1. Business Environment An environment can be defined as anything that surrounds a system. Therefore, Business environment is anything that surrounds the business organization. It consists of all those factors that have a bearing on the business such as the strengths, weaknesses, internal power relationships and orientation of the organizations, govt. policies & regulations, economic condition, natural factors & global trends.
2. Factors affecting Business Environment Economic environment Political & govt. environment Natural & technological environment Legalenvironment Social environment
3. Economic Environment The economic environment includes the structure & nature of the economy, the stages of the development of the economy, economic resources, the level of income, the distribution of income & asset, global economic linkages, economic policies etc.
4. Aspectsof Economic Environment Growth strategy:- Strategy aimed at winning large market share, even at the expense of short-term earnings. Four broad growth strategies are diversification, product development, market penetration & market development. Economic system:- Organized way in which a state or nation allocates its resources & apportions goods & services in the national community. Industry:- The term industry is something used to describe a very precise business activity or a more generic business activity. If a company participates in multiple business activity it is usually considered to be in the industry in which most of its revenues are derived.
5. Continued… Infrastructure:- The basic physical system of a country’s or community’s population, including roads, utilities, water, sewage etc. These systems are considered essential for enabling productivity in the economy. Developing infrastructure often requires large initial investment, but the economies of scale tend to be significant. Population:- A group of individuals or items that share one or more characteristics from which data can be gathered & analyzed. Economic policy:- The actions taken by a govt. to influence its economy. Types of economic policy actions can include setting interest rates through a federal reserves, regulating the level of govt. expenditure, creating private property rights & setting tax rates.
6. Impact of Economic Environment Banking sector reforms had let to many attractive schemes for deposits & lending money. The banks are offering loans at very nominal rates of interest and with minimum formalities to be completed. Lots of economic reforms are taking place in leasing & financing institutions the private sector is allowed to enter in financial institution as a result customers are gaining.
7. Political & Govt. Environment The political environmentincludes all laws, govt. agencies, and lobbying groups that influence a restrict individuals or organizations in the society.
8. Aspects of Political Environment Role of legislature: The legislative branch can initiate and rescind laws & is the only authority able to approve proposed laws, although the constitution of many jurisdiction allows persons or agencies of the executive branch to propose laws. Role of executive: The executive branch is the administrative arm of govt.; the one with the most employees as it operates, implements & enforces all the laws created by the legislative branch, and as interpreted, from time to time by the judiciary.
9. Continued… Role of judiciary: A branch of govt., judges. It is the sole authority to issue opinions binding on all, on the constitution and laws; and authority to hear cases not only between persons, and between persons and the govt. and thus, authority to render binding decisions in regard to govt. actions
10. Constitution Judiciary Executive Legislature Central list Concurrent list State list Central govt. State govt. Local govt. Policies guideline codes laws Direct involvement in business Development/promotional organizations (e.g. development banks) Regulatory organization (e.g. SEBI,TRAI) Budget
11. Impact of Political Environment The govt. in Hyderabad is taking keen interest in boosting I.T. industry, as a result the state is more commonly known as CYBERABAD instead of Hyderabad. After the economic policy of liberalization & globalization, the foreign companies got easy entry in India. As a result the coca-cola which was sent back in 1977 came back in India. Along with Pepsi-Cola & many other foreign companies are establishing there business in India.
12. Global Environment Global business environment can be defined as the environment in different sovereign countries, with factors exogenous to the home environment of the organization, influencing decision making on resources use and capabilities.
13. Impact of Global Environment Increase opportunities: A better understanding of opportunities leads to increase in international trade & investment, and the no. of businesses operating across national borders. These increases mean that the economies and financial markets around the world are more closely integrated. Threats from MNC’s: After new economic policies the multinational companies got permission to establish themselves in Indian market. These companies are having large amount of resources, world class technology and operate on large scale.
14. Technological Environment Technological environment refers to changes taking place in the method of production, use of new equipments & machineries to improve the quality of product. The businessmen must closely monitor the technological changes taking place in his industry because he will have to implement these changes to remain in the competitive market.
15. Aspects of Technological Environment Various innovations & inventions Scientific improvements Developments in I.T. sector Import & exports of technology Technological advances in computers.
16. Impact of Technological Environment Digital watches have killed the prospects and the business of traditional watches. Color T.V. technology has closed the business of black & white T.V. Artificial fabric has taken the market of traditional cotton & silk fabric. Photo copier & Xerox machines have led to the closer of carbon paper business.
17. Legal Environment Legal environment constitutes the laws and various legislations passed in the parliament. The businessman cannot overlook the legislations because he has to perform his business transactions within the frame work of legal environment. The common legislation passed wich has affected the business transactions are Trade Mark Act, Essential Commodity Act, Weights And Measures Act etc.
18. Aspects of Legal Environment Various laws and legislative acts Legal policies related to licensing Legal policies related to foreign trade Statutory warnings essential to be printed on label Foreign Exchange Regulation and Management Act. Laws to keep a check on Advertisements
19. Impact of Legal Environment Deregulation of capital market have made It easy for businessman to collect capital from primary market. Removal of control from the foreign exchange and liberalization in investment is encouraging foreign investors and NRIs to invest in Indian capital market. Advertisement of alcoholic product is prohibit. Compulsory to give statutory warning in tobacco production. Delicensing policy of industries.
20. Social Environment Social environment consists of customs and traditions of the society in which business is existing. It includes the standard of living, tastes, preferences, and education level of the people living in the society where business exists.
21. Aspects of Social Environment Quality of life Importance or place of women in workforce Birth & death rates Attitude of customers towards innovations, lifestyle etc. Education & literacy rates Consumption habits Population Traditions, customs and habits of people
22. Impacts of Social Environment Demand for reservations in jobs for minority & women. Demand for equal status of women by paying equal wages for male & female workers. Demand for automatic machines and luxury items in middle class families. The social movements to improve the education level of girl child. Health & fitness trend has become popular.
