1. BUSINESS
ENVIRONMENT
FUNDAMENTALS OF BUSINESS
&
BUSINESS ORGANISATIONS

2. Objective
After reading this section you should be able
to describe the environmental forces that
affect the company’s ability to serve its
customers & understand the significance of
Business Environment .

3. Business
?

4. BUSINESS
• Business may be understood as the organized
efforts of enterprises to supply consumers with
goods and services for a profit.
Or
• It may be understood as the organized efforts of
enterprises to earn profit. Business may be small
or big in size but all together the aim at making
profit.

5. • Business enterprises cannot function in isolation
• Open systems interact with their environment
• Business enterprises exist in and are surrounded
by an ‘environment’ – the business or
commercial environment

6. • Society and business enterprises are mutually
dependent
– Business enterprises satisfy societal needs
• Relationship between society and business
enterprises takes place in a changing
environment

7. BUSINESS ENVIRONMENT
?

8. BUSINESS ENVIRONMENT
• It can be defined as the forces, factors and institutions
with which the businessman must deal with to achieve
the objectives.
OR
• Business Environment is the surroundings in which
business exists. Whenever any businessman is operating
or working then he must interact with customers,
suppliers and he must perform the transactions within
the rules and regulations of the government. All these
persons, institutions and policies form a part of
business environment

9. BUSINESS ENVIRONMENT
Definitions:
“ Environment of the Business means the
aggregate of all conditions, events and influences
that surround and affect it.”
Keith Davis
“ Business Environment is the total of all
things external to firms and individuals which
affect their Organization and operations.”
B.O. Wheeler

10. Significance of Business
Environment
• First Mover Advantage
• Warning Signals
• Sensitize the Management
• Basis of Strategy
• Source of intellectual Stimulation
• Image Building
• Continuous Learning

11. COMPONENTS OF THE
BUSINESS ENVIRONMENT
• Different environmental variables exist internally
and externally to the business enterprise
• Environmental variables have a positive or
negative influence on the enterprise

12. TYPES OF BUSINES
ENVIRONMENT
There is two types of business environment:
Internal Environment
These are generally regarded as controllable factors
because the company has control over these factors.
External Environment
These are the one which are beyond the control of a
company.

13. Internal Environment
 Value System
The values, beliefs and the acceptance of it by the
founders, has important bearing on the choice of
business, the mission and objectives of the
organization, business policies and practice.
 Management Structure and Nature
The organizational structure, the composition of the
Board of Directors, extent of
professionalization of management etc. are the
important factors influencing business decisions.

14. Internal Environment
 Internal Power Relationship
The support of the top management to its
different employees and vice-versa i.e., the support
the top management enjoys from different levels of
employees, shareholders. Board of Directors have
important influence on the decision and their
implementations.
Human Assets
the competence, morale and motivation of
employees have a significant impact in the success of
the firm.

15. Internal Environment
Company Image and Brand Equity
The image and brand equity of the company plays a
significant role in raising finance, forming alliance,
choosing dealers and suppliers, launching of new
products entering foreign markets.
Mission and Objectives
The business philosophy and the purpose of a
company guide its priorities, business strategies,
product market scope and its development
process.

16. External Environment
It consist :
• Micro-Environment
Microenvironment is also known as task environment and the
operational environment because the micro environmental forces
have direct impact on the operations of the firm.
• Macro Environment
Macro environment refers to the general environment or remote
environment with in which a business firm and forces in its
microenvironment operate.

17. The Company’s Micro -
Environment
In designing business/marketing plans,
management must take other company
groups, such as top management, finance,
research and development (R&D),
purchasing, manufacturing and accounting,
into consideration.

18. Micro-Environment
 Suppliers of inputs
Company’s success to a great extent depends upon the
low-cost production of products. This can be ensured
by uninterrupted supply of inputs, particularly raw
material.
 Customers
A business exists to create and satisfy customers. A
firm may have customers like individual's customer,
households, government departments, commercial
establishments. In order to be successful a company
must understand and meet the needs and
expectations of its customers.

