ECONOMIC ENVIRONMENT OF BUSINESS

Chapter 1
Business and Its Environment

Chapter 1 Business and Its Environment

CHARACTERISTICS OF MODERN BUSINESS ARE AS FOLLOWS :

Large size Oligopolistic character Diversification Global reach Technology orientation Change Government control

Himalaya Publishing House

Economic Environment of Business S.K. Misra & V.K. Puri

TABLE 1.1. THE WORLDS LARGEST Revenue 2009

Chapter 1 CORPORATIONS, Business and Its Environment

Himalaya Publishing House

Economic Environment of Business S.K. Misra & V.K. Puri

Chapter 1 Business and Its Environment

OLIGOPOLISTIC CHARACTER
First : Some firms operate at a price that is too low from the point of view of other firms. Secondly : Economies of large scale production often allow some firms to corner the entire supply of a product. Thirdly : Financial capital requirements of modern business are quite large and these forestall entry of too many firms in the business.

Himalaya Publishing House

Economic Environment of Business S.K. Misra & V.K. Puri

Chapter 1 Business and Its Environment

NON-PRICE COMPETITION OCCURS IN TWO MAJOR FORMS:

1. Advertising, and 2. Variation in quality and design of product.

Himalaya Publishing House

Economic Environment of Business S.K. Misra & V.K. Puri

DIVERSIFICATION

Chapter 1 Business and Its Environment

Conglomerate Diversification : Royal Philips Electronics Concentric Diversification : Maruti Udyog Limited Some Companies do not attempt to diversify and prefer takeover of companies in their own area Example Coca Cola : Parle Soft Drinks Whirlpool : Kelvinator Refrigerators

Himalaya Publishing House

Economic Environment of Business S.K. Misra & V.K. Puri

Chapter 1 Business and Its Environment

GLOBAL REACH
The index of transnationality is a simple mean of the ratio of foreign to total activities for three indices: assets, sales and employees.

Himalaya Publishing House

Economic Environment of Business S.K. Misra & V.K. Puri

Chapter 1 Business and Its Environment

TECHNOLOGY ORIENTATION
On account of increasing competition the world over, technological change has become a pre-condition for the survival of a company Because modern corporations regard technological research strategic to their future, they carry out their R&D activities very close to their headquarters. Example :- Novartis has more than two thirds of its R&D activity in Switzerland while it accounts for a mere 2 per cent of the companys overall sales.

Himalaya Publishing House

Economic Environment of Business S.K. Misra & V.K. Puri

Chapter 1 Business and Its Environment

CHANGE
The business through its innovative moves can always create synthetic wants and thus find space to produce new goods to satisfy them.

Himalaya Publishing House

Economic Environment of Business S.K. Misra & V.K. Puri

Chapter 1 Business and Its Environment

GOVERNMENT CONTROL

First, the government interference in business is required to correct market failures manifested in the form of monopoly and pollution. Second, governments through monetary and fiscal regulation attempt to create stable business conditions. Third, Production of socially necessary public goods has to be undertaken by the government.

Himalaya Publishing House

Economic Environment of Business S.K. Misra & V.K. Puri

ENVIRONMENT OF BUSINESS

Chapter 1 Business and Its Environment

Business

Himalaya Publishing House

Economic Environment of Business S.K. Misra & V.K. Puri

Chapter 1 Business and Its Environment

INTERNAL ENVIRONMENT

Value system Goals and objectives Management structure Internal power relationship Physical resources and the technology Human resources

Himalaya Publishing House

Economic Environment of Business S.K. Misra & V.K. Puri

Chapter 1 Business and Its Environment

EXTERNAL ENVIRONMENT
Broadly external environment of business may be classified into (A) micro environment and (B) macro environment. The most prominent performers in the micro environment are the following : Suppliers of inputs Workers and their unions Customers Market intermediaries Competitors Publics
Himalaya Publishing House Economic Environment of Business S.K. Misra & V.K. Puri

Chapter 1 Business and Its Environment

MICRO ENVIRONMENT

Himalaya Publishing House

Economic Environment of Business S.K. Misra & V.K. Puri

Chapter 1 Business and Its Environment

MACRO ENVIRONMENT

Himalaya Publishing House

Economic Environment of Business S.K. Misra & V.K. Puri