factors affecting ib

7/31/2019 Factors Affecting IB

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INTRODUCTION

Business decisions are influenced by two sets of factors

Internal factors (The Internal Environment)

External Factors( The External Environment)

Business Environment presents two challenges to theenterprise

The challenge to combat the environmental threats

Exploit the business opportunities


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3

AN ORGANIZATIONS ENVIRONMENT

Industry SectorCompetitors,

Industry size andCharacteristics,Related Industries

Raw MaterialsSector

Suppliers,Manufacturers,Real Estate

HumanResourcesSector

Labor Market, EmploymentAgencies, Universities,Training Schools, Employees

in Other Companies,UnionizationFinancial Resources Sector

Stock Markets, Banks,

Savings and Loans,

Private InvestorsMarketSector

Customers, Clients,Potential Users ofProducts and Services

Technology Sector

Techniques ofProduction, Science,Research Centers,Automation, New

Materials

Economic

ConditionsSector

Recession,Unemployment Rate,Inflation rate, Rate of

Investment, Economics,Growth

Government Sector

City, State, Federal Lawsand Regulations, Taxes,Services, Court System,Political Processes

Socio-Cultural sector

Age, Values, Beliefs, Education,Religion, Work Ethic, Urban vs.

Rural, Birth Rate

ORGANIZATION

DOMAIN

TaskEnvironment

MacroEnvironment


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TYPES OF ENVIRONMENT

1) INTERNAL ENVIRONMENT

2) EXTERNAL ENVIRONMENT

BUSINESSDECISION

INTERNALFACTORS

EXTERNALFACTORS


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INTERNAL ENVIRONMENT

Important internal factors are

1)

The value system of founders and those at the helm ofaffairs has important bearing on the choice of business, theorganization, business policies and practices.


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2)

The organizational structure, the composition of theBoard of Directors, extent of professionalization ofmanagement etc. are important factors influencing

business decisions.

3)

Factors like the amount of support the top

management enjoys from lower levels and workers,share holders and Board of Directors have importantinfluence on the decisions and their implementation.

The relationship between the members of Board ofDirectors is also a critical factor.


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4)

The characteristics of the human resources like skill,quality, morale, commitment, attitudes etc. couldcontribute to the strength and weakness of the

organization.The involvement, initiative etc. of the people atdifferent levels may vary from organization toorganization.

5) The image of the company matters while raisingfinance, forming joint ventures or other alliances,soliciting market intermediaries, entering purchase orsale contracts , launching new products etc.


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1. Physical Assets and Facilities

2. R&D and Technological Capabilities

3. Marketing Resources4. Financial Factors


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EXTERNAL ENVIRONMENT

Two Types

a) Micro EnvironmentConsists of actors in the companys immediate environment,

that affects the performance of the company.

b) Macro Environment

Consists of larger societal forces that affect all the actors incompanys micro environment.


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MICROENVIRONMENT

Also known as and

Include

The suppliers

Marketing intermediaries

Competitors

Customers

Publics


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SUPPLIERS

Those who supply the inputsto the company.


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CUSTOMERSMajor task of business is to create

and sustain customers


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COMPETITORSA firms competitors include not only

the other firms which market thesame or similar product but also all

those who compete for the income ofthe consumers

Desire competition

Generic competitionBrand competition


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Firms that aid the company inpromoting, selling and distributing

its goods to final buyers.Vital links between the company and

the final consumers.


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PUBLICSAny group that has an actual or

potential interest in or impact on anorganizations

ability to achieve itsinterests

E.g. Media publics, citizens actionpublics, local publics


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MACRO ENVIRONMENT

Consists of larger societal forces thataffect all the actors in companys micro

environment-namely

the political

economic,

Socio-cultural forces

technological,International &

Natural.


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POLITICAL & GOVERNMENT ENVIRONMENT

Has close relationship with the economic system andeconomic policy.

In many countries regulations to protect consumerinterests have become stronger.

Some governments specify certain standards for theproducts to be marketed in the country; some evenprohibit the marketing of certain products.

Eg: In India, Advertisement of alcoholic product isprohibited.

and the packages must carry injurious to healthwarnings


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ECONOMIC ENVIRONMENT

It includes the structure of the economy, stage ofdevelopment, level of income ,the distribution of income& assets.

Important factors are:

Economic conditions

Economic policies

Economic systems


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SOCIO-CULTURALENVIRONMENT

Major factors are:

the buying and consumption habits of people,

their language beliefs and values,

customs and traditions,

tastes and preferences,

Education


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.E.g.: Vicks Vaporub, the popular

pain balm is used as mosquitorepellent in some tropicalcountries


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Language difference pose a seriousproblem.

e.g.Preet-> Prestige for overseas market

In Japanese, General Motors body by

Fisher means Corpse byfisherColour

Blue: feminine and warm in Holland ;

but masculine and cold in SwedenGreen: favourite in Muslim world; but

represents illness in Malaysia

.


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White indicates death and mourningin China and Korea while as it is a

favorite color in Christian world and isthe wedding dress of the bride.

Red is the popular colour incommunist countries but many Africancountries have a national distate forred colour.

Maroon colour is very much like in

Carribean countries.


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FAMOUS GLOBAL MARKETING MISTAKES


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TECHNOLOGICALENVIRONMENT Technology includes the tools both machines & ways of

thinking of technology.

Technological developments may increase or decreasethe demand for some existing products


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INTERNATIONAL ENVIRONMENT

Particularly important for the industries directlydepending on imports or exports and import-competing industries

Inflation, liberalization

Major international developments have their spreadeffects on domestic business.

.


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NATURALENVIRONMENT

Geological and ecological factors, such as naturalresources endowments, weather and climatic conditions,,location aspects in the global context, etc., are relevant tobusiness.


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factors affecting ib

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