UNIT 1

BUSINESS ENVIRONMENT CONCEPT OF BUSINESS NATURE, ELEMENTS, IMPORTANCE OF BUSINESS ENVIRONMENT,

Nature of Business
Business may be understood as the organised efforts of enterprises to supply consumers with goods and services for a profit. Businesses vary in size as measured by number of employees or by sales volume Large Organisations such as Steel Authority Of India Ltd SAIL and Tata

Business Objectives
EARNING PROFIT GROWTH EMPLOYEE SATISFACTION AND DEVELOPMENT QUALITY OF PRODUCTS AND SERVICES MARKET LEADERSHIP JOY OF CREATION SERVICE TO SOCIETY

BUSINESS ENVIRONMENT
It is very important to understand the environment within which the business operates as it is ultimately responsible for the success of the business. For eg when there is a change in the government policies the business has to make the necessary changes to adapt itself to new policies. Similarly a change in the technology may render the existing products

MEANING OF BUSINESS ENVIRONMENT

The term business environment means external forces, factors and institutions that are beyond the control of the business and they affect the functioning of a business enterprise. They include customers, competitors, suppliers, government and the social political, legal and technological factors etc. Thus Business Environment may be defined as the total surroundings which have a direct or indirect bearing on the functioning of the business. It may be defined as the set of external factors such as economic, social, political, and legal, demographic, technical which are uncontrollable in nature and affect the business decisions of a firm.

FEATURES OF BUSINESS ENVIRONMENT

Business environment is the sum total of all factors external to the business firm and that greatly influence their functioning. It covers factors and forces like customers, competitors, suppliers, government, and the social, cultural, political, technological, legal conditions. The business environment is dynamic

Importance of Business Environment

Determining opportunities and Threats The interaction between the business and its environment would identify opportunities for and threats to the business. Giving direction for growthThe interaction with the environment leads to opening up new frontiers of growth for the business firms. Continuous LearningEnvironmental

ENVIRONMENTAL ANALYSIS
It is the indepth study of the environment which surrounds the business and affects its performance. William Gluek and Lawrence Jauch have stressed that Environmental Analysis and diagnosis give strategists time to anticipate opportunities and to plan to take optional responses to these opportunities. It also helps strategists to develop an early warning system to prevent threats to the firm.

Environmental Analysis contd.

Firms which systematically analyse and diagnose the environment are more effective than those which dont. Without a systematic environmental search and diagnosis the time pressure of the managerial job can lead to inadequately thought out responses to the environmental changes.

OBJECTIVES/IMPORTANCE OF E.ANALYSIS
Firstly the analysis should provide an understanding of the current and political changes taking place in the task environment. Secondly the environmental analysis should provide inputs for strategic decision making. Mere collection of data is not enough, the information collected must be used in strategic decision making.

Objectives in short
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 socioeconomic changes at the national and international levels on the firms stability. Analysis of competitors strategies and formulation of effective counter

EG OF FIRMS
Firms which have initiated changes in response to environmental changes Crompton GreavesFear of Multinationals, poor financial results, return of consignment of fans from Italy as the taples on its boxes gathered rust. Environmental Changes--Restructured the company into four strategic business units, each headed by a

THE PROCESS OF E. ANALYSIS

Environmental Analysis is challenging and time consuming and expensive affair. But it is essential to be done. The Analysis consists of four essential steps: Scanning---Scanning involves general surveillance of all environmental factors and their interactions in order to identify early signals of possible environmental change and also to

STAGES
Monitoring---Monitoring involves tracking the environmental trends, sequences of events, or stream of activities. It frequently involves following signals or indicators unearthed during environmental scanning. The purpose of monitoring is to assemble sufficient data to discern whether certain trends or patterns are emerging.

STAGES..
Forecasting---Strategic decision making requires a future orientation. Forecasting is concerned with developing plausible projections of the direction, scope, and intensity of environmental change. It tries to layout the path of anticipated change. Eg How long will it take for the new technology to reach the market place?

STAGES
Assessment---Unless the outputs of scanning, monitoring and forecasting are assessed to determine the implications for the organisations current and potential strategies the information provided would be futile. Assessment involves identifying and evaluating how and why current and projected environmental changes affect the management of the

LIMITATIONS OF ENVIRONMENTAL ANALYSIS

Environmental Analysis does not foretell the future, thus organisations sometimes confront unexpected events that are not anticipated during the analysis Environmental Analysis on an off itself is not a sufficient guarantee of organisational effectiveness, it is only one of the inputs in strategy development and testing.

TOOLS AND TECHNIQUES FOR E.ANALYSIS

Environmental ScanningIt is the process that seeks information about events and relationships in a firms environment. Environmental scanning entails partitioning the external environment into sectors, namely, cultural, economic, political, technological and etc. Data are usually collected and

TOOLS AND TECHNIQUES..

SWOT AnalysisStrengths, weaknesses and opportunities and threats is a basic analytical tool in management that has become popular in recent years. It is often used by strategic planners and top management in developing competitive strategies. It is typically used to decide corporate strategies and to make product or

TOOLS AND TECHNIQUES

PEST ANALYSISA PEST analysis looks at the Political, Economic, Social and Technological sectors of a particular industry. The PEST analysis focuses on the external forces that affects the organization. Political FactorsMay have direct or indirect impact on the organizations operation, decisions, purchasing power

TOOLS AND TECHNIQUES

Porters Five Forces Analysis Porter identified five forces as: The threat of new entrants and appearances of new competitors The degree of rivalry among existing competitors in the market The bargaining power of buyers The bargaining power of suppliers The threat of substitute products or