BGE-1: An Overview of Business Environment

Introduction:
Business is an economic activity to earn money or wealth

All profit seeking activities Business activity takes place in different forms like production, Consumption, distribution and exchange

Characteristics of Business: 1. It is the organized efforts of individuals 2. Satisfaction of human wants 3. Dealing in goods and services

4. Profit motive 5. Creative and dynamic 6. Risks and uncertainties 7. Self employment 8. Social responsibility

Significance of business activities:

1. Regular supply of goods and services 2. Reasonable prices 3. Newer goods and services 4. Innovation of new product 5. Expansion and diversification 6. Proper utilization of resources 7. Develop goodwill or brand image

8. Maximize profit 9. Maximize sales revenue 10. Maximize market share 11. Prevent competitors 12. Minimize losses 13. Increase productivity 14. Generate employment opportunities 15. Improve technology 16. Investment on R&D 17. Customers satisfaction 18. Increase Govt revenue 19. Economic Growth

Managerial decisions that impact business activities?

i. Where shall the firm be located? ii. What goods to be produced? iii. What shall be its legal form? iv. How shall it raise finance? v. What sort of techniques to be adopted? vi. How shall goods to be distributed to consumers? vii. What shall be the size of output? viii. How shall it deal with its employees? All the above decision factors are internal to the firms in the sense it can be altered or controlled by the firm itself. There are certain other factors in which the firms have no control. Hence they are called uncontrollable especially as they are dynamic and keep on changing continually.

Definitions of Business Environment:

1.According to C.Duggan, Business environment consists of all internal and external factors that influence the complex interaction of production, marketing and finance of the business world 2.According to Arthur.M, Business environment includes the set of conditions like economic, social,political,cultural and technological in which the business activities are carried out Business Environment broadly reflects the factors which impact the operations of the business firms or companies. There are two types of business environment.

1) Internal environment: It refers to all the factors internal to a firm

which would affect its functioning. These factors are generally controllable. It means the firm can alter or modify such factors because they have direct bearing on the business performance.

2) External environment: It includes all those factors

which are external to firms such as socio - economic, cultural,legal,demographic etc in which the firms have no control. Business environment generally means external environment which would ultimately determine the business atmosphere in an economy.

Features of business environment:

1.Environment is inseparable from business 2.Environment is dynamic 3.Environment is complicated 4.Environment has strong impact on business 5.Environment regulates scope of business 6.Environment has to be scanned regularly

Overall Components of Business Environment

Internal Environment External Environment

Value system Management Philosophy Vision, Mission & objectives Human resources Internal relationship Corporate image Physical facilities Financial resources R&D Management structure

Micro Variables
Suppliers Customers Dealers Competitors Intermediaries

Macro Variables
Natural environ

Political environ Economic environ Demographic environ Technological environ Social & cultural enviro Legal environment Regulatory environ International environ

Indicators of International business environment

Race/colo ur Military power Economic power Industrialization Major products Religio n Nat. Resources Geog. Location

BOPs

World

Population

HRD Level Econo. system Wealth /asset Econonomic growth Political system

Life style

Indias International Business Relations

7.Europe Trading Restaurants Chemicals 6.South America Trading Powers Metals Refinery 1. Asia & Pacific Textile Trading Transport Office Eqpt HHs Eqpt Diversify 2.Africa Diversified / Small

India
Trading Construction Management Oil Telecom

Metals 5.Australia Paper Transport Telecom Power Consultancy

3.Middle East

4.North America

Software Dev Trading