Prepared by
Jagadeesh Babu.M.K. MBA, Mcom, PGDCA , (PhD)
Assistant professor
Koshys Institute of Management Studies, Bangalore
Topic :- Dimensions of Business Environment
Subject :- Business Organization and Environment
Class :- I Semester BBA
BUSINESS ENVIRONMENT
Business environment includes factors outside the firm,
which can lead to opportunities for or threats to the firm,
Although there are many factors the most important are the
socio- economic , technological , supplier, competitors and
government
Business Environment The combination of internal and external
factors that influence a company's operating situation.
Macro environment
Micro Environment
Internal Environment
TYPES OF ENVIRONMENT
BUSINESS DECISION
INTERNAL FACTORS
EXTERNAL FACTORS
Internal Environment
Company Image and Brand
Human Resources
Internal Power Relationship
Management Structure and Dimensions
Mission and Objectives
Value System
EXTERNAL ENVIRONMENT
Micro Environment
Macro Environment
MICROENVIRONMENT
Suppliers
Market Intermediaries
Competitors Customers
Publics
MACROENVIRONMENT
Economic Environment
The totality of economic factors, such
as employment, income, inflation, interest
rates, productivity, and wealth, that influence the buying
behaviour of consumers and institutions.
Economic environment can be divided into three parts. We
shall now study their effect on business. They are as under:
(i) Economic system
(ii)Economic policies
(iii) Economic conditions
(i) Economic System:
It is necessary to know about the economic system prevailing
in a country in order to understand the economic
environment. Economic system influences the freedom or
openness of business. Economic system is mainly of three
kinds:
(a) Socialistic Economic System
(b) Capitalistic Economic System
(c) Mixed Economic System.
(ii) Economic Policies:
Economic policies deeply influence the business of a country.
The economic policies are laid down to direct the economic
activities.
Economic activities include import-export, employment, tax
structure, industry, public expenditure, public debt, foreign
investment, etc. In order to direct all these economic
activities, the following economic policies are laid down:
For example, under the import-export policy, restrictions on
imports will benefit the indigenous industry.
(iii) Economic Conditions:
Economic conditions are those conditions which are related
with the possibilities of economic development of a country.
On the basis of the economic conditions the government
starts various programmes for the welfare of the people.
13
Some of the examples of economic conditions are as under:
(a) Flow of Foreign Capital
(b) Supply of Natural Resources
(c) Level of Economic Development
(d) Rate of Interest
(e) National Income
(f) Industrial Development
(g) Foreign Trade
(h) General Price Level.
Political Environment
Political environment is the outcome of a combination of
various ideologies advocated by different political parties.
Factors connected with the activities of the government are
included in it, e.g., the type of government (single-party
government or multi-party government), the attitude of the
government towards different industries, progress in passing
different laws.
15
The following are some of the examples of the impact of the political environment on business:
(i) In 1977, the Janata Government adopted a stringent attitude towards the multinational companies. As a result of this attitude, the multinational companies like the IBM and theCoca-Cola had to ignore India.
(ii) The new government encouraged the multinational companies for investment in India. This led to the opening of the doors of the Indian market for the multinational companies. Consequently, the Coca-Cola entered the Indian market once again.
MIXED ECONOMY
Mixed economy is a type of economic system that is midway
between capitalism and communism . This system admits the
public ownership
Eg: India has adopted this philosophy.
TECHNOLOGICAL ENVIRONMENT
Technological environment in 1990s
The success or failure of any business is highly dependent on the type of technology in use, the level of technological developments, the speed with which new technologies are adopted and diffused, the type of technology that are appropriate etc.
For many years in the past, India did not have a favorable attitude towards latest technology to meet foreign standards. The reservation of products for the small scale sector sometimes comes in the way of adoption of modern technology if it involves capital investment higher than the specified limit.
Technological environment in 1990s
It is only after the introduction of liberalization and globalization of Indian economy drastic changes have come in the technological standards in India. Also very high duty structure made the import of latest technology not only expensive but also almost impossible.
Today, the scenario has changed. Free availability of foreign exchange, welcoming foreign collaborations, FDI, JVs, and setting up of MNCs have led to development of various R & D centers in many firms. Even the development taken place in the infrastructure has also facilitated the technological development
Ethics in the use of business
technology
Scientific advances allow businesses to use technology to reach
goals more easily and more completely than ever before. In some
areas, however, such applications of technology start infringing on
the rights of individuals and may be unethical.
Governments and ethically operated companies are aware of these
limitations. Governments have passed privacy laws and regulated
communication companies. Some companies self-censor and apply
internal policies to limit unethical behavior.
Businesses that wish to be considered ethical must look at
whether applying certain technologies may harm some individuals
and constrain such applications to what is absolutely necessary.
Privacy
Individual privacy is one area that has been identified clearly
as a base for unethical business behavior through the
application of technologies. Companies can track Internet
usage, buying habits and individual movement as well as
collect personal information about millions of customers or
even potential clients.
While governments have passed legislation restricting the
collection of personal data and allowing individuals some
control over what companies can collect and store, ethical
businesses must decide -- independently of legislation -- what
is appropriate behavior.
