Business environment [autosaved]

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Business Environment

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

In other words , business environment is individual and organisation that exists outside the business and have influence direct and indirect to the business.



Why study Business Environment?The success of every business depends upon adapting itself to the environment

within which it functions. For Example:1. When there is a change in government policies, the business has to make the

necessary changes to adapt itself to the new policies.2. Change in technology may render the existing products obsolete, introduction of

colour T.V television replaced the black and white T.V or introduction of computers replaced type writers.

3. Introduction of Jeans affected traditional wear. Etc. All these aspects are external factors that are beyond the control of business. Hence it is very important to have a clear understanding of concepts of business environment in order for business units to adapt themselves to the BE.



Importance Of Business Environment Identification of strength Identification of weakness Identification of opportunities Identification of threats Exploitation of Business opportunities Keeping business enterprise alert

Keeping business flexible and dynamic Understanding future problems and

prospects Making business socially acceptable Ensures survival and growth



Business Environment

External Factors

Micro Factors

Macro Factors

Economic Non Economic

Internal Factors

structure



INTERNAL ENVIRONMENTThe internal environment is the environment that has

a direct impact on the business. Here there are some internal factors which are generally controllable because the company has control over these factors. It can alter or modify such factors as its personnel, physical facilities, and organization and functional means, like marketing, to suit the environment.



EXTERNAL ENVIRONMENT

It refers to the environment that has an indirect influence on the business. The factors are uncontrollable by the business. There are Consists of Micro and Macro environment.



“It consists of the factors in the company’s immediate environment that affect the performance of the company”. Micro factors influencing a business include: Market size Demand Supply Competitors Suppliers Distribution chain, such as retailer stores

Micro Environment



Macro Environment

It comprises general trends and forces that may not immediately affect the organization but sooner or later will alter the way organization operates.



Economic Environment• Economic stages that exists at a given time in a

country • Economic system that is adopted by a country for

example. Capitalistic, Socialistic or Mixed Economy• Economic planning, such as five year plans,

budgets, etc.• Economic policies for example, monetary,

industrial and fiscal policies• Economic Indices such as National Income, Per

Capital Income, Disposable Income, Rate of growth of GNP, Distribution of Income, Rate of savings, Balance of Payments etc.

• Economic Problems• Functioning of economy



Non Economic Environment

Regulatory EnvironmentSocio- Cultural EnvironmentDemographic EnvironmentTechnological EnvironmentPolitical Environment



The role of the Business Environment

The role of the business environment is perceived as being of a major importance in ensuring a competitive position of a nation. According to the assessment of the World Economic Forum, approximately 80% of the differences in the GDP per capita in different countries is due to the microeconomic gap (Stiglitz 2003)



Research Institutions

• World Bank • The Heritage Foundation• Fraser Institute• Fitch Ratings• World Economic Forum



Doing BusinessEase of Doing Business Index:

• Starting a business• Dealing with construction permits• Getting electricity• Registering property• Getting credit• Protecting investors• Paying taxes• Trading across borders• Enforcing contracts• Resolving insolvency



Economy Rankings

Economy Ease of Doing Business Rank

Singapore 1New Zealand 2

Denmark 3South Korea 4Hong Kong 5

United Kingdom 6United States 7

Sweden 8Norway 9Finland 10

Economy Ease of Doing Business Rank

Haiti 180Angola 181

Venezuela 182Afghanistan 183Democratic

Republic of the Congo

184

Chad 185South Sudan 186

Central African Republic

187

Libya 188Eritrea 189



Economy RankingsEconomy Ease of Doing Business

Rank

Lesotho 115

Brazil 116

Ecuador 117

Iran 118

Barbados 119

Belize 120

Argentina 121



World Economic ForumGlobal Competitiveness Index:

It is made up of over 110 variables, of which two thirds come from the Executive Opinion Survey, and one third comes from publicly available sources such as the United Nations. The variables are organized into twelve pillars, with each pillar representing an area considered as an important determinant of competitiveness.



The Global Competitiveness Index 2016–2017 Rankings



The Global Competitiveness Index 2016–2017 Rankings



Heritage Foundation

The Index of Economic Freedom is an annual index and ranking created by The Heritage Foundation and The Wall Street Journal in 1995 to measure the degree of economic freedom in the world's nations. The creators of the index took an approach similar to Adam Smith's in The Wealth of Nations, that "basic institutions that protect the liberty of individuals to pursue their own economic interests result in greater prosperity for the larger society".



Country Rankings




Business environment [autosaved]

Economy & Finance