BUSINESS AS A SYSTEM Which of the following represent the ‘ Integrated Whole Thing “ : Digestive System Digestive Method Digestive Process Sound SystemSound Method Sound Process Music SystemMusic Method Music Process Computer SystemComputer MethodComputer Process Political System Social System Cultural system Economic System Technological System Legal System Contd … 26/01/2014 1 [email protected]
Business.environment
Oct 19, 2014
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
BUSINESS AS A SYSTEM
Which of the following represent the ‘ Integrated Whole Thing “ :
Digestive System Digestive Method Digestive ProcessSound System Sound Method Sound ProcessMusic System Music Method Music ProcessComputer System Computer Method Computer Process Political SystemSocial SystemCultural systemEconomic SystemTechnological SystemLegal System
Contd …26/01/2014 [email protected]
BUSINESS AS A SYSTEM
System will:Draw Input
Process it Internally and Releases output into environment
BusinessDraw Input – Material , Energy , Information
Process it Internally - Into different Material , energy and Information
Releases output into environment – Tangible, Intangible and Information
Contd …[email protected]
Business & Environment InterfaceInteraction of Business & its Surroundings
I. Micro environment of business.1) Suppliers
Supply raw materials and other components (Inputs)
Importance- Reliable supply – continuous supply for
smooth functioning
Contd …[email protected]
Business & Environment InterfaceMicro environment of business.
2) CUSTOMERS
Different categories of customers
i. Industrial customers
ii. Wholesale customers
iii. Retail customers
iv. Government customers
v. Foreign customersContd …[email protected]
Business & Environment InterfaceMicro environment of business.
3) Market intermediariesi. Middlemen.
ii. Physical distribution Firms: (warehouses and transport firms)
iii. Marketing service agencies (Advertising agencies market research firms, media firms, consulting firms)
iv. Financial intermediaries
Contd …[email protected]
Business & Environment InterfaceMicro environment of business.
4. Competitors:
The Threat of entry of new firms The Power of Buyers The Power of Suppliers The Power of Substitutes The Intensity of Rivalry among existing firms
Contd …[email protected]
Business & Environment InterfaceMicro environment of business.
Competitors:
1. The Threat of entry of new firm
1. Economies of scale2. Capital Requirement3. Access to Channel4. Absolute cost advantage 5. Expected Retaliation5. Government Policy7. Differentiation
• Economies of Scale• Unit cost Inverse to units producedMeasured by ‘ Minimum Efficient Scale ‘Or Market shareMES volume is necessary to competeat minimum cost.
Strategy : ‘Just in time ‘ & Lean manufacturing to counter
economies of scale
• Capital requirement• Internet / Knowledge based services
less costly
Business & Environment InterfaceMicro environment of business.
Competitors:1. The Threat of entry of new firm
1. Economies of scale2. Capital Requirement3. Access to Channel4. Absolute cost advantage 5. Expected Retaliation5. Government Policy7. Differentiation
Access to ChannelSelf help groups / Social networks –
New channels of distribution
Absolute cost advantage ‘Learning curve effect’ – Cost advantage
Expected RetaliationGSM Players like NTC,NCELL ,Smart
retaliated entry of CMDA player UTL to operate in GSM field
Government PolicyImport of sugar, Edible oils, Steel ,
Liberation of Insurance & other sectors
DifferentiationExisting company – Strong brand
image, wide range of products to cover all segments
Business & Environment InterfaceMicro environment of business.
Competitors:
2. The Power of Buyers:
1. Concentration of buyers2. Alternative source of supply3. Component cost as a percentage of total cost4. Possibility of backward integration
Concentration of buyersSmall no. of buyer + High Volume
purchase – High buyer powerCoca-Cola – cannot bargain with Malls
Alternative source of supplyMore supply source – high buyer powerBajaj Scooter – Honda, Suzuki, TVS etc
Component cost as a % of total costHigh proportion of component/materialcost to finished goods leads to lookingfor alternatives. Possibility of backward
integration Buyer’s own supply chain – more buyer power – Co-opratives , Self help groups, MLM
Business & Environment InterfaceMicro environment of business.
Competitors:
3. The Power of Sellers:
1. Concentration of Sellers2. Switching costs3. Brand power 4. Possibility of forward integration 5. Dependence on customersDependence on customersNot depending on High volume small no.of buyers – more seller power
Concentration of SellersSmall no. of Sellers– High seller powerLike Monopoly & Oligopoly
Switching CostsHigh switching cost to other seller
source - Seller power increaseHigh-Tec & Specialised goods - SAP
Brand PowerHigh brand power – High powerAriel , Rin - Supermarkets have to sell it
Possibility of forward integration Seller’s own distribution operation –
More power
Business & Environment InterfaceMicro environment of business.
