Business Environment

Internal and External Click to edit Master subtitle style

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Business Environment
Def: The aggregate of all conditions,events,and influences that surround and effect it can be referred to as business environment Determines the role of the enterprise and the nature of task. Determines role of the top management and also its business policies.

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Interact and transact with environment

Influence on scope and direction

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Components of Business Environment

Different

environmental variables exist internally and externally to the business enterprise Environmental variables have a positive or negative influence on the enterprise Business environment consists of two subenvironments:

Internal environment External environment consists of :Micro/Operating environment Macro/General environment

Mutual

relationships exist between 9/21/12 these

Importance
Helps

an organization to develop its broad strategies and long term plans. Analyze competitors strategies. Keeps the organization dynamic in approach. Foresee the impact of socio economic changes at the national and international level. Adjust to the prevailing conditions.

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Internal factors
Factors contributing to Strength or weakness : Organizational

resources R & D ,and Technological capabilities Financial capability Marketing capability Operations capability

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External Factors
Social Economic Cultural Geographic Technological Political Legal Ecological Govt.

Policies Competitive Market Condition Locational

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Environmental factors
Social Factors business is a social institution. Social responsibility Satisfy the needs and wants of society goals Culture, Values, Tastes and Preferences, Social Integration and Disintegration and so on.are part of agenda of an organisation.

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Economic Factors Per Capita Income, National Income, Resource Mobilization Exploitation of Natural Resources, Infrastructure Development, Capital Formation Employment Generation, Propensity to Consume (Luxury or Economic goods), Industrial Development

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Cultural Factors Social and religious practices, education, knowledge and cultural factors Norms and beliefs Social stratification (rural parts) Geographic Factors important for global business managers Geographic Location, Seasonal Variations, Climatic Conditions Industrial location policies of Government

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Technological Factors Rapidly changing R & D Activity (India must invest) e.g. Foreign Investment upto 100% in Industries with sophisticated technology. Political Factors Philosophy and approach of political party Government interventions Legal Factors Industrial Licensing, Company formation laws Laws regarding Industrial disputes, payment 9/21/12

Ecological Factors Ecological Imbalance due to change in environment and biotic factors Environmental protection and Preservation Pollution Free Industrial Activity (Carbon Credit) Legislations Government Policies Industrial Policy resolutions and Licensing Policies Trade Policies, Labor Policies, Location Policies, Export Import policies, Forex Policies, Taxation policies (Arab Countries)
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Competitive Market Condition Socialist centralized authority Capitalist competitive forces India a Mixed Economy Location Factors Taxation Policies Subsidies

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Strategic Management
Nature

and environment of blocs (OPEC, ASEAN etc.) Single Market (e.g. EEC members follow similar standards) Global strategies for Global businesses

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Risk Management
Security

Risk India militancy / North Korea nuclear threat Political Risk Stability - coalition parties (India, Brazil)

Government Effectiveness risk hindrance to reforms Legal & Regulatory Risk slow Macroeconomic Risk inflation, prices Foreign Trade and Payment Risk Export / import duties, tariff barriers Tax Policy Risk VAT, GST Labor Market Risk Financial Risk Currency appreciation / 9/21/12 depreciation

Internal & External Environment

Why a product like radio declined and now once again emerging as an entertainment medium ?

Drivers of Change.???? Technology Govt. Policy Media Substitutes Tastes and Preferences
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Internal Environment
Within

the organization Factors controlled by the organization

Technology Advancement Employee Attitude 5Ms Machine, Manpower, Money, Materials, Management

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External Environment
Outside

the organization

Political - P Economical - E Social - S Technological - T Ecological - E Legal - L

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