BUSINESS ENVIRONMENT

Constituents of Business Environment UNIT 1

INTRODUCTION

A business can grow and prosper in a particular environment just as a plant can grow in a particular soil, climate, water supply etc. Hence the entrepreneur environment. has to pay attention to the

If he is able to adapt his business to the environment effectively and efficiently the business can make higher profits. This makes the study of business environment important.

Constituents of Business Environment

Environment of business can be classified as internal i.e. within the firm and external that is outside the firm. The external environment is a sum total of political, economical, social, legal factors that directly influence the Profit and production of business firm. A systematic study of each component of external environment is necessary to understand how they interact with each other and affect the working of business. Let us discuss each of these environments in detail.

External environment

External factors , these include Macro factors and micro factors. Macro Environment:

Demographic Environment Natural/Ecological Environment

Economic Environment

External environment

Political environment Cultural & Social Environment Legal environment Technological environment

International environment

External environment

while micro factors are those which affect the organization directly it involve

Customers Competitors suppliers and public

Macro Environment

What is Demographic Environment?

Through the help of internet find out the

Population of India Male Female ratio

Macro Environment

What is Demographic Environment?

The demographic environment is one of the elements of the marketing environment and includes such important aspects as population size and growth rates, age and sex profiles, family lifecycle stages, occupation patterns, levels of education, actuarial health and morbidity projections, etc

Through the help of internet find out the

Population of India - 121 Crores Male Female ratio - 940 females per 1,000 males

Macro Environment

The Demographic Environment

Size of the population The financial status of the population Rural Urban Distribution The rate of Growth Labour Supply Level of Education

Economic Environment

Economic Conditions in the Market

Demand Factors Supply Factors Economic Policies of Govt Economic Systems Capitalist Economy Centrally planned or communist economy Mixed Economies

Match the following

Capitalist Economy communist economy Mixed Economies

China India USA

Match the following - Answers

Capitalist Economy communist economy Mixed Economies

USA China India

POLITICAL ENVIRONMENT

In any country, the political environment is characterized by the following dimensions:

The nature of the polity The nature of the constitution of the country The political system The political awareness of the people and of the government The laws passed by the government

Natural/Ecological Environment

Natural environment consists of natural resources, like land, water, minerals, climatic conditions, rainfall and all other natural resources found on the surface of the earth and in its bowels. A study of natural environment is useful in deciding the location of business. The availability of raw materials in a particular area affects locational decisions of business.

Social and cultural environment

Social environment includes customs, traditions, beliefs, values, tastes and preferences, buying and consumption habits of various social groups of the society.

The social environment reflects the expectations of different social classes operating in the society. Each group has some expectations from business firms. Social environment is supplemented by cultural environment. Culture may be defined as a some total of knowledge, belief, art, morals, laws, customs and other capabilities and habits acquired by individuals and groups as elements or society.

Regulatory Environment (Legal Environment)

Laws affecting private Business Laws relating to Employer-Employee relations Laws Relating to Consumers

Technological Environment

Technology relates more to technique of production or application of scientific know-how to improve the quality and quantity of the product and production process. Technological environment consists of a) State of domestic or indigenous technology b) Facilities for Research and Development c) Technical Collaborations etc. A study of technological environment is very essential due to various reasons

Micro factors

Customers Competitors Suppliers Channel Intermediaries Society

INTERNAL ENVIRONMENT

Value system Vision, mission & objectives Mgt Structure & Nature Internal Power Relationship

HR
Company Image & Brand Equity