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Business Environment Basics
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- 2. Objective After reading thissection you should be able to describe the environmental forces that affect the company’s ability to serve its customers & understand the significance of Business Environment .
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- 4. BUSINESS • Business maybe understood as the organized efforts of enterprises to supply consumers with goods and services for a profit. Or • It may be understood as the organized efforts of enterprises to earn profit. Business may be small or big in size but all together the aim at making profit.
- 5. • Business enterprisescannot function in isolation • Open systems interact with their environment • Business enterprises exist in and are surrounded by an ‘environment’ – the business or commercial environment
- 6. • Society andbusiness enterprises are mutually dependent – Business enterprises satisfy societal needs • Relationship between society and business enterprises takes place in a changing environment
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- 8. BUSINESS ENVIRONMENT • Itcan be defined as the forces, factors and institutions with which the businessman must deal with to achieve the objectives. OR • Business Environment is the surroundings in which business exists. Whenever any businessman is operating or working then he must interact with customers, suppliers and he must perform the transactions within the rules and regulations of the government. All these persons, institutions and policies form a part of business environment
- 9. BUSINESS ENVIRONMENT Definitions: “ Environmentof the Business means the aggregate of all conditions, events and influences that surround and affect it.” Keith Davis “ Business Environment is the total of all things external to firms and individuals which affect their Organization and operations.” B.O. Wheeler
- 10. Significance of Business Environment •First Mover Advantage • Warning Signals • Sensitize the Management • Basis of Strategy • Source of intellectual Stimulation • Image Building • Continuous Learning
- 11. COMPONENTS OF THE BUSINESSENVIRONMENT • Different environmental variables exist internally and externally to the business enterprise • Environmental variables have a positive or negative influence on the enterprise
- 12. TYPES OF BUSINES ENVIRONMENT Thereis two types of business environment: Internal Environment These are generally regarded as controllable factors because the company has control over these factors. External Environment These are the one which are beyond the control of a company.
- 13. Internal Environment ValueSystem The values, beliefs and the acceptance of it by the founders, has important bearing on the choice of business, the mission and objectives of the organization, business policies and practice. Management Structure and Nature The organizational structure, the composition of the Board of Directors, extent of professionalization of management etc. are the important factors influencing business decisions.
- 14. Internal Environment InternalPower Relationship The support of the top management to its different employees and vice-versa i.e., the support the top management enjoys from different levels of employees, shareholders. Board of Directors have important influence on the decision and their implementations. Human Assets the competence, morale and motivation of employees have a significant impact in the success of the firm.
- 15. Internal Environment Company Imageand Brand Equity The image and brand equity of the company plays a significant role in raising finance, forming alliance, choosing dealers and suppliers, launching of new products entering foreign markets. Mission and Objectives The business philosophy and the purpose of a company guide its priorities, business strategies, product market scope and its development process.
- 16. External Environment It consist: • Micro-Environment Microenvironment is also known as task environment and the operational environment because the micro environmental forces have direct impact on the operations of the firm. • Macro Environment Macro environment refers to the general environment or remote environment with in which a business firm and forces in its microenvironment operate.
- 17. The Company’s Micro- Environment In designing business/marketing plans, management must take other company groups, such as top management, finance, research and development (R&D), purchasing, manufacturing and accounting, into consideration.
- 18. Micro-Environment Suppliers ofinputs Company’s success to a great extent depends upon the low-cost production of products. This can be ensured by uninterrupted supply of inputs, particularly raw material. Customers A business exists to create and satisfy customers. A firm may have customers like individual's customer, households, government departments, commercial establishments. In order to be successful a company must understand and meet the needs and expectations of its customers.
- 19. Micro-Environment Marketing Intermediaries Middlemenlike agents, wholesalers, retailers serve as a link between the company and its customers. Advertising agencies, marketing research agencies etc. are other types of marketing intermediaries. Competitors A company may face direct as well as indirect competition. Direct competitors are the forms which offers the same or similar products and services. e.g., Sony TV faces direct competition from other brands like Samsung, Onida, BPL.
- 20. Competitors – The marketingconcept states that, to be successful, a company must provide greater customer value and satisfaction than its competitors. Thus, marketers must do more than simply adapt to the needs of target consumers. – They must also gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers. They must strive to anticipate competitor activity and strategy.
- 21. Resellers The individuals andorganizations that buy goods and services to resell at a profit. Physical distribution firms warehouse, transportation and other firms that help a company to stock and move goods from their point of origin to their destinations.
- 22. Micro-Environment Financiers Debenture holders,shareholder, financial institutions provide financial assistance to the firm. Financial capacity, polices and attitude of financiers are important factors for the company. Public A public is any group that has an actual or potential interest in or impact on an organization ability to achieve its interest. e.g., Media group, Non- government organization
- 23. Public Financial public: Influencethe company’s ability to obtain funds. Banks, investment houses and stockholders are the principal financial publics. Media public: Are those that carry news, features and editorial opinion. They include newspapers, magazines and radio and television stations. Government public: Management must take government developments into account. Marketers must often consult the company’s lawyers on issues of product safety, truth in advertising and other matters.
- 24. Public • Citizen actionpublic A company’s marketing decisions may be questioned by consumer organizations, environmental groups, minority groups and other pressure groups. • Local public Every company has local publics, such as neighborhood residents and community organizations. • General public A company needs to be concerned about the general public’s attitude towards its products and activities. The public image of the company affects its buying. • Internal public A company’s internal publics include its workers, managers, volunteers and the board of directors.
- 25. General Environment Economic Technological The External Environment Industry Environment Threatof new entrants Power of suppliers Power of buyers Product substitutes Intensity of rivalry Competitor Environment
- 26. The Company’s Macro- Environment Thelarger societal forces that affect the whole microenvironment - demographic, economic, natural, technological, political and cultural forces.
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- 28. Macro Environment • GlobalEnvironment It refers to those global factors which are relevant to business as the WTO principles and agreements, International-conventional/treaties/agreement/ declarations/protocols etc. economic and business conditions etc. If the economic conditions in a company’s export prospects are generally very good and vice-versa. Recession in other countries can increase the import threats, including dumping.
- 29. Political and LegalEnvironment ?
- 30. Macro Environment • Politicaland Legal Environment Political environment serves as the regulatory framework of business main constituents of political and legal environment are: o Image of the country and its leaders o Defense and military policy o Laws governing business o The constitution of the country
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- 32. Macro Environment • Economicand Financial Environment : o For business, the economic system is a parameter, and the business has no choice but to adjust itself with in the framework of the given economic system. o The nature of economic system is capitalist, socialist and mixed economy o Economic Policies- i.e., the industrial policy, monetary policy, fiscal policy o Economic infra-structure o The markets and their factors which affect the market
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- 34. Macro Environment Technological andphysical Environment The main components of technological and physical environment are o Research and development (R&D) systems o Rate of technological changes o Approaches to production of goods and service
- 35. Social and culturalEnvironment ?
- 36. Macro Environment • Socialand cultural Environment Social environment refers to the characteristics of the society in which a business firm exist and operates. Social and cultural factors include: o Religion o Caste, Traditions, Norms, Beliefs o taste and preferences of customers o Social and Non-government organization o Education system
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- 38. Macro Environment Natural Environment oPopulation and its density o Agriculture resources o Natural resources o Ecological system o Climatic conditions under which the firm operates