business environment

Business Environment

The objective of the paper is to provide the student with a background of various environment factors that have major impact on business and sharpen their mind to watch and update the changes that occur constantly and analysis

of competitive business environment with special reference to India.

Unit I: Business Environment and Analysis:

The concept of Business Environment, significance and nature. Overview of Political, Socio-cultural, Legal, Technological environment: Impact of technology on business. Technological policy, import of technology, appropriate technology, problems in technology transfer. Global environment. Environment Scanning: meaning, nature and scope, the process of environmental scanning, Interaction between internal and external environments.

Unit II: Indian Financial System: Current Financial Structure, Non Banking Finance Companies (NBFCs) and Financial Institutions. Reforms of the banking sector and Financial Sector, Role of SEBI, FEMA. The changing dimensions of these laws and their impact on business.

Unit III: Macro Economic policies of India: Indian tax system, Direct and Indirect taxes. MODVAT, CENVAT and Value Added Tax. An evaluation of recent fiscal policy of Government of India – Highlights of Budget. Monetary Policy: RBI , Objectives of monetary and

credit policy, Policy tools and Recent trends of Monetary Policy.

Unit IV: Micro Economic policies of India: Public sectors reforms and disinvestment, Industrial Policy in recent years, MRTPAct. policy, Foreign investment Policy, EXIM Policy, Flow of Capital, Acquisition, Mergers, India and WTO.

Unit V: LPG Liberalization, Privatization and Globalization: New Economic Policy , Privatization, Liberalization Globalization, their Implication for Indian Business, its Impacts and emerging trends and issues of

LPG in Indian Business

Environment:

Environment means the surroundings, external objects, influences or circumstances under which someone or something exists.

The environment of any organization is the aggregate of all conditions, events, influences that surround and affect it.

Business – Economic activity

Business Firm – Economic Unit

Business Decision Making – Economic in Nature

Business Firm: Adaptability and adoptability to environment.

Managers: Capability to deal with environment.

Internal Environment

External Environment

Business Environment

Regarded as controllable factorsRegarded as controllable

factorsRegarded as uncontrollable

factors

Internal and External business environment

Internal business environment Internal structure System, culture Staff Resources of the organization Marketing-distribution Finance accounting Human resources Production-operation Research-development

External business environment Industry level Suppliers Customers Competitors Financiers Society General level Regional National International level

Macro Environment:

Economic Environment

Economic System

Growth

Economic stability

Economic policy

Non Economic Environment

Political Environment

Regulatory & Legal Environment

Social / Cultural Environment

Demographic Environment

Technological Environment

Natural Environment

Determinants of International Environment for Business

State of world economy. International economic cooperation. Role of multinational economic institution. International economic laws ,agreement codes. Political condition & system in different countries. Growth and speed of MNCs. Technology growth & transfer. International market structure and competition. Barriers of international trade & investment.

Nature of Business Environment:

Dynamic Uncertain Opportunity & Threat Internal & External factors Economic and Non Economic factors

Significance of Business Environment

Facilitates operations of the organization. Form the basis of long term policies, plans and strategies of organization. Help organization in identifying & understanding its competitors. Help the firms to expand & grow.

Corporate response & adjustment to specific changes in Business Environment:

Competitive Environment Marketing Strategy Developing new product Satisfying customers Measuring for realization of

economies of scale and scope

Technological Environment Research & development Foreign technical

collaborations Choice of technology Capital labour ratio

Corporate response & adjustment to specific changes in Business Environment:

Labour Environment Productivity Employee motivation Working Conditions Compensation

Social Environment Social responsibility Welfare expenditure

Legal Environment Procedure & documentation Ethics Practices Intellectual property

protection Credibility

Types of Business Environment Risk

Legal Risks

Regulatory Risks

Political Risks

Social Risks

Natural Risks

Process of Environment Analysis :

Scanning : General surveillance of environmental factors & their interactions.

Monitoring : Tracking environmental trends events.

Forecasting: Developing plausible projections of direction, scope & intensity of

environment changes

Assessment: Identifying & evaluating how & why current and projected environment

changes will affect strategic management of organization

Environment Scanning

Environmental scanning is a process of gathering, analyzing, and dispensing information for tactical or strategic purposes. The environmental scanning process entails obtaining both factual and subjective information on the business environments in which a company is operating or considering entering.

Strategic planning in which manager try to determine best fit b/w organization and its external environment.

Important step towards corporate planning & business policy decision.

Aimed at conditions improvement of the company, its policies & programs.

Internal Scanning :Acquisition, analyses, use of information from within the organization that will help the mngt in determining future course of action of business.

