Business

INPUT
Processing
Human Output
Physical Products/
Transformation
Financial Services
of inputs into
Technology
outputs
Organisation

Environmental Factors
Business Environment Analysis
 Environmental factors influence business directly or
indirectly:
 Micro environment: Micro environment of business
enterprise refers to study on small area or immediate
periphery of the business organisation. Micro
environment directly or regularly influence business
organisation
 Macro environment: Macro environment studies the
overall issues of firms and broader dimensions. It
principally consists of economic, technological,
political, legal and socio-cultural factors.
Micro environment
The micro / operating environment consists of the
organisation or company’s immediate environment
that affects the performance of the
organisation/company. These include :
 Consumers/Customers
 Competitors
 Marketing intermediaries
 Suppliers
 Intermediaries
 Public
Customers
 • Individual Households
 • Industries
 • Other commercial establishments
 • Governments
 • Other institutions
Competitors
 In order to assess a company’s potential to succeed in
the market, the firm must be compared with its
competitors. Through its business idea, the company
must find a way to satisfy customers’ needs better than
competitors. The company must succeed in :
 • identifying its competitors
 • evaluating the strengths, weaknesses and strategies
of competitors
 • finding a suitable competitive strategy with regard to
competing companies
Competitive Environment Analysis
 “Organisations succeed in a competitive market place
over the long run because they can do certain things
their customers value better than can their
competitors”.

 “Only firms who are able to continually build new

strategic assets faster and cheaper than their
competitors will earn superior returns over the long
term”.
 C.C. Markides and P.S. Williamson
Nature and Extent of Competition
 Who are the competitors in the market?
 What are their product and services in the market?
 What are their market share?
 What are their financial positions?
 What is the cost of products and services in the
market?
 Who are the potential competitors ?
 What are the future products and services which are
offered to customers?
 What is the target market?
Porter’s 5 Forces Model
 The risk of new entry by New competitors
 • Bargaining power of Buyers
 • The bargaining power of supplier
 The degree of rivalry among established companies
within an industries
 • The closeness of substitute to the industry’s product
 Porter’s 5 forces Model
Potential new Competitive
entrants pressures
Competitive
coming from
pressures
the threat of
stemming from
entry of new
suppliers
rivals
bargaining
power
Industry Competitors

Buyers
Suppliers

Rivalry among existing firms

Competitive Competitive
pressures coming pressures
from substitute coming from
products buyer
Firms in other
industries offering bargaining
power
substitute products
Response to five forces
 Identify the specific pressures associated with each of
the 5 forces
 Evaluate how strong the pressures comprising each of
the 5 forces are: (fierce, strong,mederate to normal, or
weak)
 Determine whether the collective strength of the five
competitive forces is conducive to earning attractive
profits
Marketing Intermediaries
 • Middlemen-retailors, wholesalers,etc.
 • Agents
 • Merchants
 • Marketing agenesis
 • Advertising agencies
 • Marketing research firms
 • Media
 • Consulting firms
Public
 Public is the one important marketing intermediaries
for promoting, advertising, channeling, selling the
organisation’s product into different segmentation.
 If public accept the product of the organisation,
definitely it will be successful in the market, suppose
product is rejected by the public definitely it will close
the company.
Macro Environment
PESTLE Analysis :
 Political factors
 Economic factors
 Social factors
 Technological factors
 Legal factors
 Environmental factors - climate, weather, geographical
location, global changes in climate, etc.
Political Factors
 Political stability
 Political Ideologies
 Thrust areas of political leaders
 Government Policies-Fiscal/ Monetary
 Regulatory Bodies
Economic Factors
 GDP –growth rates
 Market and Trade cycles
 Inflationary state
 Employment scenario- employment / unemployment
 Specific Industry Factors
 Interest and Exchange rates
 Taxation policies
Social & Cultural
 Demographics
 Religious/ Ethnic
 Cultural/ Linguistic
 Consumer buying patterns
 Consumer attitudes/opinions
 Brand image impact
 Media views including social networking
Technological Factors
 Manufacturing Maturity and capacity
 Maturity of Technology
 Pace of Innovation
 Technology Access, licensing, and patents
 Intellectual property rights/ copy rights
 Replacement Technology/ solutions
Legal Factors
 Constitution of the country
 Business and Corporate Laws
 Employment Law
 Competition Law
 International Treaty and Laws
 Double Taxation
 Health and Safety Laws
 Regional legilation,,ETC.
Ecological issues
 Climate change/ ozone layer---major issues
 Environmental hazards
 Environmental legislation
 Air,water and noise pollution
 Waste disposal
 Energy consumption
SWOT analysis

