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THE NATURE AND SCOPE OF BUSINESS ENVIRONMENT
EVENTS AFFECTING BUSINESS
CPI ---- Backing out in the matter of INDIA signing The Nuclear Deal With The USA (PE)
RELIANCE ---- Walking out of Retail in U.P. (SE)
TATA Nano ---- Being evicted from Singrur
US Sub ---- Led to worldwide recession (IE) prime Crisis
NEW ECONOMIC ---- Led to economic progress (EE) POLICY OF INDIA
RANBAXY ---- 30 Drugs banned by USFDA (LE) TROUBLE
RIL …… Resistance to increase in tariffs (SE)
Budget ……. Placing emphasis on Rural Sector (EE)
Pope’s Call ……. Threat to Outsourcing
SEZ ……. Stamp duty waiver (PE)
SATYAM ---- Poor Internal management (LE ) COLLAPSE
MEANING & SCOPE OF BUSINESS
PRODUCER USERTO
Activity
…. Obtain various inputs
…. Raise financial resources
…. Raise funds from capital markets
…. Transport finished product to market
…. Advertisement creates awareness of product
…. Distribution agencies reach the product to the ultimate user
…. Risks are covered through Insurance companies
….. PRODUCTION
BUSINESS DIMENSIONS
….. TRADE
….. TRANSPORT
….. FINANCE
….. BANKING
….. INSURANCE
….. ADVERISING
….. INDUSTRY ….. COMMERCE
CHARACTERISTICS OF MODERN BUSINESS
LARGE SIZE
OLIGOPOLISTIC CHARACTER
DIVERSIFICATION
GLOBAL REACH
HUL, Telco, L&T, Tata Motors, Maruti Udyag, Hero Honda
Small number of firms selling a homogenous or differentiated product
Modern business in its attempt to grow over time takes recourse to diversification
Companies have expanded their revenues and assets base across countries and engage in cross border flow of capital goods and know how
GOVERNMENT CONTROL
CHANGE
TECHNOLOGY ORIENTATION
Role of Govt. in both developed & underdeveloped countries has diminished
Govt. Role
Market failures
Externalities
Public goods
Strategies for making changes in product design, quality, and packaging for offering differentiated products.
Technology orientation to improve products and cut costs. R & D
Japanese & Korean Companies
CHARACTERISTICS OF ENVIRONMENT
Complex
Dynamic
Multi- faceted
Impact
Environment consists of a number of factors, events, conditions and influences arising from different sources which impact business
Environment is constantly changing
Environment has different effects on different industries e.g. WTO
Environment has different effects on different firms in the same industry e.g. Drugs
Opportunity & Threat
Increases Competition
Unpredictable
It may be an opportunity as well as a threat to expansion. E.g Liberalization…HUL
General environmental changes alter the boundaries of an industry and change the nature of its competition
Environmental changes are difficult to predict with any degree of accuracy e.g. interest rate fluctuations, rate of inflation, exchange rate variations.
IMPORTANCE OF THE STUDY OF BUSUNESS ENVIRONMENT
STRATEGIES & POLICIES : Helps an organization its broad strategies and long term policies
COMPETITORS ANALYSIS : Enables an organization to analyse its competitors strategy and thereby formulate effective competitive strategies
DYNAMISM : Knowledge about changing environment will keep the organization dynamic in its approach IMPACT : Enables the organizations to foresee the impact of socio-economic changes at the national and international level on its stability
ADJUSTMENT : As a result of the study, executives are able to adjust to the prevailing conditions and thus influence the environment to make it congenial to do business
Environment and Strategic Management
Environ-mental
scanning
Strategy Formul-
ation
Strategy Implemen-
tation
Evaluation and
Control
Input Providers
Customers
Channel Members
Employees
Rivals
Government
INTERNAL ENVIRONMENT
Domestic Macro Environment
Non Economic Macro Environment
Growth & Distribution Environment
Economic System
Economic Stability
Competitive Environment
Socio-Cultural Environment
Demographic Environment
Economic Policy
EXTERNAL ENVIRONMENT
INTERNATIONAL ENVIRONMENT
DIFFERENT LAYERS OF BUSINESS ENVIRONMENT
Internal Environment
INTERNATIONAL ENVIRONMENT
INTERNATIONAL ENVIRONMENT
Domestic Macro Environment
Non Economic Macro Environment
Growth & Distri- bution En- vironment
Economic System
Economic Stability
Competitive Environment
Socio- Cultural Environment
Demo- graphic Envi- ronment
Economic PolicyCustomers Rivals
Input Providers
Employees
EXTERNAL
BUSINESS
Channel Members
Govern-ment
THE INTERNATIONAL
ENVIRONMENT
DOMESTICMACROECONOMIC
ENVIRONMENT
SECTORALENVIRONMENT
PUBLIC RELATIONS
ENVIRONMENT
BUSINESS ENVIRONMENT
INTERNAL ENVIRONMENT
NON ECONOMIC ENVIRONMENT