THE NATURE AND SCOPE OF BUSINESS ENVIRONMENT

EVENTS AFFECTING BUSINESS

CPI ---- Backing out in the matter of INDIA signing The Nuclear Deal With The USA (PE)

RELIANCE ---- Walking out of Retail in U.P. (SE)

TATA Nano ---- Being evicted from Singrur

US Sub ---- Led to worldwide recession (IE) prime Crisis

NEW ECONOMIC ---- Led to economic progress (EE) POLICY OF INDIA

RANBAXY ---- 30 Drugs banned by USFDA (LE) TROUBLE

RIL …… Resistance to increase in tariffs (SE)

Budget ……. Placing emphasis on Rural Sector (EE)

Pope’s Call ……. Threat to Outsourcing

SEZ ……. Stamp duty waiver (PE)

SATYAM ---- Poor Internal management (LE ) COLLAPSE

MEANING & SCOPE OF BUSINESS

PRODUCER USERTO

Activity

…. Obtain various inputs

…. Raise financial resources

…. Raise funds from capital markets

…. Transport finished product to market

…. Advertisement creates awareness of product

…. Distribution agencies reach the product to the ultimate user

…. Risks are covered through Insurance companies

….. PRODUCTION

BUSINESS DIMENSIONS

….. TRADE

….. TRANSPORT

….. FINANCE

….. BANKING

….. INSURANCE

….. ADVERISING

….. INDUSTRY ….. COMMERCE

CHARACTERISTICS OF MODERN BUSINESS

LARGE SIZE

OLIGOPOLISTIC CHARACTER

DIVERSIFICATION

GLOBAL REACH

HUL, Telco, L&T, Tata Motors, Maruti Udyag, Hero Honda

Small number of firms selling a homogenous or differentiated product

Modern business in its attempt to grow over time takes recourse to diversification

Companies have expanded their revenues and assets base across countries and engage in cross border flow of capital goods and know how

GOVERNMENT CONTROL

CHANGE

TECHNOLOGY ORIENTATION

Role of Govt. in both developed & underdeveloped countries has diminished

Govt. Role

Market failures

Externalities

Public goods

Strategies for making changes in product design, quality, and packaging for offering differentiated products.

Technology orientation to improve products and cut costs. R & D

Japanese & Korean Companies

CHARACTERISTICS OF ENVIRONMENT

Complex

Dynamic

Multi- faceted

Impact

Environment consists of a number of factors, events, conditions and influences arising from different sources which impact business

Environment is constantly changing

Environment has different effects on different industries e.g. WTO

Environment has different effects on different firms in the same industry e.g. Drugs

Opportunity & Threat

Increases Competition

Unpredictable

It may be an opportunity as well as a threat to expansion. E.g Liberalization…HUL

General environmental changes alter the boundaries of an industry and change the nature of its competition

Environmental changes are difficult to predict with any degree of accuracy e.g. interest rate fluctuations, rate of inflation, exchange rate variations.

IMPORTANCE OF THE STUDY OF BUSUNESS ENVIRONMENT

STRATEGIES & POLICIES : Helps an organization its broad strategies and long term policies

COMPETITORS ANALYSIS : Enables an organization to analyse its competitors strategy and thereby formulate effective competitive strategies

DYNAMISM : Knowledge about changing environment will keep the organization dynamic in its approach IMPACT : Enables the organizations to foresee the impact of socio-economic changes at the national and international level on its stability

ADJUSTMENT : As a result of the study, executives are able to adjust to the prevailing conditions and thus influence the environment to make it congenial to do business

Environment and Strategic Management

Environ-mental

scanning

Strategy Formul-

ation

Strategy Implemen-

tation

Evaluation and

Control

Input Providers

Customers

Channel Members

Employees

Rivals

Government

INTERNAL ENVIRONMENT

Domestic Macro Environment

Non Economic Macro Environment

Growth & Distribution Environment

Economic System

Economic Stability

Competitive Environment

Socio-Cultural Environment

Demographic Environment

Economic Policy

EXTERNAL ENVIRONMENT

INTERNATIONAL ENVIRONMENT

DIFFERENT LAYERS OF BUSINESS ENVIRONMENT

Internal Environment

INTERNATIONAL ENVIRONMENT

INTERNATIONAL ENVIRONMENT

Domestic Macro Environment

Non Economic Macro Environment

Growth & Distri- bution En- vironment

Economic System

Economic Stability

Competitive Environment

Socio- Cultural Environment

Demo- graphic Envi- ronment

Economic PolicyCustomers Rivals

Input Providers

Employees

EXTERNAL

BUSINESS

Channel Members

Govern-ment

THE INTERNATIONAL

ENVIRONMENT

DOMESTICMACROECONOMIC

ENVIRONMENT

SECTORALENVIRONMENT

PUBLIC RELATIONS

ENVIRONMENT

BUSINESS ENVIRONMENT

INTERNAL ENVIRONMENT

NON ECONOMIC ENVIRONMENT