Dimensions of Business Environment

Dimensions of Business Environment

Business EnvironmentThecombinationof internal andexternal factorsthatinfluenceacompany'soperating situation.

TYPES OF ENVIRONMENT

BUSINESS DECISION

INTERNAL FACTORSEXTERNAL FACTORS

Internal Environment

EXTERNAL ENVIRONMENT

MICROENVIRONMENT

MACROENVIRONMENT

Economic EnvironmentThe totality ofeconomic factors, such asemployment,income,inflation,interest rates,productivity, andwealth, thatinfluencethebuying behaviourofconsumersandinstitutions. Economic environment can be divided into three parts. We shall now study their effect on business. They are as under:(i) Economic system(ii)Economic policies(iii) Economic conditions

(i) Economic System:It is necessary to know about theeconomic systemprevailing in a country in order to understand the economic environment. Economic system influences the freedom or openness of business. Economic system is mainly of three kinds:

(a) Socialistic Economic System(b)Capitalistic Economic System(c)Mixed Economic System.

(ii)Economic Policies:Economic policiesdeeply influence the business of a country. The economic policies are laid down to direct the economic activities.Economic activities include import-export, employment, tax structure, industry, public expenditure, public debt, foreign investment, etc. In order to direct all these economic activities, the following economic policies are laid down:For example, under the import-export policy, restrictions on imports will benefit the indigenous industry.

(iii)Economic Conditions:

Economic conditions are those conditions which are related with the possibilities of economic development of a country. On the basis of the economic conditions the government starts various programmes for the welfare of the people.

12 Some of the examples of economic conditions are as under: (a)Flow of Foreign Capital(b)Supply of Natural Resources(c) Level of Economic Development (d) Rate of Interest (e) National Income (f) Industrial Development (g) Foreign Trade(h) General Price Level.

Political EnvironmentPolitical environment is the outcome of a combination of various ideologies advocated by different political parties.

Factors connected with the activities of the government are included in it, e.g., the type of government (single-party government or multi-party government), the attitude of the government towards different industries, progress in passing different laws.

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The following are some of the examples of the impact of the political environment on business:

In 1977, the Janata Government adopted a stringent attitude towards the multinational companies. As a result of this attitude, the multinational companies like the IBM andthe Coca-Colahad to ignore India.

(ii) The new government encouraged the multinational companies for investment in India. This led to the opening of the doors of the Indian market for the multinational companies. Consequently, the Coca-Cola entered the Indian market once again.

TECHNOLOGICAL ENVIRONMENT

Technological environment in 1990sThe success or failure of any business is highly dependent on the type of technology in use, the level of technological developments, the speed with which new technologies are adopted and diffused, the type of technology that are appropriate etc.For many years in the past, India did not have a favorable attitude towards latest technology to meet foreign standards. The reservation of products for the small scale sector sometimes comes in the way of adoption of modern technology if it involves capital investment higher than the specified limit.

Technological environment in 1990sIt is only after the introduction of liberalization and globalization of Indian economy drastic changes have come in the technological standards in India. Also very high duty structure made the import of latest technology not only expensive but also almost impossible.

Today, the scenario has changed. Free availability of foreign exchange, welcoming foreign collaborations, FDI, JVs, and setting up of MNCs have led to development of various R & D centers in many firms. Even the development taken place in the infrastructure has also facilitated the technological development

Ethics in the use of business technologyScientific advances allow businesses to use technology to reach goals more easily and more completely than ever before. In some areas, however, such applications of technology start infringing on the rights of individuals and may be unethical. Governments and ethically operated companies are aware of these limitations. Governments have passed privacy laws and regulated communication companies. Some companies self-censor and apply internal policies to limit unethical behavior. Businesses that wish to be considered ethical must look at whether applying certain technologies may harm some individuals and constrain such applications to what is absolutely necessary.

PrivacyIndividual privacy is one area that has been identified clearly as a base for unethical business behavior through the application of technologies. Companies can track Internet usage, buying habits and individual movement as well as collect personal information about millions of customers or even potential clients. While governments have passed legislation restricting the collection of personal data and allowing individuals some control over what companies can collect and store, ethical businesses must decide -- independently of legislation -- what is appropriate behavior.

ContentWith new technologies allowing the easy creation and distribution of images and videos, both individual employees and companies need guidelines as to what is acceptable. Without such guidelines, some of this content will be offensive to some of the company staff and to some members of the public.

SecurityCompanies monitor employees and visitors and collect much additional information in the name of security. Ethical issues arise from the continuous monitoring of employee activity and the recording of security camera images. An unjustified level of employee surveillance is ethically questionable; the ethical company must try to establish a level of monitoring it can justify. The surveillance of non-employees, such as visitors or suppliers' representatives, must be constrained to an even lower level to be ethically acceptable.

2G Spectrum ScamThe 2G spectrum scam involved politicians and government officials in India illegally undercharging mobile telephony companies for frequency allocation licenses, which they would then use to create 2G subscriptions for cell phones. The shortfall between the money collected and the money which the law mandated to be collected is estimated to beRs.1,76,645 crore, as valued by the Comptroller and Auditor General of India based on 3G and BWA spectrum auction prices in 2010.

Legal EnvironmentMany Acts are passed from time to time in order to control and regulate business activities.

The sum total of all these Acts creates legal regulatory environment. Acts are mossy passed to regulate such business activities as sale-purchase, industrial disputes, labour, regulating partnership business, regulating company business, foreign exchange, etc.

What is Social Environment?

Social environment is the totality of conditions which concern in the effecting of the activity feature of a human being. Those conditions promote or hinder, motivate or restrain, the characteristic activities of a living being.

Why Study Social Environment?Businesses live within society and the interrelation between businesses and stakeholders takes place within a social environment.

They interrelate with society on many levels: owners, customers, suppliers, employees, government and the community as stakeholders

Cultural EnvironmentThe cultural environment mean a environment which affect the basic values, behaviours, and preferences of the society-all of which have an effect on business decisions. Socio-cultural environment.

All companies often include an examination of the socio-cultural environment prior to entering their markets.

Case of McDonalds In India.A Company, which got benefit due to social environment of India was McDonalds.All the ethical decisions to respect the tastes of the Indians and their religious beliefs were taken care of.McDonalds made sure that it altered the menu to better suit the taste and religious beliefs of Indians.

Business Environment presents two challenges to the enterpriseThe challenge to combat the environmental threatsExploit the business opportunities

Business and Society31

Course focuses on large businesses (visibility, power, widely recognized brands), but issues apply to small and medium-sized companies as well.

BusinessThe collection of private, commercially oriented organizationsSocietyA broad group of people and other organizations, interest groups, a community, a nation. 0

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32Society as Macroenvironment

SegmentFocusSocialDemographics, lifestyles, social valuesPoliticalProcesses for passing of laws and election of officials. Interactions between firms, politics, and governmentEconomicNature and direction of the economy in which business operatesTechnologicalChanges in technological advancements taking place in society0

Chapter 1The Business and Society Relationship32

Business Relationships

34Societys Expectations VersusBusinesss Actual Social Performance

Societys Expectations of Business Performance

Social Performance: Expected and Actual1960s2000sTime

Social ProblemBusinesss Actual Social PerformanceSocial Problem0

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