Hey guys, this presentation has a wide coverage of " Business Environment". It includes topics such as objectives of business,forces operating in business environment, relationship between an org and its environment, environment analysis, features and problems of the same as well, the components of business environment have been explained in detail along with illustrative diagrams ans self explanatory charts. Focus has been emphasized on clear cut presentation along with providing sneak peek into the deep knowledge about business environment.

1. TECHNOLOGY
MACRO
PROFIT
STABILITY
SURVIVAL
EFFICIENCY
GROWTH
OBJECTIVES
ANALYSIS
ENVIRONMENTAL FORCES
INFORMATION
RESOURCE
INFLUENCEPOWER
DIVERSITY
COMPLEXITY
UNCERTAINITYDYNAMIC
MULTI-FACETED
MICRO
STRENGTH
WEAKNESS
OPPORTUNITY
THREAT
MARKET
SUPPLIER
CONSUMER
ECONOMY
POLITICS
SOCIO-CULTURE
Presented By :
ADITI WALIA

2. ❖Business Environment
❖Objectives of Business
❖ Environmental Analysis & its Goals
❖ Forces Operating in Business Environment
❖ Relationship Between Organization &
Environment
❖ Problems in Business Environment
❖ Features of Business Environment
❖ Components of Business Environment
❖ Conclusion
CONTENTS

3. WHAT
IS
BUSINESS
ENVIRONMENT ?

4. Etymologically, the term “business”
refers to the state of being busy for an
individual, group, organization or
society. The term is also interpreted as
one’s regular occupation or profession.
A business for our
purposes can be any activity which
comprises of purchase, sale,
manufacturing, processing and/or
marketing of products & services.

5. Peter F. Drucker has drawn two important
conclusions about business :-
❖ It is created and managed by people :
There will be a group of people who will
take the decisions that
will determine whether
an organization is going
to flourish, prosper or
decline, whether it will
survive or eventually
perish. This is true for every business.

6. ❖ It cannot be explained in terms of profit :
The economic criterion of maximizing profits
for a firm has little
Relevance in the present
times.“Profit Maximization”
has been qualified &
modified with the long
term perspective to
include development of
wealth and several non-financial factors
such as goodwill, societal factors,
relations and so on.

7. Environment is the sum total of several external
and internal forces that affect the functioning of
business. Just like Human Beings, business does
not function in an isolated vacuum. Every business
functions within a whole gambit of relevant
environment and have to negotiate its way
through it.
According to Barry M.
Richman & Melvyn Copen “Environment factors or
constraints are largely if not totally, external &
beyond the control of individual industrial
enterprises & their managements”.

8. The extent to
which the business thrives
depends on the manner in which
it interacts with the environment.
A business
which remains continuously
passive to the relevant changes in
the environment is destined to
gradually fade away in oblivion.
A
successful business has to
identify, appraise and respond to
the various opportunities and
threats in the environment.

9. OBJECTIVES
OF
BUSINESS

10. Enterprises pursue multiple objectives
rather than a single objective. In general,
we may identify a set of business
objectives pursued by a large
criss- cross section of business
enterprises. These relate to
profitability, productive efficiency, growth,
technological dynamism, stability, self-reliance,
survival, competitive strength, financial solvency,
customer service, product quality, diversification,
employee satisfaction and so on. Business
organization seek to balance these objectives in an
appropriate manner.

11. 49%
18%
8%
7%
14%
4%
Other Business Objectives
Customer centric
outcomes
Operational Optimization
Risk Management
Financial Management
New Business Model
HR Analytics

12. Some of the
most
important
objectives of
every
business are -

14. SURVIVAL
It is the will & anxiety to perpetuate into the
future as long as possible. While survival is
an obvious, basic & implicit objective,
business enterprises are interested in more
than mere survival. The ability to survive is
a function of :
▪ Nature of Ownership
▪ Nature of Business
▪ Competence of Management
▪ General & Industry Conditions
▪ Strength of the Enterprise and so on.

15. STABILITY

16. STABILITY
One of the most important objective of an
enterprise is stability. It is a cautious &
conservative objective. Stability is the least
expensive and risky objective in terms of
managerial time & talent & other
resources. A stable and steady
organization minimizes managerial
tensions and demands less dynamism from
managers. It is a strategy of least
resistance in a hostile external
environment.

