The Nature and Scope of Business Environment

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.

TATA Nano ----

Being evicted from Singrur 

US Sub ---prime Crisis

Led to worldwide recession

(SE)

(IE)

NEW ECONOMIC ---- Led to economic progress (EE) POLICY OF INDIA RANBAXY ---- 30 Drugs banned by USFDA TROUBLE

(LE)

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 ---COLLAPSE

Poor Internal management (LE )

MEANING & SCOPE OF BUSINESS TO PRODUCER

USER

Activity «. Raise funds from capital markets «. Obtain various inputs «. Raise financial resources «. 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

 

BUSINESS DIMENSIONS

«.. FINANCE «.. TRADE «.. TRANSPORT «.. PRODUCTION «.. 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

TECHNOLOGY ORIENTATION

CHANGE

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

Strategies for making changes in product design, quality, and packaging for offering differentiated products. Role of Govt. in both developed & underdeveloped countries has diminished

GOVERNMENT CONTROL

Govt. Role

Market failures Externalities Public goods

CHARACTERISTICS OF ENVIRONMENT

Complex

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

Dynamic

Environment is constantly changing

Multifaceted

Impact

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

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

Increases Competition

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

Unpredictable

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 socioeconomic 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

Environmental scanning

Strategy Formulation

Strategy Implementation

Evaluation and Control

Input Providers

Customers

Channel Members

Employees

INTERNAL ENVIRONMENT

Rivals

Government

Domestic Macro Environment Economic System Economic Stability

Socio-Cultural Environment

Growth & Distribution Environment EXTERNAL ENVIRONMENT Competitive Environment Non Economic Macro Environment

Economic Policy Demographic Environment

INTERNATIONAL ENVIRONMENT

DIFFERENT LAYERS OF BUSINESS ENVIRONMENT INTERNATIONAL ENVIRONMENT

Domestic Macro Environment Economic System Economic Stability Competitive Environment

EXTERNAL Input Providers

Customers

Employees

Internal Environment

Channel Members

SocioCultural Environment

BUSINESS

Growth & Distribution Environment

Rivals

Economic Policy

Govern- Demoment graphic Environment

Non Economic Macro Environment

INTERNATIONAL ENVIRONMENT

BUSINESS ENVIRONMENT

DOMESTIC MACROECONOMIC ENVIRONMENT

INTERNAL ENVIRONMENT

SECTORAL ENVIRONMENT

NON ECONOMIC ENVIRONMENT

PUBLIC RELATIONS ENVIRONMENT

THE INTERNATIONAL ENVIRONMENT