UNIT -I

Definition: According to Androse “The term

business environment of a company is defined as

a pattern of all external influences that effect its

life and development.

 

Business environment consist of all those factors

that have a bearing on the business.

The survival of a business firm depends on its

innate strength resources at its command and its

adaptability to the environment and the extent to

which the environment is favorable to

development of the firm

The survival and success of a firm, thus, depend

on two major factors, viz,- the internal

environment - the external environment.

A SWOT analysis i.e analysis of strengths

and weaknesses of the organisation and

opportunities and threats in the environment.

• The internal environment has two components:

strengths and weaknesses of the organisation.

• The internal factors are generally regarded as

controllable factors because the company has

control over these factors: it can alter or modify

such factors as its personnel, physical facilities,

organisational and functional means, such as

marketing mix, to suit the environment.

The external environment has two components:

opportunities and threats to business.The external

factors such as economic factors, socio-cultural

factors, govt and legal factors, demographic

factors, geo-physical factors etc are

uncontrollable factors.

Business Environment at 3 levels:

Internal environmentcro/task/operating environmentMacro/general/remote environment

Customers

Those people & organizations in the environment who

acquire goods or services from the business are

customers.

As recipients of the business’ output, customers are

important because they determine the business’ s

Types of Customers

Industrial Customers

Institutional Customer

Foreign Customer

• Retail Customer

• Multiple Customer

• Globalization

• Customer Segmentation

  Competitors

Other firms in the same industry or type of business that

provide goods & services to the same set of

customers.

In today’s environment most competitors are

cooperating to achieve common goals.

Suppliers

The people & organizations who provide the raw

material the business uses to produce its output.

The relationship among them must of cooperative

in nature in order to save money, maintaining

quality, and speeding products to market.

Reliability

Multiple Supplier

Market Intermediates

Types of Market Intermediates

Middlemen

Marketing Agencies

Financial Institution

Physical Intermediates

PUBLIC

Media Publics

Local Public

Significance of Business Environment:

There is a mutual interdependence between

business and its environment. A business

enterprises is an open system. It continously

interacts with its environment. Business takes

inputs raw materials, capital, labour, energy etc.

from its environment, and transform them into

goods and services and then send them back to

the environment.

Business and its external environment interact in the

following ways.

. Exchange of information

. Exchange of resources.

. Exchange of influence and power.

For incorporating dynamic behavior of environment

Complete knowledge of internal environment

To understand international events, pressures& impact

Economic policies of the govt.

Economic policies of the govt.

To face business problems &challenges

Vigilant regarding dangersAdministrative system

Optimum utilization of resources

Market conditions

Scientific & industrial advancement

Development & success of business

Dimensions of Business Environment:

The main dimensions elements of business

Environment are as follows:-

Economics Environment: The economics

environment comprises of the factors and forces

concerned with means of production and

distribution of wealth. It refers to the nature of

economic system ,organisation of capital and

money markets, income level ,price level,

economic policies of the country etc.

Social Environment: This environment includes

social factors such as attitudes of people ,social

customs and traditions ,education level, size of

population ,trade unions, occupational structure

etc.

Political Environment: Political environment

refers to the country's political system, type of

government, government policies towards

business ,government ,centre state

relations ,public opinion, law and order etc.

Legal/ Regulatory environment:

Legal environment of business includes all the

laws, legal system and judiciary system of the

country. A business has to work within framework

of country's laws and regulations.

 

Socio-Cultural Environment

Social and Cultural environment refers to the

influence exercised by certain social factors which

are ‘beyond the company’s gate.’ Such factors

include, among others, attitude of people to work,

attitude to wealth, family, marriage, religion,

education, ethics and social responsibility of

business.

LEVELS OF CULTURE: Four levels

National Culture: National culture is the dominant

culture within the political boundaries of a country.

Business Culture: Business culture guides everyday

business transaction.

Organisational Culture: It refers to the philosophies,

ideologies, values, assumptions, beliefs, expectations,

and norms that knit an organisation together and are

shared by its employees.

Occupational Culture: Different Occupational

groups such as physicians, lawyers, accountants,

professors, and crafts people have distinct

cultures- called Occupational cultures.

Technology:

Includes scientific and technological

advancements in a specific industry as well as in

society at large. E.g. Computer industry, etc.

Technological advances can change the rule of

the game; thus every business must be ready to

respond.

Legal and Political

The legal-political element includes the legal and

governmental systems within which a business must

function.

a. Business must operate within the general legal

framework of the countries in which they do business.

b. Businesses are subject to an increase in lawsuits

filed by customers or employees.

c. The political issues which affect businesses include

those which influence the extent of government

regulation.

Natural Environment

Climatic & weather condition.

Availability of Natural resources.

Topographical factors: Physical features of place.

Pollution Control

Demographic Environment

Age Composition

Sex Composition

Education Level

Family size & structure

Urban-rural population 

Business Environment

International Business

When business activities are performed on an

international level, these can be termed as

international business.

Basic functions, processes and techniques of

international business are essentially the same as

those involved in domestic business.

What is different is the environment within which

these functions are performed and processes are

carried out.

International Business environments are

unfamiliar and different from the domestic

environment

These variations may need adaptation for

business success.International Business Environment

In the context of a business firm, environment can

be defined as various external actors and forces

that surround the firm and influence its decisions

and operations.

The two major characteristics of the environment as

pointed out by this definition are:

these actors and forces are external to the firm

these are essentially uncontrollable. The firm

can do little to change them

Concept of Globalisation:

Globalisation means " to make global ,that is world

wide or effecting or taking into consideration the

whole world or all people ".Globalisation is a

process of integration of business activities and

growing economic interdependence between

countries in the world economy.

Factors that lead to globalisation:

Growing similarities of countries in terms of

available infrastructure.

Globalisation exposes firms to international

competition.

Employment opportunities wil be increase over a

period of time.

Widening of competition.