UNIT 1 Buss Environ

8/6/2019 UNIT 1 Buss Environ

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UNIT 1

BUSINESS ENVIRONMENT

CONCEPT OF BUSINESSNATURE, ELEMENTS,

IMPORTANCE OF BUSINESS

ENVIRONMENT,ENVIRONMENTAL ANALYSIS



Nature of Business

Business may be understood asthe organised efforts of enterprises to supply consumers

with goods and services for aprofit.

Businesses vary in size as

measured by number of employees orby sales volume

Large Organisations such as Steel

Authority Of India Ltd SAIL and Tata



Business Objectives

EARNING PROFIT

GROWTH

EMPLOYEE SATISFACTION ANDDEVELOPMENT

QUALITY OF PRODUCTS AND SERVICES

MARKET LEADERSHIP

JOY OF CREATION

SERVICE TO SOCIETY



BUSINESS ENVIRONMENT

It is very important to understand theenvironment within which the businessoperates as it is ultimately responsible

for the success of the business.

For eg when there is a change in thegovernment policies the business has

to make the necessary changes toadapt itself to new policies.

Similarly a change in the technology

may render the existing products



MEANING OF BUSINESSENVIRONMENT

The term business environment means external forces, factorsand institutions that are beyond the control of the business andthey affect the functioning of a business enterprise.

They include customers, competitors, suppliers, government andthe social political, legal and technological factors etc.

Thus Business Environment may be defined as the totalsurroundings which have a direct or indirect bearing on thefunctioning of the business.

It may be defined as the set of external factors such as

economic, social, political, and legal, demographic, technicalwhich are uncontrollable in nature and affect the businessdecisions of a firm.



FEATURES OF BUSINESSENVIRONMENT

Business environment is the sum totalof all factors external to the businessfirm and that greatly influence their

functioning.

It covers factors and forces likecustomers, competitors, suppliers,

government, and the social, cultural,political, technological, legalconditions.

The business environment is dynamic



Importance of BusinessEnvironment

Determining opportunities and Threats—The interaction between thebusiness and its environment would

identify opportunities for and threatsto the business.

Giving direction for growth—The

interaction with the environment leadsto opening up new frontiers of growthfor the business firms.

Continuous Learning—Environmental



ENVIRONMENTAL ANALYSIS

It is the indepth study of theenvironment which surrounds thebusiness and affects its performance.

William Gluek and Lawrence Jauchhave stressed that “EnvironmentalAnalysis and diagnosis give strategists

time to anticipate opportunities and toplan to take optional responses tothese opportunities. It also helpsstrategists to develop an early warningsystem to prevent threats to the firm.”



Environmental Analysiscontd…….

Firms which systematically analyseand diagnose the environment aremore effective than those which don’t.

Without a systematic environmentalsearch and diagnosis the time pressureof the managerial job can lead to

inadequately thought out responses tothe environmental changes.





Objectives in short

Development of broad strategies andlong term policies of the firm.

Development of action plans to dealwith technological advancements.

To foresee the impact of

socioeconomic changes at the nationaland international levels on the firmsstability.

Analysis of competitors strategies andformulation of effective counter



EG OF FIRMS

Firms which have initiated changes inresponse to environmental changes—

Crompton Greaves—Fear of Multinationals, poor financial results,return of consignment of fans fromItaly as the taples on its boxes

gathered rust.

Environmental Changes--Restructuredthe company into four strategic

business units, each headed by a



THE PROCESS OF E.ANALYSIS

Environmental Analysis is challengingand time consuming and expensiveaffair. But it is essential to be done.

The Analysis consists of four essentialsteps:

Scanning---Scanning involves general

surveillance of all environmentalfactors and their interactions in orderto identify early signals of possible

environmental change and also to



STAGES………

Monitoring---Monitoring involvestracking the environmental trends,sequences of events, or stream of

activities.

It frequently involves following signalsor indicators unearthed during

environmental scanning. The purposeof monitoring is to assemble sufficientdata to discern whether certain trends

or patterns are emerging.



STAGES……………..

Forecasting---Strategic decisionmaking requires a future orientation.Forecasting is concerned with

developing plausible projections of thedirection, scope, and intensity of environmental change.

It tries to layout the path of anticipatedchange.

Eg How long will it take for the new

technology to reach the market place?



STAGES………………

Assessment---Unless the outputs of scanning, monitoring and forecastingare assessed to determine the

implications for the organisation’scurrent and potential strategies theinformation provided would be futile.

Assessment involves identifying andevaluating how and why current andprojected environmental changes

affect the management of the



LIMITATIONS OFENVIRONMENTAL ANALYSIS

Environmental Analysis does notforetell the future, thus organisation’ssometimes confront unexpected

events that are not anticipated duringthe analysis

Environmental Analysis on an off itself

is not a sufficient guarantee of organisational effectiveness, it is onlyone of the inputs in strategy

development and testing.



TOOLS AND TECHNIQUESFOR E.ANALYSIS

Environmental Scanning—It is theprocess that seeks information aboutevents and relationship’s in a firm’s

environment.

Environmental scanning entailspartitioning the external environment

into sectors, namely, cultural,economic, political, technological andetc.

Data are usually collected and



TOOLS AND TECHNIQUES……………..

SWOT Analysis—Strengths,weaknesses and opportunities andthreats is a basic analytical tool in

management that has become popularin recent years.

It is often used by strategic planners

and top management in developingcompetitive strategies.

It is typically used to decide corporate

strategies and to make product or



TOOLS AND TECHNIQUES………

PEST ANALYSIS—A PEST analysislooks at the Political, Economic, Socialand Technological sectors of a

particular industry.

The PEST analysis focuses on theexternal forces that affects the

organization.

Political Factors—May have direct orindirect impact on the organization’s

operation, decisions, purchasing power



TOOLS AND TECHNIQUES………

Porter’s Five Forces Analysis—Porter identified five forces as:

The threat of new entrants andappearances of new competitors

The degree of rivalry among existingcompetitors in the market

The bargaining power of buyers

The bargaining power of suppliers

The threat of substitute products or

Documents

UNIT 1 Buss Environ