In the name of ALLAH the most beneficent & the most merciful

MBA HR Semester spring 2011 Financial management Assignment 2

The business environment of Pakistan. Give a comprehensive theoretical background of the topic and then analyze its practical application in any private organization.

Contents
Introduction Mean of business environment Classification of Business environment Internal Environment External Environment Characteristics Business environment of Pakistan Practical study Swot analysis Conclusion & recommendations References

Introduction
What is business environment? Meaning: - The term Business Environment is composed of two words Business and Environment. In simple terms, the state in which a person remains busy is known as Business. 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. On the other hand, the word Environment refers to the aspects of surroundings. Therefore, Business Environment may be defined as a set of conditions Social, Legal, Economical, Political or Institutional that are uncontrollable in nature and affects the functioning of organization. Business Environment has two components: 1. Internal Environment 2. External Environment Internal Environment: It includes 5 Ms i.e. man, material, money, machinery and management, usually within the control of business. Business can make changes in these factors according to the change in the functioning of enterprise. External Environment: Those factors which are beyond the control of business enterprise are included in external environment. These factors are: Government and Legal factors, Geo-Physical Factors, Political Factors, Socio-Cultural Factors, Demo-Graphical factors etc. It is of two Types:

1. Micro/Operating Environment 2. Macro/General Environment

Micro/Operating Environment: The environment which is close to business and affects its capacity to work is known as Micro or Operating Environment. It consists of Suppliers, Customers, Market Intermediaries, Competitors and Public. (1) Suppliers: They are the persons who supply raw material and required components to the company. They must be reliable and business must have multiple suppliers i.e. they should not depend upon only one supplier. (2) Customers: - Customers are regarded as the king of the market. Success of every business depends upon the level of their customers satisfaction. Types of Customers: (i) Wholesalers (ii) Retailers (iii) Industries (iv) Government and Other Institutions (v) Foreigners (3) Market Intermediaries: - They work as a link between business and final consumers. Types:(i) Middleman (ii) Marketing Agencies (iii) Financial Intermediaries (iv) Physical Intermediaries (4) Competitors: - Every move of the competitors affects the business. Business has to adjust itself according to the strategies of the Competitors.

(5) Public: - Any group who has actual interest in business enterprise is termed as public e.g. media and local public. They may be the users or non-users of the product.

Macro/General Environment: It includes factors that create opportunities and threats to business units. Following are the elements of Macro Environment: (1) Economic Environment: - It is very complex and dynamic in nature that keeps on changing with the change in policies or political situations. It has three elements:
Economic Conditions of Public Economic Policies of the country

Economic System Other Economic Factors Infrastructural Facilities, Banking, Insurance companies, money markets, Capital markets etc. (2) Non-Economic Environment: - Following are included in noneconomic environment:(i) Political Environment: - It affects different business units extensively. Components: (a) Political Belief of Government (b) Political Strength of the Country (c) Relation with other countries

(d) Defense and Military Policies (e) Centre State Relationship in the Country (f) Thinking Opposition Parties towards Business Unit (ii) Socio-Cultural Environment: - Influence exercised by social and cultural factors, not within the control of business, is known as SocioCultural Environment. These factors include: attitude of people to work, family system, caste system, religion, education, marriage etc.

(iii) Technological Environment: A systematic application of scientific knowledge to practical task is known as technology. Everyday there has been vast changes in products, services, lifestyles and living conditions, these changes must be analyzed by every business unit and should adapt these changes. (iv) Natural Environment: It includes natural resources, weather, climatic conditions, port facilities, topographical factors such as soil, sea, rivers, rainfall etc. Every business unit must look for these factors before choosing the location for their business. (v) Demographic environment:It is a study of perspective of population i.e. its size, standard of living, growth rate, age-sex composition, family size, income level (upper level, middle level and lower level), education level etc. Every business unit must see these features of population and recognize their various needs and produce accordingly. (vi) International environment: -

It is particularly important for industries directly depending on import or exports. The factors that affect the business are: Globalization, Liberalization, foreign business policies, cultural exchange.

