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A business organization does not exist in a vacuum. It exists in a world of concrete places and things, natural resources and living persons. The sum of all these factors and forces is called the Business Environment. Business Environment consists of both Internal and External factors. Business Environment in the present era of LPG is becoming increasingly complex. Business Environment can be further classified into two major categories: the economic environment and the non-economic environment. The economic environment includes factors likethe Fiscal Policy, the Monetary Policy, the Industrial Policy, the price and Income equation, Nature of the Economic System, the pace of Economic Development etc. The Non-economic environment includes factors likesocial, cultural, political, legal, technological factors etc.
Regulating Agencies
Demographic Factors
Natural Factors
Competitors
Business
Macro Environment
1. a. b. c. ECONOMIC ENVIRONMENT Economic Conditions Economic Systems Economic Policies
(i) Budgets, (ii) Industrial Regulations, (iii) Economic Planning, (iv) Import & Export Regulations, (v) Business laws, (vi) Industrial Policy, (vii) Control on Prices and Wages, (viii) Trade and Transport Policies, (ix) The size of the National Income, (x) Demand and Supply of various goods The important acts are (i) Factories Act, (ii) Industrial Disputes Act, (iii) FERA, (iv) Imports and Exports Act, (v) Companies Act, (vi) Industries Act.
2. a. b. c. 3. a. b. c. d. e. f. g. 4. a. b. c. d. e.
POLITICAL AND GOVERNMENT ENVIRONMENT Legislature Executive Judiciary SOCIO CULTURAL ENVIRONMENT peoples attitude to work and health Role of family Marriage Religion Education Ethical issues Social responsibility of business NATURAL ENVIRONMENT includes Natural resources endowments Weather & climate conditions Topographical factors Location aspects Port facilities etc.
Almost every aspect of business depends upon natural environment. For example.
(i) (ii) (iii) (iv) (v) (vi) Manufacturing depends on physical inputs Mining and drilling depends on natural deposits Agriculture depends on nature Trade between two nations depends on geographical factors Transport and communication depends on geographical factors Topographical factors may affect the demand pattern
5. a. b. c. d. e.
DEMOGRAPHIC ENVIRONMENT includes Size, growth rate, age composition, sex composition etc. of population Family size Economic stratification of population Educational level Caste, religion etc.
Computation laws
Cs
Shipping of Goods
Labor laws
6.
TECHNOLOGICAL ENVIRONMENT
Technology
A. Social Implications
B. Economic Implications Increased productivity Need to spend on R&D Jobs become intellectual Increased regulation
7. 1. 2.
INTERNATIONAL ENVIRONMENT
3.
4. 5. 6.
7.
Due to liberalization, Indian companies are forced to view business issues from the global perspective. Safe and protected markets are no longer there. World is becoming small in size due to advanced means of transport and communication facilities. Learning of foreign languages is a must for every business manager. Acquiring familiarity with foreign currencies is also a must. Facing political and legal uncertainties is inevitable. To survive amidst intense competition every businessman should try to adapt his products to different customer needs and tastes. Mobilization of resources, particularly financial is an essential starting point in the process of international environment.
Micro Environment
1. SUPPLIERS Suppliers are the persons who supply the inputs like raw materials and components to the business. IMPORTANCE: (i) For the smooth functioning of the business it is very important to have a reliable source of supply. (ii) Uncertainty regarding the supply or other supply problems will compel the companies to maintain high inventories which will cause increase in costs. WHY MULTIPLE SOURCES OF SUPPLY? (i) It is very risky to depend on a single supplier because a strike, lockout or any other production problem with that supplier may seriously affect the company. (ii) A change in the attitude or behavior of the supplier may also affect the company.
CUSTOMERS Industrial Customers Retail Customers Wholesale Customers Government as Customer Foreign Customers LABOUR BUSINESS ASSOCIATES COMPETITORS Generic Competition: Competition in the same line of business. Product form Competition Brand Competition REGULATING AGENCIES
GOVT.
INTERFEENCE
INFORMATION
SCIENCE
GLOBALIZATION
MARKET LEADERSHIP
CORPORATE RELATIONSHIP
SERVICE TO SOCIETY
ENVIRONMENTAL ANALYSIS
ENVIRONMENTAL ANALYSIS MEANS TO FIND OUT THE IMPLICATIONS OF THE POLICIES OF THE COUNTRY AND COUNTRIES FOR THE COMPANY- THREATS, OPPORTUNITIES etc.
3.
4.
2.
SOCIAL FORECASTS -FAMILY SET UP, EDUCATION, POPULATION GROWTH, MIGRATION, RURAL-URBAN, INCOME LEVELS etc.
POLITICAL FORECASTS CHANGES IN VARIOUS POLICIES, STABILITY OF THE GOVT. TECHNOLOGICAL FORECAST CHANGES IN TECHNOLOGY, R & D etc.
3.
4.
ENVIRONMENT TYPES
Macro
Political
Conventional Competitors
Environmental
Economic
Micro
Suppliers
Internal
Buyers Social
ENVIRONMENT MEGATRENDS
Rise of BRIC countries Faster technological advance Shorter product life cycles
ENVIRONMENT MEGATRENDS
Peace dividend Rising real incomes Ageing population
MICRO
INTERNAL
Organisational
Marketing
Financial Personnel Production R & D
INDUSTRY ANALYSIS
FIVE FORCES
(1) BARRIERS TO ENTRY
Economies of Scale Technology Patents R&D spend Controlled Supply Government Protection Specialist Knowledge
INDUSTRY ANALYSIS
FIVE FORCES
(3) SUBSTITUTES
of Existing Competitors Similarity Exit Barriers Slow Industry Growth Type and Diversity of Competitors Strategic Stakes
INDUSTRY ANALYSIS
FIVE FORCES
(4) POWER OF BUYERS Buyers Low Profits Buyers Low Switching Costs Buyers Total Material Costs
(5) POWER OF SUPPLIERS Concentration Few Substitutes Customer Importance Crucial Product
INDUSTRY ANALYSIS
FIVE MORE FORCES
TECHNOLOGICAL SOPHISTICATION
RATE OF INNOVATION
MANAGERIAL CAPABILITY
SWOT ANALYSIS
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