Be1

1) What is BE?

2) Internal Environment

3) External Environment

4) Micro and Macro Environment

5) Porter’s Five Forces Model

6) Environmental Analysis

7) SWOT Analysis

04/07/23 Thapasya Vijayan

Business Environment consists of all the factors that have an ability to impact the way a business operates.

All organizations have certain missions, goals and objectives which they seek to achieve by means of Strategy.

Strategy can be viewed as actions trying to establish a proper firm - environment fit.

The two sets of factors impacting business decisions are

1. The Internal Environment

2. The External Environment


The internal factors are generally regarded as Controllable factors, because the company can alter or modify such factors. The important internal factors are

1.Value System: The value system of the founders and top management affects the choice of business, mission, objectives, business policies and practices. Value system is shared by all in the company.

2. Mission and Objectives: The mission statement articulates the vision of the founders and provides a general idea as to the business domain, priorities , business philosophy of the company.

3. Management Structure and Nature: consists of the organizational structure, extent of professionalization of management, shareholding pattern etc.


4. Internal Power Relationship: The amount of support the management enjoys from relationships with various stakeholders in the business.

5. Human Resources: The skill, morale, commitment, initiate, involvement, willingness, quality, attitude of the work force contribute to the overall environment of the organization and provide it with the requisite flexibility to engage in business.

6. Company Image and Brand Equity: The image of the company with its customers, stakeholders etc which helps it in raising finance, forming joint ventures, launching new products etc.

7. Miscellaneous Factors: Other internal controllable factors like Physical assets, R&D capabilities, marketing resources, financial factors etc.


The External Environment is more complex and uncontrollable. It is divided into two parts:

1. The Micro Environment: also called the Task and the Operating environment. Consists of factors impacting the performance of the company on a regular basis.

2. The Macro Environment: The set of forces that shape opportunities and pose threats to business operations. They are more uncontrollable than factors in the micro environment .


1. Suppliers

2. Customers

3. Competitors

4. Marketing Intermediaries

5. Financiers

6. Publics


1. Political and Regulatory(Legal) Environment

2. Economic Environment

3. Social / Cultural Environment

4. Technological Environment

5. Natural Environment

6. Global Environment



Competitive

Legal

Ecological Technological

Social

Economic

Political

Business

1. POLITICALFactors related to management of public

affairs, their impact on businessPhilosophy of political party in authority has

strong economic consequencePolitical systemEconomic Role of the GovtThe Constitutional Environment

2. ECONOMICMacro level patterns related to production,

distribution of wealthDeveloped, Less/least developedEconomic structures: Capitalism, Socialism,

mixed economyEconomic planningEconomic policies: monetary, fiscal …Economic indices: GNP, PCIInfrastructure etc.

3. SOCIALDifferent Form & functioning of human

relationships that influence businessDemographic characteristicsEducation, extent &quality Family structures & changesSocial attitudes & valuesWork ethics

4.TECHNOLOGICAL

Related to use of knowledge & Embedded technology

Technology sources, cost, collaboration, transfer

Rate of change of technologyImpact on human beings: Man-machine-fit

Studies environment, biotic (water, air, sunlight & soil)

Business & Ecological imbalancePollution : industrial effluents Global warming

5. ECOLOGICAL

6. LEGAL/REGULATORY

Planning & promotion of economic activities by govt. that impact business

Constitution, F. rights & duties, Directive principles, Centre-state relations

Industrial policyDistribution & Pricing (Petroleum)Legislations on monopoly, FDI, FIIEXIM policy regulations

It is an analysis of the strengths and weaknesses inherent in a company and an assessment of the opportunities and threats thrown up by the external environment.


Objectives help define the organization in its environment.

Environmental Analysis helps find answers to questions like:

1. What is the business of the company?

2. What will be the business of the company?

3. What should be the business of the company?

SWOT Analysis:

Identification of the strengths and weaknesses of the firm and the opportunities and threats in the environment


Identification of competitive forces are very useful in formulating strategies.

Michael Porter’s Five Forces Model for Structural Analysis of Industries:

1. Rivalry among existing firms

2. Threat of New Entrants

3. Threat of Substitutes

4. Bargaining power of Suppliers

5. Bargaining power of Buyers04/07/23 Thapasya Vijayan

The factors influencing the intensity of rivalry in an industry include:

1. Number of Firms, Relative Market Share, Strengths etc

2. State of Growth of Industry eg: stagnant industries

3. Fixed or Storage Costs

4. Economies of Scale

5. Product Standardization Switching Costs eg. Mobile connections

6. Exit barriers e.g. running firm


1. Government Policy

2. Economies of Scale

3. Cost disadvantages independent of Scale eg: favorable access to raw materials

4. Product Differentiation eg brand image, customer loyalty virgin mobile

5. Monopoly Elements eg: control over technology, distribution channels etc

6. Capital Requirements – Risk of huge investment


Substitutes offer choice to the customer.

They should be evaluated on the price-performance alternative provided by them.


1. Extent of concentration and domination in the supplier industry

2. Importance of the product to the Buyer

3. Importance of the buyer to the supplier

4. Extent of substitutability of product

5. Switching costs

6. Extent of differentiation or standardization of product

7. Potential of Forward Integration by Suppliers Eg: Farmers


1. The volume of purchase relative to total sale of the seller.

2. The importance of the product to the buyer in terms of the total cost

3. The extent of standardization or differentiation.

4. Switching costs

5. Profitability of Buyer

6. Potential of Backward integration by Buyer Eg: Bakery business

7. Contribution to quality of buyer’s product or service

8. Extent of Buyer’s information 04/07/23 Thapasya Vijayan

It is to diagnose the competitive forces. Enables the firm to answer questions such as:

1. How vulnerable is the firm against potential entrants?

2. How serious is the threat of substitutes?

3. What is the nature of supplier power? How to deal with it?

4. How powerful are the buyers? Bargaining power?

5. What are the strengths, weaknesses and strategies of the established competitors and how to cope with them?


Competitor Analysis is necessary for formulating the right strategies and determining the right positioning for the firm in the industry.

Seeks to find answers to basic questions like:

1. Who are the competitors of the firm?

2. What are the current strategies of the competitors?

3. What are their future goals and likely strategies?

4. What motivates the competitor?

5. Where is the competitor vulnerable?

6. How are the competitors likely to respond to the strategies of others? 04/07/23 Thapasya Vijayan

Mission Objectives SWOT

Strategic Alternatives

Choice of Strategy

Implementation

Evaluation & Control



Glueck defines strategy as a "unified, comprehensive and integrated plan relating the strategic advantages of the firm to the challenges of the environment. It is designed to ensure that the basic objectives of the enterprise are achieved”

Strategic Management is defined as “that set of decisions and actions which leads to the development of an effective strategy or strategies to help achieve corporate objectives”

Strategy is the means to achieve the ends or objectives of the company.

Be1

Technology

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