Competitors:4. Threat of Substitution:Non-essential goods where there is theultimate substitute of doing withoutThat:
1. Relative Price & Performance of substitutes2. Switching Costs3.Buyer’s willingness to substitute
Relative performance & Price of SubstitutesSubstitutes with same cost – High threat – Email replaced Post Offices
Switching costsThe Cheaper switching cost - High
threatPet foods , Fast foods , Malls
Buyer’s Willingness to substituteLow-cost articles & infrequent purchase
of articles – little effort made to go for substitutes
Match box – Lighter
Business & Environment InterfaceMicro environment of business.
Competitors:5. Competitive Rivalry:
1. Industry Growth2.High Fixed costs3. Volatile Demand4.Product Differentiation5. Extra Capacity in large increments6. Balance of firms7. High exit barriersIndustry Growth:Rapid Growth – Competition need not be intenseMaturity Phase- Intense competition
High fixed costsHigh Fixed cost – High break even pointIn depression times – Price war tomaintain turnover1990 – UK & USA accused each of
dumping Steel on Export marketVolatile Demand
May lead to intermittent Over-capacitySteel war -1990
Product DifferentiationHomogeneous products – More intense
the rivalry - SteelExtra capacity in large increments
Creates short term over capacity . Honda Nissan – plant in UK
Business & Environment InterfaceMicro environment of business.
Competitors:5. Competitive Rivalry:
1. Industry Growth2.High Fixed costs3. Volatile Demand4.Product Differentiation5. Extra Capacity in large increments6. Balance of firms7. High exit barriers
Balance of firmsIf the no. of firms is large / similar size
the rivalry will be intensive. Clear market leader can bring discipline
High exit barriers High exit barriers – Excess capacity to
persist and rivalry to be intense
Business & Environment InterfaceMacro environment of business.
1. Demography: Quantitative aspects of
population. Qualitative aspects of
population.
1. Population Growth2. Drivers of Population Changes3. Ethnicity of Population4. Implications of Demographic Changes
Population Growth:Year 1000 – Estimated 300 millionYear 1750 – Actual 728 millionYear 1900 – Actual 1500 millionYear 1960 – Actual 3 billionYear 2000 – Actual 6 billion
Drivers of Population Changes
Birth Rate – No. of births per 1000 populationFertility Rate- Av. No. of birth per womenDeath Rate - No. of deaths per 1000 Migration – Country to Country movement
Implication – Consumer, Labour , Employment participation
Business & Environment InterfaceMacro environment of business.
2. Economic environmenti. Economic conditions- GDP, Business Cycle, Unemployment,
Inflation, Balance of Payment, Fiscal Policy, Monetary Policy, Exchange rate Policy, Interest Rate.
ii. Economic policies
a) Budget
b) Industrial policy
c) Trade policy
d) Agricultural policy
iii. Economic system- Capitalistic, Socilalitic, Mixed
Contd …[email protected]
Business & Environment InterfaceMacro environment of business.
3.Political environment
i. Legislature - Labour Laws like Factories Act, EPF Act, ESI Act, Industrial Disputes Act, Minimum Wages Act, Payment of Wages Act, etc
MRTP Act, Law of Contracts, Companies act, IDRA Act, FERA, Import & Export Control act, Tax Laws
ii. Executive- Administrators
iii. Judiciary - District, High Courts, Supreme Court, Tribunals
Contd …[email protected]
Business & Environment InterfaceMacro environment of business.
Contd …
4. Socio cultural environment
i. Attitude of people towards work and health.
ii. Role of family.
iii. Marriage.
iv. Religion.
v. Education
vi. Ethical issues
vii. Social responsibility of [email protected]
Business & Environment InterfaceMacro environment of business.
Contd …
5. Natural environment
i. Natural resources.
ii. Weather and climatic conditions.
iii. Locational aspects.
iv. Nearness to port facilities.
Business & Environment InterfaceMacro environment of business.
Contd …
6. Technological environment
i. Nature of technology
ii. Scope for innovation
Business & Environment InterfaceMacro environment of business.
Contd …
7. International environment
i. Economic
ii. Political
iii. Legal
iv. Demography
v. Technology
Business & Environment Interface
Uses of environment studies1) Awarness
2) Policy decisions
3) Demand forecasting
4) Competitor’s strategies.
