business environment meaning and factors

8/2/2019 Business Environment Meaning and Factors

1/16


2/16

Business is an integral part ofecology and social system

Important decisions related tobusiness are influenced by anumber of factors which constitute

what is generally referred to as thebusiness environment.


3/16

Meaning of business environmentBusiness environment refers to all

those internal and external factors

which impact the functioning/performance of a firm and its decisionmaking, particularly strategies.


4/16

Business EcologyBusiness ecology is very similar to human

ecologySuccess of any individual depend on his innate

capabilities- such as to cope up with the

environment and the extend to which the

environment is conducive to the development

of individual

The survival and success of a business firm

depend on its innate strength and its

adaptability to the envt and the extend to which

the envt is favourable to the development of the

firm.


5/16

The survival and success of the firm, thus

depend on two sets of factors, viz,1. Internal factors (internal environment)

2. External factors ( external environment)

Internal (organizational) envt has twocomponents: strength and weakness of

the organization External envt has two components:

business opportunities and threats to

business.


6/16

Business environment

interrelationship

Any organization has certain mission,objectives and goals and a strategy toachieve them

Formulation of strategy is establishing aproper firm envt fit.

A SWOT analysis( analysis of the strength

and weakness of the organization andopportunities and threats in the envt) is oneof the first steps in the strategicmanagement process.


7/16

Factors influencing business

decision

ExternalEnvironment

InternalEnvironment

BusinessDecision


8/16

Business environment is considered at threelevels:

1. Internal environment

2. Micro environment/ task environment/operating environment

3. Macro environment/ general environment/remote environment


9/16

Internal environmentThe important internal factors are:

1. Value system: The value system of theorganization influences its portfolio strategy,

HRM, marketing strategy and CSR

2. Vision, mission and objectives: set thescope, direction, philosophy and pace of

development.

3. Management structure and nature:organizational structure, composition of

board of directors, extent of

professionalization of management etc.,


10/16

4. Internal power Relationship

5. Human Resources6. Company Image and Brand Equity

7. Miscellaneous factors: Physical assets

and facilities, R & D and technologicalCapabilities, Marketing resources, Financial

factors.

Internal factors determine the potential of acompany to meet the environmental

challenges.


11/16

Micro Environment :

The Micro Environment consists of theactors in the company (intermediates) that

affect the performance of the company.


12/16

Micro environment Suppliers

They refer to the people who supply raw materials,

components and parts, machinery expert services,

fuel, electricity etc. to help in production of goods

and services.

Suppliers - responsible for smooth functioning of

the firm therefore reliability is very importantVendor development is gaining importance


13/16

Marketing service agenciesmarketing

research firms, advertising agencies, marketing

consulting firms, Financial intermediaries -

banks, credit companies, insurance companies.

PublicAny group that has an actual or

potential interest in or has an impact on

achieving organization's objective.

types:- financial public, media public,

citizen-action public, local public, generalpublic, internal public.


14/16

Customers :

A company may have different categories of

business

individuals, households, industriesand other commercial establishments, andgovernment and other institutions

Marketing intermediaries

these are the firmsthat help the company to promote, sell, anddistribute its goods and services to the finalbuyers.

They are

middlemen-wholesalers, retailers

physical distribution firmswarehouses,transportation firms


15/16

Competitors :-

Entry and exit of major competitors

Substitutes and complements for current

product/ services

major strategic changes by current competitors

The competition among the products can be

-Desire competition

Generic competitionProduct form competition

Brand competition


16/16

Macro/ General/Remote-Environment

Political/Govt. Environment Legal Environment

Micro/Task/Operating Environment

Financiers

Suppliers Internal EnvironmentPromoters/shareholders, values Customers Global

Mission /objectives Environment

Management structure Human resourcesTech capabilities

Demographic FinancialEnvironment capabilities

Public Internal power relationship Marketing competitors

Physical assets and facilities capabilities

Co. image/brand equity

Marketing intermediaries

Social/cultural Environment Technological/Natural Environment

BusinessDecision

business environment meaning and factors

Documents