Characteristics of Business Entrepreneur deals in goods and services involve production or exchange of goods series of deals desire to earn profit involves element of risks creation of utilities

"Business may be defined as human activities directed towards providing or acquiring wealth through buying and selling goods". This definition includes activities relating to the production of goods. A vital omission is 'services'. Business includes rendering of services also. The main characteristics of business are; 1. Entrepreneur: - There must be someone to take initiate for establishing a business. The person who recognizes the need for a product or service is known as entrepreneur. The entrepreneur is a key figure in the process of economic growth. The quality of entrepreneurship exiting in any region determines to a large growth. The quality of entrepreneurship existing in any region determines to a large extent the development of that region. The entrepreneur visualizes a business, combines various factors of production and puts them into a going concern. 2. Economic Activities: - A Business includes only economic activities. All those activities relating to the production and distribution of goods and services are called economic activities. These activities

are under-taken with economic motive. Business is carried on with a profit motive. Any activity undertaken without economic consideration will not be a part business. So, business covers only economic activities.

3. Exchange of Goods and Services: A business must involve exchange of goods and services. The goods to be exchanged my either be produced or procured from other sources. The exchange of goods and services is undertaken with profit motive. Production or purchasing of goods and services for personal consumption do not constitute business. The purchase of goods by a retailer constitutes business while the purchase of goods by a consumer is not business. The purchase of goods should be to sell them again. The same principle is applicable to services. If a person cooks his food at home it is not business, but if the same person cook at a restaurant, it is business, because he exchange his services for money. 4. Profit Motive: - The profit motive is an important element of business. Any activity undertaken without profit motive is not business. A businessman tries to earn more and more profits out of his business activities. The incentive for earning profits keeps a person in business and is also necessary for the continuity of the business. This does not mean that there will not be losses in business. The object of starting a business is to earn profit through there may be losses. The profit motive does not entitle a businessman to start exploiting the consumers. The responsibility of business towards society restricts a businessman from earning exorbitant profit. The business activity will flourish more when the business serves the society. 5. Risk and Uncertainty: - The business involves larger element of risk and uncertainty. In fact a business tries to foresee any future uncertainties and plan his business activities accordingly. The factors on which business depends are never certain, so the business

opportunities will also be uncertain. These may be shift in demand, strike by employees, floods, war, fall in prices, fluctuations in money market etc. If a businessman is able to foresee uncertainties and is able to bear them then he will successful, otherwise he may be forced out of business. The risk element in business keeps a person vigilant and he tries to ward off his risk by executing his policies properly.

6. Continuity of Transactions:In business, only those transactions are included which have regularity and continuity. An isolated transaction will not be called business, even if the person earns from that deal. A person builds a house for himself, but later on sells it on profit. We will not sell them, this will be called business. So the transactions should have continuity and regularity, otherwise they will not be a part of business. 7. Creation of Utility:The goods are provided to the consumers s per their linkings and requirements. Business crates various types of utilities ion goods so that consumers may use them. The utility may be form utility, place utility, time utility etc. When raw materials are converted into finished goods, it creates from utility. The goods are transported from the places of production to the ultimate consumers; it creates place utility. In the present industrial world, production is not done only for the present but it is undertaken for the future also. The process of storing goods when they are not required and supplying them at a time when they are needed is called creation of time utility. So the business creates many utilities in goods so that the consumers may use them according to their preferences and needs 8. Organization:Every enterprise needs an organization for its successful working. Various business activities are divided into departments, sections, and jobs. An organization creates the framework for managerial performance and helps in coordinating various business activities. A proper organization is helpful in the

smooth running of the business and helps to achieve its objectives.

9. Financing:Business enterprises cannot move a step without finance. The finances are required for providing fixed and working capital. The availability of other factors of production also depends upon the availability of finances. After estimating its financial requirements, the businessman tries to find out the sources from which these requirements will be met. A proper capital structure is must for the success of the business. 10. Consumer Satisfaction:The utilities of business are to supply goods to the consumers. The foods are produced for the consumers. If the consumer is satisfied, then he will purchase the same thing again, otherwise he will for in for an alternative commodity. The business should try to satisfy the consumer so that the demand for his products is maintained. The existence and expansion of business depends upon the liking of the consumers for the products of that business. The businessman should try to produce goods according to the linkings and tastes of consumers. The commodities should be made available when they are needed. Business and consumers exist for each other. 11. Satisfying Social Need:The business should aim at serving the society at large. The business is a socio-economic institution. It must look to the public good. A great emphasis is laid, now-a-days, on the social aspect of business and social obligations of business. It is not

only the public which needs business but business also needs public support. S business must serve public purpose.