External Scanning:Acquisition, analyses, use of information about events & establishing the relationship of business with its environmental variables.

SWOT analysis

Important Information :

The size and type of sectors represented How many people they currently employ Business expansion initiatives Employee shortages Skills required Business growth opportunities Gaps in the business sector

There are three ways of scanning the business environment:

Ad-hoc scanning - Short term, infrequent examinations usually initiated by a crisis

Regular scanning - Studies done on a regular schedule (e.g. once a year)

Continuous scanning (also called continuous learning) - continuous structured data collection and processing on a broad range of environmental factors

Macro environment

Economy Government Legal Technology Ecology Socio-cultural Potential suppliers Stakeholders

Economy

GDP per capita economic growth unemployment rate inflation rate consumer and investor confidence inventory levels currency exchange rates merchandise trade balance financial and political health of trading partners balance of payments future trends

Government

political climate - amount of government activity political stability and risk government debt budget deficit or surplus corporate and personal tax rates payroll taxes import tariffs and quotas export restrictions restrictions on international financial flows

Legal

minimum wage laws environmental protection laws worker safety laws union laws copyright and patent anti- monopoly laws Sunday closing laws municipal licences laws that favour business investment

Technology

efficiency of infrastructure, including: roads, ports, airports, rolling stock, hospitals, education, healthcare, communication, etc.

industrial productivity new manufacturing processes new products and services of competitors new products and services of supply chain partners any new technology that could impact the company

Socio-cultural demographic factors such as:

population size and distribution age distribution education levels income levels religious affiliations

attitudes towards: materialism, capitalism, free enterprise individualism, role of family, role of government, collectivism role of church and religion consumerism environmentalism importance of work, pride of accomplishment

cultural structures including: diet and nutrition housing conditions

Potential suppliers

Labour supply quantity of labour available quality of labour available stability of labour supply wage expectations strikes and labour relations educational facilities

Material suppliers quality, quantity, price, and stability of material inputs delivery delays level of competition among suppliers

Service providers quantity, quality, price, and stability of service facilitators special requirements

SWOT analysis

Strengths: attributes of the person or company that are helpful to achieving the objective.

Weaknesses: attributes of the person or company that are harmful to achieving the objective.

Opportunities: external conditions that are helpful to achieving the objective.

Threats: external conditions which could do damage to the objective.

List Strengths:Develop a list of all of the internal strengths of the agency incorporating

feedback from the team members, emails and surveys. Discuss the strengths and clarify any questions or confusion.

Examples of strengths could include an experienced staff or good employee training program.

Identify Weaknesses

Weaknesses are internal factors that may impact workforce planning negatively.Examples of weaknesses could include an absence of procedural manuals or lack of an employee mentoring program. It is possible that a strength could also be a weakness. Forexample, long-time employees could be a strength because of their experience, but may be a weakness because it might indicate a workforce close to retirement..

List Opportunities:

Opportunities are external factors, as opposed to the internal factors of strengths and weaknesses. Opportunities could include new relevant training programs at educational institutions or an emerging diverse workforce.

Identify Threats:

Threats are also external factors. Threats could have a negative impact on your workforce planning and could include a projected increase in the costof employee health insurance or an expected reduction in government funding. Again it is possible that an opportunity may also be perceived as a threat. For example, new technology tools might be an opportunity, but also threaten staffing levels.

Establish Priorities

SWOT Analysis

Strengths Weaknesses

What does your community do well?

What unique resources do you have?

What do others see as your strengths?

What could you improve?

Where do you have fewer resources than other communities?

What do others see as your weaknesses?

Opportunities Threats

What good opportunities are available to you?

What trends would you take advantage of?

How can you turn your strengths into opportunities?

What trends could affect you negatively?

What are competing communities doing?

How would a weakness be potential threat?

Responses When an issue is detected, there are generally six ways of responding to

them: opposition strategy - try to influence the environmental forces so as to

negate their impact - this is only successful where you have some control over the environmental variable in question

adaptation strategy - adapt your marketing plan to the new environmental conditions

offensive strategy - try to turn the new influence into an advantage - quick response can give you a competitive advantage

redeployment strategy - redeploy your assets into another industry contingency strategies - determine a broad range of possible reactions -

find substitutes passive strategy - no response - study the situation further

Role of Business Economists:

To provide economic logic & perspective for managerial decision making.

Integrating economic theory with practical business environment.

Monitoring, scanning, careful analysis & interpretations of business environment.

Forecasting, future planning & formulating future business strategy.

Thank You