5) To innovate
Business & Environment Interface
Techniques for environmental studiesi. Verbal and written information
ii. Search and scanning
iii. Forecasting and formal studie
Business & Environment Interface
Limitations of environmental analysisa) Unexpected events
b) Future is not a guarantee
c) Too much of information.
d) Overcautions approach
Business Sectors
Primary Sector – Agriculture, Mining
Secondary sector - Manufacturing IndustriesManufacturing activities – Electricity Generation and Construction
Tertiary Sector – Services industriesTrade , Commerce, Insurance, Banking,Repair, Transport
Classification of Business – Based on Scope of Business
1. Business which Produce Goods:
Two categories of Goods:
a. Commodities – Goods produced by Primary sector
- Will not undergo any processing
- Agriculture , Fisheries, Mining,
b. Products - Goods produced by Secondary sector
– Conversion of Raw material into another form
- Farms, Diaries,
-Manufacturing Enterprises – Machinery, Materials for -other business, Producing goods for consumption
Classification of Business – Based on Scope of Business
2. Business which Produce Services:
Transport , Telephone , Electric Light ,Hotels ,Entertainment
3. Business which Distribute Goods:
Wholesale merchants
Retail Merchants
Importers & Exporters
4. Business which Facilitates Distribution of Goods:
Warehouse, Auction Houses, Advertising, Financing
5. Business which Deals in Finance:
Commercial Banks, Co-Operative Banks, Development Bankd, Insurance Stock Exchange
Classification of Business – Based on the Nature of Activity
1.Extractive Industries:
Extract goods from natural resources- Oil extraction, Farming, Fishing
2. Genetic Industries:
Produce goods by breeding- Poultries, Bio Tech
3. Manufacturing Industries:
Process Raw materials into finished goods – 4 Types
1. Basic Industries : Iron, Steel
2. Capital goods Industries : Machines
3. Intermediate Industries : Tyre , Tubes
4.Consumer goods Industries : Soap
4. Construction Industries
Canals, Dams, Road, Buildings, Road
5. Service & IT [email protected]
Classification of Business – Based on Uses of Goods Produced
1. Basic Industries :
Provide essential inputs to other industries
Iron, Steel, Fertilizer, Chemicals
2. Capital goods Industries :
Instrumental in producing goods and services
Do not directly produce goods for consumption
Capital intensive
Machines, Tools,
3. Intermediate Goods Industries :
Goods already had undergone manufacturing process but which forms input for
other industries for further processing
Tyre , Tubes
4.Consumer goods Industries : For consumption – Durable / Nondurable goods
Durable – Usage for more than 3 years
Non-durable – Usage within 3 years [email protected]
Classification of Business – Based on Competitive Structure
1. Monopoly : Single –Firm Industry
Monopsony – Single Buyer
Bilateral Monopoly – single Buyer and Single seller
MRTP Act
2.DuopolyTwo sellers
3. Oligopoly
Only few firms holding 80 to 85 % market share
4.Monopolistic competition
Large sellers & similar but not Substitute products – Textile
5.Perfect competition
Large sellers & Homogeneous & free entry , exit & no single firm has any control over
the market & Perfect knowledge about market & no transport cost & complete mobility
of factors of production between [email protected]
Business Motives & Objectives
Objective:The end actions
Motive:The desire which stimulate action
Motive – Profit, Non-Profit
Objective – Supply Quality Products, Customer Satisfaction, Exploit labour, Tax evation
Business Motives & Objectives
Importance of Objectives
1. Justifies existance
2. Provide Direction
3. Help coordination
4.Provide standards for assesment & control
5. Help decentralisation
Business Motives & Objectives
I. Economic Objectivesa) Earning of adequate profit.
b) Creation of customers
c) Innovation
d) Generation of employment
e) Control of inflation
f) Economic development
g) Reduction of inequalities of income
Contd …[email protected]
Business Motives & Objectives
II. Social Objectivesa) Supply of goods and services.
b) Good treatment of customers.
c) Fair treatment of employees.
d) Good working environment
e) Customer Counseling
f) Social responsibility.
g) Pollution control.
Contd …[email protected]
Business Motives & Objectives
III. National Objectivesa) Implement of government laws.
b) Payment of taxes.
c) Democratic practices.
Contd …[email protected]
Business Ethics
Study of good and evil ,right and wrong actions of Business
Dishonesty – Unethical , then being dishonest with employees, Customers and shareholders is unethical.
Protecting others from harm – Ethical then recalling defective products is ethical action.
Contd …[email protected]
Business Ethics
Sources of Business Ethics :
Religion
Culture &
Law
Religion : Advocate orderly social system
Culture : Rules and standards transmitted among generations to produce behaviours- Sathi, Child marriage, Untouchability, Joint family
Law : Rules of conduct approved by Legislators – Companies act , Labour laws etc
Contd …[email protected]
Business Ethics
Codes of Business Ethics :
Codes of conducts of business
FICCI
1. Business must maintain highest standard of behaviour for the benefit of industry, employees, customers, shareholders
2. Goods and services must conform to committed quality
3. Customers must be treated with respect and fairness
Contd …[email protected]
Business Ethics
UnEthical Actions :
1.Kentucky Fried Chicken ( KFC ) – Use of Harmful hormons & Monosodium glutamate to fatten the chicken
2. Neem – Oil : Ptent by U.S company
3. Women Harassment – Sacking of Chief Executive of Infosys