Business environment of Pakistan

Region: South Asia Income category: Lower middle income Population: 169,708,303 (2011) GNI per capital (US$): 1,020 Pakistan has suffered from decades of political instability and low levels of foreign investment. However, the IMF-approved government policies, foreign assistance and renewed access to global markets since 2001, have generated a solid macroeconomic recovery. The Pakistan government has made substantial macroeconomic reforms since 2000, although progress on more politically sensitive reforms has slowed. While long-term prospects still remain uncertain (given Pakistan's general low level of development), medium-term prospects for job creation and poverty reduction are the best in more than a decade. GDP growth, spurred by double-digit gains in industrial production over the past years, has become less dependent on agriculture. In the near term it has been doubted that growth can be sustained at the 7% level; however, massive international aid (the World Bank and Asian Development Bank announced that they would provide US $1 billion each in aid To help Pakistan rebuild areas hit by the October 2005 earthquake in Kashmir, in Spring 2006 World Bank announced of increased aid totaling 1.5 billion per year over 3 years + 2 billion in infrastructure development), increased government

spending, lower taxes, and pay increases for government workers will help Pakistan maintain strong GDP growth over the longer term. In 2004-2005 Pakistans economy extended its impressive expansion for the third year in a row, with economic Growth reaching its highest annual rate of 8.4 per cent in two decades. Pakistan positioned itself as the second fastest growing economy after China. Pakistan witnessed the largest ever expansion of private sector credit, the Countrys public and external debt burden declined to their lowest in decades.

Pakistans overall Doing Business 2011 ranking is 83, recording a decline of 8 positions from last year. Indeed, Pakistan made registering property more expensive by doubling the capital value tax to 4%, and Pakistan reduced the time to export by improving electronic communication between the Karachi Port authorities and the private terminals, which have also boosted efficiency by introducing new equipment. According to the latest Enterprise Surveys (2007), Electricity and Corruption represent the main constraints to firm investment in Pakistan. As regards to Lack of Electricity, Pakistani firms reported an average of 33.90 electrical outages in a typical month, compared to 42.18 for the region. Pakistans economic freedom score is 55.1, making its economy the 123rd freest out of 183 countries in the 2011 Index. Its score is 0.1 point lower than last year, with declines in freedom from corruption and labor freedom offsetting a gain in investment freedom. Pakistan is ranked 24th out of 41 countries in the AsiaPacific region, and its overall score is below the world and regional averages. Pakistan has pursued reforms to improve its entrepreneurial environment and facilitate privatesector development. The financial sector has undergone modernization and restructuring and has weathered the global

financial crisis relatively well. However, progress lags significantly behind other countries in the region. Business is easiest in Faisalabad. Meanwhile, Islamabad and Peshawar were first and second, respectively, on starting a business, while Sukkur stood first in terms of enforcing contract

Sub national Doing Business Report Doing Business in Pakistan 2010 compares the regulatory environment for business in 13 Pakistani cities. The report focuses on 6 stages of the life of a small to medium-size domestic enterprise: starting a business, dealing with construction permits, registering property, paying taxes, enforcing contracts, and trading across borders. Doing Business in Pakistan 2010, the first sub national Doing Business report on Pakistan, found that provincial and municipal level reforms of business regulation in Pakistan complement nationwide reforms. Consistent reformers outperformed others, but no single city did well on all the indicators measured. Each of the 13 cities benchmarked in the report could learn from each others best practices. Main Findings If a city in Pakistan adopted all existing best practices in the 6 areas covered by the report, it would rank 69th out of 183 economies16 places ahead of Pakistans position in Doing Business 2010.

Overall, business is easiest in Faisalabad. Meanwhile, Islamabad and Peshawar were first and second, respectively, on starting a business, while Sukkur stood first in terms of enforcing contracts.

Practical study Pizza hut

Introduction
Pizza Hut (corporately known as Pizza Hut, Inc.) is an American restaurant chain and international franchise that offers different styles of pizza along with side dishes including pasta, buffalo wings, breadsticks, and garlic bread. Pizza Hut is a subsidiary of Yum! Brands, Inc., the world's largest restaurant company. According to its corporate website, there are more than 6,000 Pizza Hut restaurants in the United States, and more than 5,600 store locations in 94 other countries and territories around the world. In 1958, Frank and Dan Carney had an idea for a great local pizza restaurant in Wichita Kansas. The small 25 seat restaurant only had room for 9 letters on the sign the building looked like a hut so 'Pizza Hut' was born!

