UNIT -I
Definition: According to Androse “The term
business environment of a company is defined as
a pattern of all external influences that effect its
life and development.
Business environment consist of all those factors
that have a bearing on the business.
The survival of a business firm depends on its
innate strength resources at its command and its
adaptability to the environment and the extent to
which the environment is favorable to
development of the firm
The survival and success of a firm, thus, depend
on two major factors, viz,- the internal
environment - the external environment.
A SWOT analysis i.e analysis of strengths
and weaknesses of the organisation and
opportunities and threats in the environment.
• The internal environment has two components:
strengths and weaknesses of the organisation.
• The internal factors are generally regarded as
controllable factors because the company has
control over these factors: it can alter or modify
such factors as its personnel, physical facilities,
organisational and functional means, such as
marketing mix, to suit the environment.
The external environment has two components:
opportunities and threats to business.The external
factors such as economic factors, socio-cultural
factors, govt and legal factors, demographic
factors, geo-physical factors etc are
uncontrollable factors.
Business Environment at 3 levels:
Internal environmentcro/task/operating environmentMacro/general/remote environment
Customers
Those people & organizations in the environment who
acquire goods or services from the business are
customers.
As recipients of the business’ output, customers are
important because they determine the business’ s
Types of Customers
Industrial Customers
Institutional Customer
Foreign Customer
• Retail Customer
• Multiple Customer
• Globalization
• Customer Segmentation
Competitors
Other firms in the same industry or type of business that
provide goods & services to the same set of
customers.
In today’s environment most competitors are
cooperating to achieve common goals.
Suppliers
The people & organizations who provide the raw
material the business uses to produce its output.
The relationship among them must of cooperative
in nature in order to save money, maintaining
quality, and speeding products to market.
Reliability
Multiple Supplier
Market Intermediates
Types of Market Intermediates
Middlemen
Marketing Agencies
Financial Institution
Physical Intermediates
PUBLIC
Media Publics
Local Public
Significance of Business Environment:
There is a mutual interdependence between
business and its environment. A business
enterprises is an open system. It continously
interacts with its environment. Business takes
inputs raw materials, capital, labour, energy etc.
from its environment, and transform them into
goods and services and then send them back to
the environment.
Business and its external environment interact in the
following ways.
. Exchange of information
. Exchange of resources.
. Exchange of influence and power.
For incorporating dynamic behavior of environment
Complete knowledge of internal environment
To understand international events, pressures& impact
Economic policies of the govt.
Economic policies of the govt.
To face business problems &challenges
Vigilant regarding dangersAdministrative system
Optimum utilization of resources
Market conditions
Scientific & industrial advancement
Development & success of business
Dimensions of Business Environment:
The main dimensions elements of business
Environment are as follows:-
Economics Environment: The economics
environment comprises of the factors and forces
concerned with means of production and
distribution of wealth. It refers to the nature of
economic system ,organisation of capital and
money markets, income level ,price level,
economic policies of the country etc.
Social Environment: This environment includes
social factors such as attitudes of people ,social
customs and traditions ,education level, size of
population ,trade unions, occupational structure
etc.
Political Environment: Political environment
refers to the country's political system, type of
government, government policies towards
business ,government ,centre state
relations ,public opinion, law and order etc.
Legal/ Regulatory environment:
Legal environment of business includes all the
laws, legal system and judiciary system of the
country. A business has to work within framework
of country's laws and regulations.
Socio-Cultural Environment
Social and Cultural environment refers to the
influence exercised by certain social factors which
are ‘beyond the company’s gate.’ Such factors
include, among others, attitude of people to work,
attitude to wealth, family, marriage, religion,
education, ethics and social responsibility of
business.
LEVELS OF CULTURE: Four levels
National Culture: National culture is the dominant
culture within the political boundaries of a country.
Business Culture: Business culture guides everyday
business transaction.
Organisational Culture: It refers to the philosophies,
ideologies, values, assumptions, beliefs, expectations,
and norms that knit an organisation together and are
shared by its employees.
Occupational Culture: Different Occupational
groups such as physicians, lawyers, accountants,
professors, and crafts people have distinct
cultures- called Occupational cultures.
Technology:
Includes scientific and technological
advancements in a specific industry as well as in
society at large. E.g. Computer industry, etc.
Technological advances can change the rule of
the game; thus every business must be ready to
respond.
Legal and Political
The legal-political element includes the legal and
governmental systems within which a business must
function.
a. Business must operate within the general legal
framework of the countries in which they do business.
b. Businesses are subject to an increase in lawsuits
filed by customers or employees.
c. The political issues which affect businesses include
those which influence the extent of government
regulation.
Natural Environment
Climatic & weather condition.
Availability of Natural resources.
Topographical factors: Physical features of place.
Pollution Control
Demographic Environment
Age Composition
Sex Composition
Education Level
Family size & structure
Urban-rural population
Business Environment
International Business
When business activities are performed on an
international level, these can be termed as
international business.
Basic functions, processes and techniques of
international business are essentially the same as
those involved in domestic business.
What is different is the environment within which
these functions are performed and processes are
carried out.
International Business environments are
unfamiliar and different from the domestic
environment
These variations may need adaptation for
business success.International Business Environment
In the context of a business firm, environment can
be defined as various external actors and forces
that surround the firm and influence its decisions
and operations.
The two major characteristics of the environment as
pointed out by this definition are:
these actors and forces are external to the firm
these are essentially uncontrollable. The firm
can do little to change them
Concept of Globalisation:
Globalisation means " to make global ,that is world
wide or effecting or taking into consideration the
whole world or all people ".Globalisation is a
process of integration of business activities and
growing economic interdependence between
countries in the world economy.
Factors that lead to globalisation:
Growing similarities of countries in terms of
available infrastructure.
Globalisation exposes firms to international
competition.
Employment opportunities wil be increase over a
period of time.
Widening of competition.
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