Business Environment

What is Business..??

 Business may be understood as

the organised efforts of
enterprises to supply
consumers with goods and
services for a profit
Purpose of a business
 All businesses share the same purpose:
TO EARN PROFITS
 But other purposes are:
Supplying goods and services to the
society; creating job opportunities; offer
of better quality of life; contributing to
the economic growth of the country.
Business objectives
Before we describe business objectives, it
is desirable to be clear about related
concepts
 Vision

 Mission &Objectives

VISION: A Vision is a broad explanation

of why the firm exists and where it is
trying to lead.
A vision gives the organisation a sense of
purpose and a set of values that unite
employees in a common destiny.
Creating the Vision
 Establishing Goals

Visioning
One of the most important things to do in the
preparation stage is to VISUALIZE things in
your mind
Mayor Rudolph Giuliani
Visioning vs Planning
Visioning Planning
 proactive plan for - process that
the future
provides specific
direction and
 It is a view of the
meaning to the day-
future that
everyone can to-day activities.
believe in. - strategic planning
places the strategic
vision into motion.
A Vision Statement
- Says what you want out of Business.
- Details principles and beliefs.
- Gives you the power to create and design your
business around your values.
In Summary
You have to have a plan for success !!!
It starts with a vision
You get the vision by reaching each goal.
You reach goals by hard work, dedication, and
perseverance.
Objectives
 Objectives render mission statements
more concrete.
 Mission statements seek to make a
vision more specific and Objectives are
attempts to make mission statements
more concrete.
 Objectives therefore, represent the
operational side of an organisation.
 Profit: Profit is the main incentive, motivator,
strong sustainer, judicious allocator of
resources, objective indicator of productivity
and a solid basis for growth, expansion and
survival.
 Growth: Business should grow in all directions
over a period of time. The strategies adopted
to achieve growth are:
 (a) add more products/markets;
 (b) diversify into new areas;
 (c) increase market share;
 (d) cut down costs and increase productivity.
 Power: Business houses have vast resources at
its command. These resources confer
enormous economic and political power on
owners and managers of business ventures.
Employee satisfaction & Development:
Concern for employees continues to be an
important aspect of management
Quality products & services: Those who
insisted on and persisted in quality survived
competition and stayed ahead of others in the
market. Persistent quality of products earns
brand loyalty, a vital ingredient of success.
Market Leadership: To earn market
leadership, innovation is the key factor.
Innovation may be in product, advertising,
distribution, finance or in any other field.

Challenging: Business offers vast scope and

poses formidable challenges.

Joy of creation: It is through business

strategies new ideas and innovations are given
a shape and are converted into useful products
and services for the benefit of customers.
Service to society: Business is a part of
society and has several obligations towards it.

Good Corporate citizenship: It implies that

the business unit complies with the rules of the
land, pays taxes to the government regularly,
discharges its obligations to society and cares
for its employees and customers.
What is environment..??
 Circumstances, influences, stresses, and competitive,
cultural, demographic, economic, natural, political,
regulatory, and
technological factors (called environmental factors) that
effect the survival, operations, and growth of
an organization.
Business Environment

 Definition of Business environment by Davis

Keith “ The Aggregate of all conditions
events and influences that surround and
affect business.”
 Business environment refers to all those
internal and external factors that have a
bearing on the business.
Characteristics of Business
environment.
 Business is the surrounding situation that affect the
business.

 Business environment is very Complex and needs

a deep study.

 Dynamic nature is one of the part of business

environment. Study of changes is very important
for the business.

 Environment = Opportunities & Threats

 Environment is very complicated and Hence it

needs minute study.
Characteristics of Business
environment.
 Changes in the environment cant be done by one
businessman. Businessman has to adjust to the
environment.
 Creates framework for business.
 It’s a challenge and an opportunity for the
business man and its study can help make or
brake the business.
 As the business environment is very complex and
cannot be changed hence It needs adaptability.
Need & Importance of
Business Environment.

 The study of Business Environment helps

keeping the business flexible.

 To exploit business opportunities fully.

 need & Importance of Business
Environment.

 To make business socially acceptable.

 To keep the business enterprise alert.

 To maintain adaptability to socio-economic

changes.

 To understand future problems and prospects.

 To ensure optimum utilization of resources.

Types of Business Environment.
Three different levels of Business

Environment are as follows:

 Internal Environment
 Micro Environment
 Macro Environment
INTERNAL ENVIRONMENT
The important internal factors which have a
bearing on the strategy and other decisions
are:
1. Value system
2. Mission & Objectives
3. Management Structure & Nature
4. Internal Power relationship
5. Human resources
6. Company image & Brand equity
MICRO ENVIRONMENT
The micro environment consists of the actors in the
company’s immediate environment that affect the
performance of the company.

 Suppliers: Suppliers are the important force in the task

environment of a business. Multiple sources of supply
often help to reduce risks.

 Customers: To succeed in capturing customers, a

business must try its best to know what people want
and will buy.

 Labour: The labour force is organised in the form of

trade unions. The trade unions interact with the
management & pressurise the management for the
fulfilment of their demands.
Competitors: Competitors play a vital role in
running the business enterprise. There are
various types of competitions:
 Desire competition: Under this type of
competition the primary task is to influence
the basic desire of the customer.
 Generic competition: The competition among
alternatives which satisfy a particular category
of desire is called generic competition.
 Product form competition: In this type of
competition, the consumer has to choose
between different forms of the product.
 Brand competition: The competition between
different brands of the same product.
Taking into consideration these different factors
every marketer should strive to create primary
and relative demand for his product.
Regulating agencies: The regulators include
government departments and other
organizations which monitor the activities of
business.
Types of Business Environment
 The macro forces are, generally, more
uncontrollable than the micro forces.

Important macro environment factors includes:

 Political Environment.
 Economic Environment.
 Social Environment.
 Technological Environment.
 Natural Environment.
 International Environment.
 Demographic Environment.
ECONOMIC ENVIRONMENT
The survival & success of a business enterprise is
finally decided by the economic environment
& various market conditions. The important
external factors that affect the economic
environment of a business are as follows:
 Economic conditions
 Economic policies
 Economic growth
 Interest rates
 Currency exchange rates.
SOCIO-CULTURAL
ENVIRONMENT
It is very comprehensive because it may include
the total social factors within which an
organisation operates.
 Socio-cultural environment may include
expectations of the society from business,
attitudes of society towards business & its
management, views towards achievement of
work, views towards structure, responsibility
& organisational positions, views towards
customs, & labour mobility & level of
education.
NATURAL ENVIRONMENT
It includes geographical & ecological factors.
Almost every aspect of business depends
upon natural environment.
 Manufacturing depends on physical inputs.
 Mining depends on nature
 Agriculture depends on nature.
 Trade between two regions depends on
geographical factors.
 Topographical factors may affect the demand
pattern.
DEMOGRAPHIC ENVIRONMENT
It includes:
 Size, growth rate, age composition, sex composition
etc., of population
 Family size
 Caste, religion,
 Educational level...etc
TECHNOLOGICAL
ENVIRONMENT
Business has to adopt technological changes from
time to time. Every business enterprise has
two basic functions i.e.,
 Marketing &
 Innovation.
Technological environment also includes research
base decisions.
The fast changes in technology also create
problems for enterprises as these render
plants and products obsolete quickly.
International Environment
Implications of global or international environment are as
follows:
 Companies are forced to view business issues from a
global perspective.
 Safe & protected markets are no longer there.
 Learning of foreign languages is a must for every
business manager.
 Acquiring familiarity with foreign currencies is also a
must.