18. GROWTH
This is a promising and popular objective
which is equated with dynamism, vigour,
promise and success. Enterprise growth
may take one or more form like increase in
assets, manufacturing facilities, increase in
sales volume in existing products or
through new products, improvement in
profits & market share. Growth may take
the enterprise along relatively unknown &
risky paths full of promises & pitfalls.

19. EFFICIENCY

20. EFFICIENCY
Business enterprise seek efficiency in in
rationally choosing appropriate means to
achieve their goals, doing things in the best
possible manner & utilizing resources in the
most suitable combination to get highest
productivity. It is a very operational
objective. In a sense, efficiency is an
economic version of technical productivity –
designing & achieving suitable input output
ratios of funds, resources, facilities &
efforts.

21. PROFIT

22. PROFIT
It is generally asserted that private
enterprises are primarily motivated by the
objective of earning high profits. All other
objectives are facilitative objectives & are
meant to be subservient to the profit
motive. It is pointed out that private
business enterprises are operated on
behalf of and for the benefits of the
owners who have assumed the business
risk of investing their funds.

23. ENVIRONMENTAL
ANALYSIS
&
ITS
GOALS

24. When the company ceases to adjust the
existing business environment to its strategy or does not
react to the complex and
ever changing business
environment changing its
strategy, the result is
reduced achievement of
corporate objectives.
Through environmental analysis, strategists get time to
anticipate opportunities and plan to take optional
responses for these strategies. It also helps the strategists
to develop an early warning system to prevent threats or
to develop strategies which can turn the threats to the
company’s advantage.

25. “Positive trends in the environment breed
complacency. That underscores a basic point : in
change there is both opportunity and challenge”.
- Clifton Garvin
“The business environment remains challenging,
but if you have a good strategy there is gold in all of
this”.
- John Barth

26. ➢ The analysis should provide an understanding of
the current and potential changes taking place in
the environment. It is important that one must
be aware of the existing environment & at the
same time one must have a long term
perspective about the future too.
➢It should provide inputs for strategic decision
making. Mere collection of data is not enough.
In general, Business Environment analysis has
three basic goals as follows :

27. The information collected must be useful for
and useful in decision making.
➢It should facilitate and foster strategic thinking
in organizations-typically a rich source of ideas
and understanding of the context within which
a organization operates. It should challenge the
current wisdom by bringing viewpoints into the
organization.

28. FORCES
OPERATING IN
BUSINESS
ENVIRONMENT

29. Business Environment is the sum of several
external & internal forces that affect the
functioning of business. Just like Human Beings,
businesses have to function within a whole gambit
of relevant environment forces & have to
negotiate their way through it.
The inputs in the
form of human, physical, financial & other related
resources are drawn from the environment. The
business converts these resources through various
processes into outputs of products or services. The
latter are partly exchanges with the external client
groups, say customers.

30. INPUT
Human
Physical
Finance
Technology
PROCESSING
Transformation
of Inputs into
Outputs
OUTPUT
Products &
Services
ENVIRONMENTAL FORCES
The Input – Output exchange activity ( shown above ) is a
continuous process and calls for an active interaction with
the external environment.

31. RELATIONSHIP
BETWEEN
ORGANISATION
&
ENVIRONMENT

32. A business does not work in isolation, rather
it acts as a sub-system of its environment
consisting of society, economics, law,
competitors and so on. Business draws
certain inputs from the environment in the
form of resources & information and
transforms them into outputs.
The relationship
between the organization & its environment
can be discussed in the form of interactions
between them that can be broadly outlined
as follows :

33. O
R
G
A
N
I
S
A
T
I
O
N
E
N
V
I
R
O
N
M
E
N
T
INFORMATION
RESOURCES
INFLUENCE & POWER

34. EXCHANGE OF INFORMATION
The organisation scans the external environment
variables, their behaviour & changes, generates
important information and then uses it for its
planning, decision making & control purposes.
On the other hand, the organisation
itself transmits information to several external
agencies either voluntarily, inadvertently or
legally .

35. EXCHANGE OF RESOURCES
The organization receives inputs – finance,
materials, manpower, equipment, etc. from
external environment. It sustains itself by
employing the above inputs for producing output
of products & services.
The organization is also dependent on
the environment for disposal of its outputs of
products & services to a wide range of customers
& clients.

