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Business is an activity which involves buying and selling of goods & services. Modern business covers a complex field of industry and commerce which involve activities related to both production and distribution. These activities on the one hand satisfy societal need and desires and on the other hand bring profits to business firms. All the business activities are normally motivated by profits, in case , any of these activities is carried out by some organization for the purpose other than profit seeking, it cannot be justifiably considered as business.
Business Environment
What are the contribution from business?
Economic growth creates employment opportunities Provides all kinds of goods and services which we need for consumption
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Most of the fortune 500 companies are located in the USA Biggest capitalist economy, 189 of the worlds largest Cos belong to US Japan - second largest with 104 of the Fortune 500 Europe Western Europe holds 138 of the worlds largest companies.
Business Environment
Big business houses usually expand their activity by establishing new companies which undertake production of unrelated new products or services. This is conglomerate diversification. Ex: TATAs However, diversification may not always contribute to growth of a business enterprise. In the recessionary phase, it is quite risky to aspire for growth by going for unplanned diversification.
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The business through its innovative moves can always Create synthetic wants and thus find space to produce new goods To satisfy them.
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Business Environment
Environment by definition is something external of an individual or an organization.
Therefore in strict sense, business environment refers to an external factors which have a direct or indirect bearing on the activities of business. Certain aspects of both internal and external environment pose a threat to business, other aspects provide opportunities for business growth.
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ENVIRONMENTAL SCANNING
What do you mean by Environmental scanning?
It is the process of monitoring & collecting the information about the various current and potential changes taking place in the environment to facilitate in decision making and problem solving.
ENVIRONMENTAL SCANNING
Objectives of Environmental scanning:
1. To provide and understanding of current and potential changes taking place in the environment.
1. 2. 3. 4. 5.
Firms which systematically analyze and diagnose the environment are more effective than those which dont
Development of broad strategies and long term policies of the firm. Development of action plans to deal with technological advancements. To foresee the impact of socio-economic changes at the national & international level. To analyze the competitors strategies and formulation of effective counter-measures. TO keep oneself dynamic.
Internal Environment :
Value system, Goals and objectives, Management structure, Relationship among the various constituents, Physical assets, Technological capabilities Human, financial and marketing
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Cos R&D activity and the speed at which technological changes occur determine Cos internal environment which in turn influence Business decisions. Quality of Human Resources of a Company, Depends on Commitment, attitude and morale of the employees also have an impact on business as an internal factor.
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Publics
BUSINESS
Customers
Competitors
Marketing Intermediaries
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Business Environment
Suppliers of inputs: Important factor in Cos success is low cost of production of goods. Availability of raw materials without any interruption especially raw materials thru out the year lessen the financial burden on the company. Sometimes monopolistic suppliers manages to secure monopoly control over the supply of some strategic raw material, such as iron ore or copper, it starts regulating its supply to generate maximum possible monopoly profits. No Co. should depend for the supply of some input on single source. Supply management should be high on agenda of the company.
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loyalty depicts customer satisfaction. Universally accepted fact that the satisfaction of customers is the ultimate bench mark of the Cos success.
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Ex: In the Air conditioner market Voltas air conditioner faces competition from other branded air conditioner such as Videcon, Elgi, Samsung companies. Public : Environmentalists, consumers protection groups & media persons may influence both Production & Sales.
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Macro environment
Macro environment of business consist of the following factors: A. Economic Environment National Global B. Non Economic Environment Political Socio Cultural Demographic Technological Natural
Global Environment
Globalization- expansion of business activities across boundaries of the nation states.
It refers to a process of increasing economic openness growing economic interdependence and deepening economic integration between countries in the world economy.
Global Environment
Over the past ten years the Indian economy is integrates into the global economy. The three policy measures initiated to realize the objectives of globalization are: 1. Exchange rate adjustment and rupee convertibility. 2. Import liberalisation & 3. Opening upto foreign capital
Political Enviroment
A stable & dynamic political environment due influences business growth. In a capitalist economic system corporate firms are very powerful, yet they have to operate within the parameters which are determined by the broad policies of the government. Ex: MRTP Act, FERA because of the experiences of the colonial era, Foreign capital & the multinationals corporations were suspects.
Legal enviornment
Govt. sets the legal framework within which business firms operate. Legislations defining: property and business organizations, laws of contracts bankruptcy( one whos assets are used to repay debts), Mutual obligations of labour & management Laws and regulations, the way the business are carried out constitute legal environment of business.
Legal enviornment
Economic legislations can be classified into two categories: 1. legislations facilitatory role in business. Ex: contract act rules for systematic exchange transactions. 2. legislations- restrictive role in business Ex: Sherman anti-trust act in 1890, Clayton anti-trust act 1914 Federal trade commission act 1914 of USA to prevent unfair monopolistic unfair practices. In India MRTP-Monopolies & restrictive Trade Practice ACT-1969. Foreign Exchange Regulation Act (FERA) -1973 directly regulated the foreign exchange related transactions of the indian business. Both MRTP & FERA diluted stringent & restrictive in nature.
SOCIO-CULTURAL ENVIRONMENT
Business firms operate in a socio-cultural environment & their strategies needs to be formulated keeping this factor in view.
SOCIO-CULTURAL ENVIRONMENT
Muslim societies conservative. Womens still under Purdah. Demand for cosmetics & western cloths are limited. Business firm aiming at capturing markets for its products in these diversified societies has to be careful about the cultural sensitivities of these societies. India- liberal outlook, modeling by young women for advertising fashionable products, wine & beer is acceptable in Indian society.
Technological environment
Technology- Knowledge about machines & processes. Any business- cannot survive with outdated techniques in international competition.
Four decades ago technology of Fiat was unsophisticated. Users had no choice & thus product survived for a long period. Setting up of Maruti udyog Ltd., the situation changed due to superior technology.
Technological environment affects business from the demand side as well. Ex: In a country where power is scarce, demand for electrical appliances will be limited. Erratic power supply and frequent load shedding creates market for inverters.