Introduction to BE - Rohit Sharma · PDF fileInternal & External Internal Environment reveals an organization's strength and weaknesses ... mission and objectives, business ......

Business EnvironmentDr. Kavita Srivastava

Department of Management

ITS, Ghaziabad

Chapter

1

Meaning & Definition

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

Keith Davis defines environment of business as “aggregate of all conditions, events and influences that surround and affects it”

21/27/2010 Dr. Kavita Srivastava

Factors influencing Business Policy of an organization

Internal & ExternalInternal Environment reveals an organization's strength and weaknesses and the external environment reflect the opportunities available to the organization and the threats it faces


Internal Factors are controllable factors :

•Organizational Resources•Research & Development•Financial Capability•Marketing Capability

An organization can alter such factors to suit the environment


External FactorsExternal factors are uncontrollable factors because they are largely beyond the control of an individual enterprise. Such factors can be grouped as:

•Social

•Geographical

•Political

•Legal

•Government Policies


Business Environment generally refers to the external environment and includes factors outside the firm which leads to opportunities for or threats to the firm.


Need to study Business Environment

•Every Business Organization has to interact and transact with its environment

•Hence, the business environment has a direct relationship with the business organization

•The environment imposes several constraints on an enterprise and has a considerable impact and influence on the scope and direction of its activities.

•Enterprise on the other hand has a very little control over its environment

•The basic job of the enterprise is to identify with the environment in which it operates and to formulate its policies in accordance with the external factors


Importance of Study

•It helps organization to develop its broad strategies and long term policies

•It enable an organization to analyze its competitor’s strategies and formulate counter strategies

•Enables organization to foresee changes at national and international level


Internal Factors in Detail

Value System: The value system of the founders and those who are at the top has an important bearing on the choice of business, mission and objectives, business policy and practices.

Value system also is evaluated by many companies in selection of suppliers, distributors ,collaborators etc.

Core value system of Infosys states: To achieve our objective in an

environment of fairness, honesty, transparency and courtesy towards our customers, employees, vendors and society at large


Vision , Mission & Objectives

Business objectives of a company are also guided by the mission and objectives of the company

Ranbaxy’s thrust in foreign market is based on the mission “to become a research based international pharmaceutical company”


Human Resources

The characteristics of human resources like skill, quality, morale, commitment, attitude etc. could contribute to the strength & weakness of an organization

Some organizations find it difficult to carry out restructuring or modernization because of resistance by employees whereas some others do it smoothly


Miscellaneous Factors

Physical Assets

R &D and Technological capabilities

Marketing Resources

Financial Factors


External Factors


Micro Economic Factors

Suppliers: An important force in micro environment of a company.

Uncertainty regarding supply of raw material or at an increased costs is a matter of concern for the company


Customers

Customers : A business exists only because of its customers

Monitoring customer sensitivity thus is main task of business these days

A company may have different types of customers

Customers of a tyre manufacturing company may include individualautomobile owners, automobile manufacturers, public sector transport company & other transport operators

With growing globalization , customer environment has become more global


Competitors

A firms competitors include other firms producing similar products

Competition also arises from various saving schemes of the banks and NBFIs and companies producing different consumer goods

If a consumer desires to buy TV, which brand of TV he/ she should go for, whether he should go for TV or refrigerator or saving under a lucrative scheme of the government.

A marketer should create a primary and selective demand for his/her product


Marketing Intermediaries & Financers

Marketing intermediaries which aids firm in promoting, selling and distributing its goods to the final buyers

Financers of the company their policy and strategy are very important for a company


Macro Environment

Global Environment: The global environment refers to the global factors which are relevant to the business

WTO principles and agreements

Hike of crude oil prices

Global Inflation


Social Factors

Every Business organization operates within a norm of a society

It has a social responsibility

A business has to operate within the norms of society and satisfy the needs of the individuals


Economic Factors

Per capita Income, National Income, infrastructural Development,capital formation and level of employment do effect the activities of any business organisation


Legal Factors

Every aspect of business is related to law

Laws relating to Industrial Licensing, company formation, Factory Administration, payment of wages, trade unions etc


Government Policies

Fiscal policy & Monetary Policies, EXIM Policy, Foreign Exchange policy, Industrial Policy , etc have a strong bearing on the performance of a company


Conclusion

Business environment is affected by various internal and external factors.Any substantial change in those factors are bound to bring corresponding change in the business policy of an organization


1/27/2010 Dr. Kavita Srivastava 24

Thank You

Introduction to BE - Rohit Sharma · PDF fileInternal & External Internal Environment reveals an organization's strength and weaknesses ... mission and objectives, business ......

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