Content
With new technologies allowing the easy creation and
distribution of images and videos, both individual employees
and companies need guidelines as to what is acceptable.
Without such guidelines, some of this content will be
offensive to some of the company staff and to some members
of the public.
Security
Companies monitor employees and visitors and collect much
additional information in the name of security. Ethical issues
arise from the continuous monitoring of employee activity
and the recording of security camera images.
An unjustified level of employee surveillance is ethically
questionable; the ethical company must try to establish a
level of monitoring it can justify. The surveillance of non-
employees, such as visitors or suppliers' representatives,
must be constrained to an even lower level to be ethically
acceptable.
2G Spectrum Scam
The 2G spectrum scam involved politicians and government
officials in India illegally undercharging mobile telephony
companies for frequency allocation licenses, which they
would then use to create 2G subscriptions for cell phones.
The shortfall between the money collected and the money
which the law mandated to be collected is estimated to
be Rs.1,76,645 crore, as valued by the Comptroller and
Auditor General of India based on 3G and BWA spectrum
auction prices in 2010.
Legal Environment
Many Acts are passed from time to time in order to control
and regulate business activities.
The sum total of all these Acts creates legal regulatory
environment. Acts are mossy passed to regulate such business
activities as sale-purchase, industrial disputes, labour,
regulating partnership business, regulating company business,
foreign exchange, etc.
What is Social Environment?
Social environment is the totality of conditions which concern
in the effecting of the activity feature of a human being. Those
conditions promote or hinder, motivate or restrain, the
characteristic activities of a living being.
Why Study Social Environment?
Businesses live within society and the interrelation
between businesses and stakeholders takes place
within a social environment.
They interrelate with society on many levels:
owners, customers, suppliers, employees,
government and the community as stakeholders
Cultural Environment
The cultural environment mean a environment which affect
the basic values, behaviours, and preferences of the society-
all of which have an effect on business decisions. Socio-
cultural environment.
All companies often include an examination of the socio-
cultural environment prior to entering their markets.
Case of McDonalds In India.
A Company, which got benefit due to social environment of
India was McDonalds.
All the ethical decisions to respect the tastes of the Indians
and their religious beliefs were taken care of.
McDonalds made sure that it altered the menu to better suit
the taste and religious beliefs of Indians.
Capitalist economy
A capitalist economy is an economic system based on the
private ownership of the means of production , distribution
and exchange , characterized by the freedom of capitalists to
operate or manage their property for profit in competitive
conditions.
Most of the decisions about production and distribution are
made by the market rather than government command.
Task Environment
Task Environement specifies the range of products to be
offered , the technology to be employed and the productive
strategies to be used to counter the global competition.
The need and Importance of business
environment
It helps in the identification of strengths of the business
It helps in the identification of the weakness of the firm
It helps in identification of threats and opportunities
It helps in keeping the business enterprise alert
It ensure survival and growth
It helps in keeping business flexible and dynamic
It helps in understanding the future problems
Economic and non Economic factors of
economic development:ECONOMIC FACTORS:
1. Natural Resources
2. Capital Formation
3. Technological Progress
4. Size of market and investment
NON- ECONOMIC FACTORS
1. To consumes less income and have more for investment
2. To have less children
3. To work beyond the expected target
4. To accept innovations and apply the new ideas for economic development.
Characteristic features of Indian
economy1. Low per capita income
2. Low standard of living
3. Rapid growth of population and high dependency ratio
4. Predomination of agriculture
5. Industrial backwardness
6. Unemployment
7. Technological backwardness
8. Scarcity of capital
9. Poor quality of working population
10. Unequal distribution of income
11. Lack of entrepreneurs
Technological factors influence
business on the Economy
Technology is the systematic application of scientific or other organized knowledge to practical tasks (JK GALBRAITH)
1.Increase productivity
2. Need to spend on R & D
3. Jobs tend to become more intellectual
4. Problems of techno structure
5. Increased regulation and staff opposition
6. Insatiable demand for capital
7. Rise and decline of product and organizations
8. Business boundaries redefined
Business Environment presents two challenges to the enterprise
The challenge to combat the environmental threatsExploit the business opportunities
Business and Society
39
Course focuses on large businesses (visibility, power, widely
recognized brands), but issues apply to small and medium-
sized companies as well.
BusinessThe collection of private,
commercially oriented organizations
SocietyA broad group of people and other
organizations, interest groups,
a community, a nation.
40
Society as Macroenvironment
Segment Focus
Social Demographics, lifestyles, social values
Political
Processes for passing of laws and election
of officials. Interactions between firms,
politics, and government
EconomicNature and direction of the economy in
which business operates
TechnologicalChanges in technological advancements
taking place in society
Business Relationships
42
Society’s Expectations Versus
Business’s Actual Social Performance
Society’s
Expectations
of Business
Performance
Soc
ial
Pe
rfo
rman
ce:
Ex
pe
cte
d a
nd
Ac
tual
1960s 2000s
Time
Social
Problem
Business’s Actual
Social Performance
Social Problem
THANK YOU