History

1958Frank and Dan Carney open the first Pizza Hut in Wichita, Kansas.

1973Pizza Hut went international with restaurants in Japan, Canada & England. The first UK Pizza Hut opened in Islington, London. 19721000 restaurants are open throughout the USA.

1977PepsiCo bought Pizza Hut. 1980Pan Pizza was introduced. 1982The UK joint venture started between PepsiCo and Whitbread.

Pan Pizza

1984Over 50 restaurants so far in the UK. 1986By now, there were 100 restaurants in the UK and 5000 world wide. 1987An average of one restaurant opened each week in the UK 1988The UK's first delivery unit was opened in Kingsbury, London.

1989The first restaurant was converted into a Restaurant Based Delivery store.

Delivery Unit

1990Pizza Hut warmed the cold shores of Russia. In the UK there were now 200 restaurants. 1992There were 9,000 restaurants in 84 countries. 1993There were 300 restaurants and delivery stores in the UK. 199410,000 Pizza Huts were open for business.

Stuffed Crust
.

Symbols:
Their symbol is

Mission Statement
We take pride in making a perfect pizza and providing courteous and helpful service on time all the time. Every customer says, "I'll be back! We are the employer of choice offering team members opportunities For Growth, Advancement, And Rewarding Careers in a Fun, Safe Working Environment. P.E.A.R.L.S

 PASSION for excellence in Doing everything EXECUTE with positive energy and urgency. ACCOUNTABLE for growth in customer satisfaction and

profitability. RECOGNIZE the achievement of others and have fun doing it. LISTEN and more importantly, respond to the voice of the customer.

Four Ps in pizza hut

Product
Product refers to the actual program you are planning. The goal of pizza hut is to develops the best product with the resources available. Pizza Hut sells pizzas in four different sizes: personal (an individual serving), small, medium and large, though most stores have done away from with the small size. A variety of toppings are available, plus "specialty" styles, including Meat Lovers, Pepperoni Lovers, Cheese Lovers, Veggie Lovers, Double Cheeseburger, Supreme, Super Supreme and the newly introduced Pizza Mia. The pan pizza has a thicker crust than most other commercially available pizzas .so their products have help them to retain their customers and to increase them .they provide their customers with complete nutrition plan and healthy food is guaranteed.

PRICE:
As there are no such competitors of Pizza Hut which could compete with the quality of pizza produced at Pizza Hut, therefore, the pricing strategy adopted by Pizza Hut is 'market skimming'. Pizza Hut has adopted this pricing strategy as they want to hold maximum share of the market by maximum profit. This is a golden era for Pizza

Hut, as there are no competitors and hence, Pizza Hut is free to charge any price they want. They are charging higher prices duet the uniqueness of the product. They satisfy the target market as the food quality is worth the price paid. The pricing strategy is not just to get the worth of quality but also to gain maximum profits before any competitor enters because then Pizza Hut will have to change its pricing strategy. Although the prices would be lowered with the new entrants in the market but not to a greater extent as the quality food products are not home-produced

PLACE/DISTRIBUTION:
It refers to the best place to offer program. That is the place where it is located and through what channels are we distributing programs and the competitive advantage lies in distribution. The pizza hut Peshawar is situated out of the market area near Army Stadium and Shami road. This site has been chosen keeping in view the following factors. It is in an out of centre location on retail or Leisure Park with good parking accessibility. Secondly the catchment area is of a specified minimum size and within a given drive time to the site. Distribution The type of distribution channel used by Pizza Hut is the direct channel. The direct channel is successful when there is an extremely large market that is geographically dispersed.

PROMOTION:
The objectives of promotion are to introduce a new product, stimulate demand, change the short-term behavior of the customers, and encourage repeat or greater usage by current customers. Pizza hut uses many promotional strategies. The main promotion is a coupon to purchase. This promotion is also distributed mainly by mail, but also by fliers on college campuses around the country in order to reach the target market. They are using billboards on main stream places to get there customer. They are also distributing door to door brochures to capture more anymore customers.