Strengths
Weaknesses
Opportunities
Threats
Tows MATRX
 Threats
 Opportunities
 Weaknesses
 Strengths
BCG Growth-Share Matrix
 Stars-These are products that are growing rapidly, they
require heavy investment, best opportunities for expansion
 Cash Cows- These are low growth, high market share
products.they generate cash and have low costs.
 Question marks-These are low market share but high
growth products.they require a lot of cash to hold their
share. High investment having low potential to generate
cash
 Dogs-these are low growth, low share businesses/
products. They may generate enough cash to maintain
themselves, but do not have much future
stars Question Marks

????
Cash cows Dogs
Developing Company Profile
Functional approach key strategic factors are as follows:
 • Marketing
 • Finance and accounting
 • Production /operation/ technical
 • Human resource development
 • Organisation of general management
Marketing
 Organisation’s products/service; product life cycle and marketing strategy.
 • Concentration of sales in few products or little customer segmentation.
 • Ability to be gathered information about the market.
 • To know the market share or sub market share.
 • Product/service mix and expansion potential: to know the life cycle of key products;
to know the
 profit or loss of the product/service.
 • To clearly know the channel of distribution; number, coverage, and control.
 • To maintain effective sales organisation: to find out knowledge about the customer
needs.
 • To improve product/service quality with image and reputation of brand name.
 • Efficient and effective utilization of available resource for effective sales promotion
and advertising.
 • To aware of the pricing strategy and pricing flexibility.
 • To effective monitoring and feedback of the marketing functions and expansion of
product.
 • Effective implementation of after sales service and follow up.
 • To keep standards, goodwill and brand loyalty
Finance and Accounting
 Ability to raise short term and long-term capital: either debt or equity.
 • To maintain good corporate level resource.
 • To know the cost of capital relative to industry and competitors.
 • Tax consideration.
 • To build up effective relationship with owners, investors, financial institution and stock
holders.
 • To know the leverage position: capacity to utilize financial strategies, like lease or sale
and lease
 back.
 • To aware of the cost of entry and barriers of the entry.
 • To know the price earning ratio.
 • Present working capital position of the organisation.
 • Effective cost control and ability to minimize cost of expenditure for production of
goods and
 service.
 • Financial size of the organisation.
 • Efficient and effective accounting system for cost, budget, and profit planning of the
Production
 To know the present raw material cost and availability.
 • Inventory control system of the organisation.
 • Location facilities; layout and utilization facilities.
 • Technical efficiency and effective utilization of technical resource in the
organisation.
 • Effective use and implementation of subcontracting.
 • Degree of vertical integration in terms of value added and profit margin of the
product.
 • To know the efficient and cost benefit of production techniques.
 • Effective utilization and implementation of operation control procedure:
design, scheduling,
 purchasing, quality control and efficiency.
 • To know the costs and technological competencies relative to industry and
competitors.
 • Research development, innovative, advance technological development.
 • Patents, trademarks and similar legal protection for their organisation products/
service.
Human Resource Development
 • Effective management of the human resource in the
organisation:
 • Improvement of employee skill and morale.
 • Labor relations costs compared to industry and
competition from present industry scenario.
 • Efficient and effective formulation and implementation
and controlling of the policies.
 • Effective utilization of incentive to motivate employees’
performance.
 • To know the ability to level peaks and valleys of
employment.
 • To regulate employee turnover and absenteeism.
 • Specialized skills and experience.
Organisation of General
Management
 To know the organisation structure:
 • Organisation image and prestige to public world.
 • Organisation record for achieving goals and objectives.
 • Effective utilization of resource and overall organisation
control system.
 • To effectively monitoring organisation cultural climate.
 • Effective utilization of systematic procedure and tools and
techniques in decision-making.
 • To know the top management skills, capabilities and
interest.
 • Effective implementation of strategic planning system.
 • To keep and maintain intra organisation synergy (multi
business)