19. Micro-Environment
 Marketing Intermediaries
Middlemen like agents, wholesalers, retailers serve
as a link between the company and its customers.
Advertising agencies, marketing research agencies
etc. are other types of marketing intermediaries.
Competitors
A company may face direct as well as indirect
competition. Direct competitors are the forms which
offers the same or similar products and services. e.g.,
Sony TV faces direct competition from other brands
like Samsung, Onida, BPL.

20. Competitors
– The marketing concept states that, to be
successful, a company must provide greater
customer value and satisfaction than its
competitors. Thus, marketers must do more than
simply adapt to the needs of target consumers.
– They must also gain strategic advantage by
positioning their offerings strongly against
competitors’ offerings in the minds of consumers.
They must strive to anticipate competitor activity
and strategy.

21. Resellers
The individuals and organizations that buy
goods and services to resell at a profit.
Physical distribution firms
warehouse, transportation and other firms that
help a company to stock and move goods from
their point of origin to their destinations.

22. Micro-Environment
 Financiers
Debenture holders, shareholder, financial institutions
provide financial assistance to the firm. Financial
capacity, polices and attitude of financiers are
important factors for the company.
 Public
A public is any group that has an actual or potential
interest in or impact on an organization ability to
achieve its interest. e.g., Media group, Non-
government organization

23. Public
Financial public: Influence the company’s ability to obtain
funds. Banks, investment houses and stockholders are the
principal financial publics.
Media public: Are those that carry news, features and editorial
opinion. They include newspapers, magazines and radio and
television stations.
Government public: Management must take government
developments into account. Marketers must often consult the
company’s lawyers on issues of product safety, truth in
advertising and other matters.

24. Public
• Citizen action public A company’s marketing decisions may
be questioned by consumer organizations, environmental
groups, minority groups and other pressure groups.
• Local public Every company has local publics, such as
neighborhood residents and community organizations.
• General public A company needs to be concerned about the
general public’s attitude towards its products and activities.
The public image of the company affects its buying.
• Internal public A company’s internal publics include its
workers, managers, volunteers and the board of directors.

25. General
Environment
Economic
Technological
The External Environment
Industry
Environment
Threat of new entrants
Power of suppliers
Power of buyers
Product substitutes
Intensity of rivalry
Competitor
Environment

26. The Company’s Macro-
Environment
The larger societal forces that affect the whole
microenvironment - demographic, economic,
natural, technological, political and cultural
forces.

27. Global Environment
?

28. Macro Environment
• Global Environment
It refers to those global factors which are relevant to
business as the WTO principles and agreements,
International-conventional/treaties/agreement/
declarations/protocols etc. economic and business
conditions etc. If the economic conditions in a
company’s export prospects are generally very good
and vice-versa. Recession in other countries can
increase the import threats, including dumping.

29. Political and Legal Environment
?

30. Macro Environment
• Political and Legal Environment
Political environment serves as the regulatory
framework of business main constituents of
political and legal environment are:
o Image of the country and its leaders
o Defense and military policy
o Laws governing business
o The constitution of the country

31. Economic and Financial
Environment
?

32. Macro Environment
• Economic and Financial Environment :
o For business, the economic system is a parameter, and
the business has no choice but to adjust itself with
in the framework of the given economic system.
o The nature of economic system is capitalist, socialist
and mixed economy
o Economic Policies- i.e., the industrial policy, monetary
policy, fiscal policy
o Economic infra-structure
o The markets and their factors which affect the
market

33. Technological and physical
Environment
?

34. Macro Environment
Technological and physical Environment
The main components of technological and
physical environment are
o Research and development (R&D) systems
o Rate of technological changes
o Approaches to production of goods and
service

35. Social and cultural Environment
?

36. Macro Environment
• Social and cultural Environment
Social environment refers to the characteristics of the
society in which a business firm exist and operates.
Social and cultural factors include:
o Religion
o Caste, Traditions, Norms, Beliefs
o taste and preferences of customers
o Social and Non-government organization
o Education system

37. Natural Environment
?

38. Macro Environment
Natural Environment
o Population and its density
o Agriculture resources
o Natural resources
o Ecological system
o Climatic conditions under which the firm
operates