Chapter-1 Introduction to Business Environment

8/2/2019 Chapter-1 Introduction to Business Environment

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CHAPTER-1BUSINESSENVIRONMENT

Ms. Meera Mody


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Business Environment

Business environment

consists of all those factors that have a bearing on the business


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Concept

Survival and success of any individualdepend on

His innate capabilityto cope with theenvironment

The extent towhich the environmentis conducive


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Definition

The environment include

factors outside the firm whichcan lead to opportunity for andthreats to the firm

Glueck & Lawrence


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Types of Environment

On the basis of the extent ofintimacy with the firm, the

environmental factors areclassifiedFactors are classified in to two

Internal factorsExternal factors

Micro/task/operating environment


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MacroEnvironment

Micro factors

InternalEnvironments

Political/govt. Legal Demographic Social/cultural Technological Global

Financiers Suppliers Public Customers Competitors Marketing

intermediaries Promoters/shareholdersvalues

Mission/objectives Mgt. sturcture Internal power relationship Physical assets and

facilities Co. image/ brand equity Human resources Financial capabilities Technological capabilities Marketing capabilities


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MacroEnvironment

MicroEnvironment

InternalEnviro

nment


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Macro Environment

Forces that shape opportunitiesand pose threats to the company

Uncontrollable factors andsuccess depends on itsadaptabilityAlso known as general orremote environment


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Factors in Macro Environment

Factors included in macroenvironment are:

Economic environmentPolitical or regulatory/legal environmentSocial/cultural environment

Technological environmentNatural environmentGlobal environment


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Micro Environment

Known as task or operating environment asit directly affect operations

It includes co. s immediateenvironment affecting performanceof the firm

Micro factors need not necessarilyaffect all the firms in an industryin the same way


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Factors in Micro Environment

SupplierCustomersCompetitorsMarketing intermediariesFinancierspublics


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suppliers

These are the intermediaries who provides theraw material and components to the company.Because the timely production depends on them.Honda Activa..If these services are not there than companyhave to block its lot of money into inventories .


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customers

The major task of any business is to retain theexisting customer and find out the new customer.The company is having diff. type of customer likeindividual, household, industry and government .The task of the company here is to satisfy itscustomer by price, quality and service.Co. also do by the way of providing theinnovation into existing product.


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Competitors

The competitors may be from the sameindustry who sells the similar product.E.g. L.G. and ONIDA,The competitors can be the company whofights for the market share .Competition may be to create brand loyalty.

Competition may be from new entry also.


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Marketing intermediaries

In includes the wholesaler, retailer, distributors,agent .Who help the company in finding out the newcustomer.These are the people who make it possible toreach the companys product into customer

hand.Marketing agencies and transportation firmshelp the company in these.


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financieries

These are the crucial factors which providesthe finance to the business firm.At times to cover up losses incurred by thebusiness these group provide the finance tothe business.It enhances the profitability of the firm

It also help the firm for tax planning.


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Society/people

These the group which is having the interest orwho has the capabilities to create interest forthe company.Media people positive or negativeCitizens of the country.


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Internal Environment

Factors in InternalEnvironment

Value systemMission and objectivesManagement structure and

nature


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Human resourcesCompany image and brand equity

OthersPhysical assets and facilitiesR&D and technological capabilities

Marketing resourcesFinancial


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Value system:

Value system:The value system of founder, or by the pioneer have acrucial impact on Mission, vision statement, businesspolicy and practice.The extent to which the employee bound by the valueare contributing to the success of the firm.Each firms value reflect in its mission statement.


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EXAMPLE

Dabur Dedicated to the health & well being of everyhousehold.

Coca Cola A coke is in arms reach of any customers nomatter where that customer is around the world.

Micro Soft Corp. A computer on every desk & in every home,using great software as an empowering tool.


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MANAGEMENT STRUCTURE

Management structure consist of the employee at variouslevel of the organization ,Starting from board of directors to the lower level

manager all are part of management.Two kinds of structure are there traditional structurewhere most of the decision taken by upper level personand that delays the decision.

Another one is flat structure which induce the employee totake initiatives without further delay.


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INTERNAL POWERRELATIONAmount of support from top management.Influence of the decision taken by the board of directorsand implementation of it.

The relation between board of directors.Relation of the employee at different level oforganization.


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HUMAN RESOURCE

Skill, quality, morale, commitment of the people.Ability of the employee to cope up with change .The remuneration provided to the employee.

The welfare activities like food, clothing, cleanliness atwork place.Promotion and performance appraisal.


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COMPANY IMAGE AND BRANDEQUITY

The IMAGE OF THE COMPANY IN THE MARKET.

McDonalds should be the leading provider of moderately

priced, quality food to anyone, anywhere. It matters when the company want to merge withsomeone or want to acquire new company .At times to get timely supply from the suppliers and tohave the resources on credit.At times of timely payment of debt.At the time of having money from the shareholders.


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Miscellaneous factors

Physical assetsResearch and development

Marketing activityFinancial stability

Documents

Chapter-1 Introduction to Business Environment