PRESENTED BY- ANIL KUMAR SINGH (45567) MOHAMMAD HAMZA (45569) SIDDHARTH SINGH (45559) SWATI BHARDWAJ (38113)

BUSINESS ENVIRONMENT

Business Environment :Business Environment is the

aggregate of all conditions, events and influences that surround and affect it.

Business Decision depends on : Internal environment

External environment

Internal environment

Business Decision External

environment

Controllable Beyond the Factors control

Internal Environment

Management Structure Stakeholders Relationships Physical Assets Technology Resources Human Resources Financial Resources Firm’s Goals and Objectives Value System

External Environment

Micro environment Macro environment

Micro EnvironmentSuppliersWorkers & unionsCustomersMarketing IntermediariesCompetitors & Public

Suppliers:

Who supplies inputs/raw materials for smooth functioning of company

Top priority for Vender development

Not to depend on one suppliers

Workers & Unions

Very risky

Lockouts Strikes Production problems

Maintaining stocks/inventories due to uncertainties

Supply management Scarcity Environment

Customers: Major task create and sustain customers

Individual

House holds Do not depend on one customer Industries Other commercial establishment Poor Bargaining Very Risky Government Other institution

Competitors: Competitors of same products

Compete for discretionary incomes of the consumer

Desired Generic Product forms Brand competitioncompetition competition competition

Market intermediaries

Consist of number of firms that helps the company in promoting, selling and distribution of goods to final buyers.

Market Intermediaries

Link between company and the consumer

Middlemen(Agents and Merchants to final customers)

Physicaldistributing firms (storing & moving goods from origin to distribution i.e. warehouses and transportation)

Market service Agencies(Targeting and promoting products)

Final Intermediaries(Finance market & Insurance Business Risks)

Publics

Any group that has an actual or potential interest in or impact on an organization’s ability to achieve its

interests.

Macro Environment

Demand-PriceSavings/ InvestmentMonetary/ FiscalBalance of Payments Situations

Overall Growth Activity

Economic Environment

Economic Condition

Structure Equilibrium Money & Capital Market

Size Of the Market Income Distribution Purchasing Power

Economic Policies

Banking & Monetary Policy

Fiscal Policy

Economic System

CapitalistSocialist

Mixed

Economic System

• The Economic System that has been adopted in a

country is basically influenced by the philosphy, history, aspirations & attitudes of its people & the system which they put in use to achieve their goals.

• Prevalent Economic Systems : Capitalist Socialist Mixed

• Economics Systems all over the world while being implemented have not retained their theoritical purity.

Structure Equilibrium

It is based on national output, structure of occupations, productivity, capital formation, consumption & foreign trade.

Changes in the production structure must be synchronized & balanced with the changes in the consumption structure.

Banking & Monetary PolicyIts main objective is to ensure that there is sufficient amount of money available at an affordable cost to business for its transaction.

Neither too much Nor too little

Fiscal PolicyIt is a policy dealing with receipts & expenditures of the government to achieve certain socio-economic objectives.

Exercise of Annual Budgets.

Economic & Price Stability

Economic stability refers to an absence of excessive fluctuations in the macroeconomy. An economy with fairly constant output growth and low and stable inflation would be considered economically stable.

Price stability refers to a situation where prices are stable over time.

Money & Capital MarketThe growth of money market is required for orderly functioning of industrial & commercial organizations that require working capital.

How the income is distributed among various sections of people like affluent, rich, middle income & poor.

Purchasing power depends on disposable incomes, prices, taxation, savings, debt & availibility of credit.

Income distribution & Purchasing Power

Foreign Trade

The primary function of foreign trade is to :

• Procure plant & machinery• Facilitate the flow of technology• Encouraging Competetion• Full capacity utilization of domestic

industries.

Size of the Market

Division of labour is limited by the size of the market & vice-versa.

Non-Economic EnvironmentPolitical-legalSocio-culturalNaturalDemographicEducational

Political Environment

Political stability- changes in the form & structure of government administrationPolitical organisation- ideology of ruling government;influence of premier groups; conflicting role of public& private sector 

Political environment means the situation & circumstances relating to the government, politics & public affairs of the country.

Ideology of ruling government & influence of premier groups.

Example:

Nehru: transformation of agrarian economy into industrialised economy

Indira Gandhi: state became active in agriculture sector (subsidised fertilisers, expansion of institutional credit); tightening of state control over industrial finance, foreign investment & trade.

Legal Environment

Plays a vital role- dictating dos & don’ts of businessIt covers :

Laws Foreign PolicyFDI in Retail

Socio-Cultural EnvironmentMade up of attitude, desires, expectations, education, beliefs & customs of people.

CULTURAL ENVIRONMENT

Culture is the customary or tradition always on thinking & doing things, which are shared to a greater or lesser extent by all the members of the organisation, which new members must learn & atleast partially accept in order to be accepted into the community.

If the society is multi- cultural, then the firm cannot meet the demands of different groups with a uniform product.Example:Companies have to change their product  portfolio because of cultural differences as McDonald and KFC did when they launched their restaurant chain in India

DEMOGRAPHIC ENVIRONMENT 

Size & growth rate of population

Growing population

Urban- rural population

Example:

Demographic environment decides the marketing mix for an organisation. A one rupee sachet of shampoo or a five rupee ice-cream cone are some examples

TECHNOLOGICAL ENVIRONMENT

Positive effects of technology: Increased productivity Production of new & better goods of standardised quality

with more efficient use of raw materials Basis for fast growing urban & industrial system   Negative effects of technology: Displacement of labour  Environmental pollution Switching over might be costly   

Refers to body of skills, knowledge & procedures for making, using & doing useful things

EDUCATIONAL ENVIRONMENT

Illiteracy is closely related to poverty.

Close relationship between education & income.

University & College training is useful to firms.

Educational match with skill requirement

Geographic and ecological factor are very important in business Climate, weather, topography, location Difference in geographic condition Ecological factors: Pollution, Degradation of forest i.e. use of wooden

boxes, polythine bags

International Environment:

Important for industries depending on import or exports and import competing industries

(Hike in oil prices Increase the cost of production and

prices of certain products such as fertilizers, synthetic fibers etc.)

Natural Environment

Economic and Non-economic Environment : The Interaction

Economic Environm

ent

Political-Legal

Socio-Cultura

l

EducationalNatural

Technological

Interaction MatrixEconomic Env.

Non- economic evn.

Economic system

Economic structure

Functioning of the economy via sectors

Economic planning (Long term)

Economic programs (Short term)

Economic policies fiscal and monetary

Economic control and regu lations

Economic growth and deve lopment

Socio logical

Educational culture

Political legal

Historical

Physical Geographical

Interaction MatrixEconomic Env.

Non- economic evn.

Economic system

Economic structure

Functioning of the economy

Economic planning (Long term)

Economic programs (Short term)

Economic policies fiscal and monetary

Economic control and regu lations

Economic growth and deve lopment

Socio logical

Educational culture

Political legal

Historical

Physical Geographical