y Environmental variables have a positive or negative influence on the enterprise
y

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COMPONENTS OF THE BUSINESS ENVIRONMENT

y

Business environment consists of two subenvironments:

Internal (micro) environment External environment
x Market environment x Macro environment

Mutual relationships exist between these environments

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Significance of Commercial Environment

y y y y y y y

First Mover Advantage Warning Signals Sensitize the Management Basis of Strategy Source of intellectual Simulation Image Building Continuous Learning

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The Companys Micro Environment

In designing business/marketing plans, marketing management must take other company groups, such as top management, finance, research and development (R&D), purchasing, manufacturing and accounting, into consideration.
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The Company In designing business/marketing plans, marketing management must take other company groups, such as top management, finance, research and development (R&D), purchasing, manufacturing and accounting, into consideration. Suppliers Firms and individuals that provide the resources needed by the company and its competitors to produce goods and services.

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Marketing Intermediaries Firms that help the company to promote, sell and distribute its goods to final buyers; they include physical distribution firms, marketing-service agencies and financial intermediaries. Resellers The individuals and organizations that buy goods and services to resell at a profit. Physical distribution firms warehouse, transportation and other firms that help a company to stock and move goods from their point of origin to their destinations.

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Financial intermediaries Banks, credit companies and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods. Customers y The company must study its customer markets closely and keep up to date with changing customer requirements. y The company must communicate with its customers, and must listen to them closely.

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Competitors
The marketing concept states that, to be successful, a company must provide greater customer value and satisfaction than its competitors.Thus, marketers must do more than simply adapt to the needs of target consumers. They must also gain strategic advantage by positioning their offerings strongly against competitors offerings in the minds of consumers.They must strive to anticipate competitor activity and strategy.

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Publics Any group that has an actual or potential interest in or impact on an organizations ability to achieve its objectives.
Financial publics: Influence the companys ability to obtain funds. Banks, investment houses and stockholders are the principal financial publics. Media publics:Are those that carry news, features and editorial opinion. They include newspapers, magazines and radio and television stations. Government publics: Management must take government developments into account. Marketers must often consult the companys lawyers on issues of product safety, truth in advertising and other matters.

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Publics y Citizen action publics A companys marketing decisions may be questioned by consumer organizations, environmental groups, minority groups and other pressure groups. y Local publics Every company has local publics, such as neighborhood residents and community organizations. y General public A company needs to be concerned about the general publics attitude towards its products and activities. The public image of the company affects its buying. y Internal publics A companys internal publics include its workers, managers, volunteers and the board of directors.
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The Companys MacroMacroEnvironment

The larger societal forces that affect the whole microenvironment - demographic, economic, natural, technological, political and cultural forces.

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The External Environment

Environment
Economic Industry Environment Threat of new entrants Power of suppliers Power of buyers Product substitutes Intensity of rivalry Competitor Environment

Technological

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General Environment
y

Sociocultural Segment
     

Women in the workplace Workforce diversity Attitudes about quality of worklife Concerns about environment Shifts in work and career preferences Shifts in product and service preferences

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General Environment
 Economic
   

segment

Inflation rates Interest rates Trade deficits or surpluses Budget deficits or surpluses  Personal savings rate  Business savings rates  Gross domestic product

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General Environment
y

Political/Legal Segment
    

Antitrust laws Taxation laws Deregulation philosophies Labor training laws Educational philosophies and policies

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General Environment
 Technological
  

Segment

Product innovations Applications of knowledge Focus of private and government-supported governmentR&D expenditures  New communication technologies

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General Environment
y

Global Segment
   

Important political events Critical global markets Newly industrialize countries Different cultural and institutional attributes

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General Environment
 Demographic
  

Segment

Population size Age structure Geographic distribution  Ethnic mix  Income distribution

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