Pizza Hut in Pakistan:

Pizza Hut is not only the acknowledged leader of pizza industry worldwide, but it is also the worlds largest pizza chain, with over 12,000 restaurants across 100 countries, employing more than 300,000 people, serving 1.7 million pizzas everyday to more than seven million customers. In Pakistan Pizza Hut began in 1993 in Karachi and it expand its restaurants in other cities very soon. They are located Karachi, Lahore, Gujranwala, and Faisalabad. Pizza Hut established in Pakistan in 1993 from that time to now it is continuously succeeding in market. This is due to the reason that they are introducing new type of pizzas according to Pakistani taste. Most people in Pakistan like hot and spicy type of pizza. Therefore for making more customers they introduce Tikka pizza and hot and spicy pizza. There is another change that they also arrange birthday parties, engagement parties which attract more people.

Environment of pizza hut

Pizza Huts PEST (Political, Economic, Social and Technological) Analysis. In the internal analysis of Pizza Hut we have considered PEST (Political, Economic, Social & Technological) environment. POLITICAL ISSUES: Political issues include regulatory frame work operating in judicial system which may affect the business in different ways. There are not many political factors in Peshawar affecting Pizza Hut as is lack of competition. Factors such as laws on business employment, pollution and taxation apply on the organization which it has to follow regarding the rules. ECNOMIC FACTORS: If the countrys economy is better so the GDP of the country will be good, this is a green signal for the business as the per capita income of the people will be increased and they will spend more money. In our survey we came to know that most of the people in the beginning of the months spend more and they visit

pizza hut very often. When the inflation rate increases the cost of raw material also increases and this leads towards high prices of the products and vice versa.

SOCIAL FACTORS: Pizza hut is a multinational and it is basically originated from America so the organization is overwhelmed by western culture. There are social forms of society which consist of Upper class, middle class, middle upper class, lower class and lower class. Every country has cultural norms, values, beliefs and religion which can affect the organization.

TECHNOLOGICAL FACTORS: Now a days technology is improving so as baking and heating ovens will be of new and efficient technology and will provide efficient service. Due to new technology there are new ways of marketing like internet; telemarketing and the organization can advertise their products with much more faster pace. Computer based customer data that is MIS (managing information system) helps in collecting customer data, daily transactions, future forecasting and decision making. New vehicles will make their service more efficient

Swot analysis of pizza hut

Every organization has its strengths, weakness, opportunity and threats. So, the SWOT analysis for pizza hut is as under:

Strengths:
Pizza Hut is the market leader in providing different products of

There good image makes the organization more strong. Pizza Hut is providing good taste, Quality products Qualified staff Good atmosphere Hygienic environment. They are specialized in pizzas. Motivation level of staff is very high which make the organization more prosperous. They are ISO (International Standard Organization) certified. They have enough resources for operating different activities of the organization. They are providing free home delivery service. Competitive Advantage is they have a full service restaurant as well as delivery services. Pizza Hut can market too many different segments that other pizza chains cannot. For example, Pizza Hut can market to families much easier than Domino's or Little Caesars.

Weaknesses

 Pizza Hut has higher overhead costs, due to the restaurant that

other competitors don't have to deal with. result of higher overhead costs is higher prices Pizza Hut must charge Pizza Hut is not the low cost producer. They rely on their quality pizza and good service to account for their higher prices. They are providing less range of products comparatively with high prices. They are more focused on Western taste instead of Eastern.

Opportunities
New markets can be explored and new opportunities they can

gain. Pizza Hut can come up with the new products considering the Eastern taste of the people as like McDonalds. Diversification of new products can increase their market share. They can reduce their prices because of more resources.

Threats
Competitors Their closest competitor is Domino's Pizza who is working to

open their Branch at Karachi. Dominos main competitive advantage over Pizza Hut is their Lower price New entrance like Dominos pizza in Pakistan market can affect their market share Other local restaurants can affect their market share by providing pizzas with lower price Terrorism

CONCLUSION:
Pizza Hut has many targets which it has achieve in a given period of time. The time-period is mostly a year. Therefore, in order to fulfill the targets different strategies are adopted by Pizza Hut. It can be concluded that these strategies have been successful and there is flexibility in the strategies, as they can be changed with the changes in the market conditions as well as the targets.

Recommendations:
Pizza Hut in Pakistan has not using computer technology to a large extent. They even not make their website. They should make their website so that people should be keeping in touch with new changes occurring in the Pizza Hut. Decision making should be decentralized .In the present world the trend is moving towards flat structure in order to facilitate the decision making process. Bureaucracy could be minimized so every one could give a right to do a better job. There is need to change in the culture of the Pizza Hut its culture is bureaucratic it should be clan culture because it realizes the creativity of employee to respond to changing taste.