36. EXCHANGE OF INFLUENCE &
POWER
External environment hold considerable power
and influence over the organization in the form of
competitors, suppliers, investors, government
control, customers.
In turn, organization itself is
sometimes in a position to wield power and
influence over the external environment by virtue
of its command over the resources and
information.

37. PROBLEMS IN
UNDERSTANDING
BUSINESS
ENVIROMENT
FORCES

38. Environmental forces are difficult to analyse &
understand on account of :
. DIVERSITY : Listing all
conceivable environmental
influences may be possible
but the difficulty lies in
making sense to this
diversity in a way which can
contribute to strategic
decision making.

39.  UNCERTAINITY : Managers
claim that the pace of
technological change and the
speed of global
communication change more
faster than ever before.
However the case remains
same, it is important to try
and understand and ten
predict the future external
influences but is really very
difficult to do so.

40.  COMPLEXITY : Managers,
like other individuals, may
tend to simplify complexity
by focusing on the aspects
of environment that may
confirm their prior view or
are historically important.
These are not perverse
managerial behaviours but
only natural behaviour of
anyone faced with
complexity of the business
environment.

41. FEATURES OF
BUSINESS
ENVIRONMENT

42. Decision making is a managerial process and a
function which is greatly influenced by the broad
characteristics of the business environment which
are as follows :
 COMPLEXITY : Business Environment consists of
a number of factors, events, conditions and
influences arising from different sources. It is
difficult to comprehend all at once, the factors
constituting a given environment.
The vicious complexity has been illustrated as
follows.

43. Increased
Complexity
Poor
Execution
Loss Of
Process
Control
Poor
Business
Results
Processes
& People
are added
to Improve
Vicious
Complexity
Cycle

44. DYNAMIC :
Business
Environment
comprises of
lots & lots of
factors so is
constantly
changing the
nature.
Due to the many varied influences operating,
there is dynamism in the environment causing it
to continuously change its shape and character.

45.  MULTI-FACETED : A particular
change or development
in the business environment
may be viewed differently
by different observers. It has
been seen many a times when the same
development is welcomes as an opportunity
by one company while
another perceives
it as a threat.

46. FAR REACHING IMPACT : The growth and
profitability of an organization depends
critically on the environment in which it
operates. Any environment change has an
impact on the organization in several
different ways for a good length of period of
time.

47. Client
Experience
ProcessDesign
IneffectiveInconsistency
Reliability
Minimise Variation
Continuous Feedback

48. COMPONENTS
OF
BUSINESS
ENVIRONMENT

49. INTERNAL
ENVIRONMENT
EXTERNAL
ENVIRONMENT
BUSINESS
ENVIRONMENT

50. MANAGEMENT
FINANCE
ACCOUNTING
OPERATION
MARKETING
ECONOMY
GOVT.
CUSTOMER
TRENDS
CORPORATE
CITIZENSHIP

51. INTERNAL
ENVIRONMENT
ANALYSIS
EXTERNAL
ENVIRONMENT
ANALYSIS
STRENGTH
WEAKNESS
OPPORTUNITY
THREAT
SWOT
SUMMARY
CAPITALIZE STRENGTH
MANAGE WEAKNESS
EXPLOIT OPPORTUNITY
AVOID THREAT

52. MICRO ENVIRONMENT
Micro or Internal Environment is related to the
immediate periphery of an organization. It
influences an organization regularly and directly.
It imparts strengths or weakness to the
organization. It comprises of the following :
 Consumer
 Competitor
 Organization
 Market
 Supplier
 Market intermediaries

53. MICRO
ENVIRONMENT
CONSUMER
COMPETITION
ORGANIZATION
MARKET
SUPPLIER
MARKET
INTERMEDIARY

54. Within a Micro environment in which the firm is
operating, it needs to address the following issues :
➢ The employees of the firm, their characteristics & how they
are organised.
➢ The customer base on which the firm relies for business.
➢ The ways in which the firm can raise its finance.
➢ Who are the suppliers & how the links between the two
being developed.
➢ The local community within which the firm operates.
➢ The direct competition and how they perform.

55. CONSUMER
Consumer is the one who ultimately
consumes/uses the product or
service thus, occupies the central
position in the market. The
organisation needs to closely
monitor and analyse the changes in
the consumer’s tastes, preferences
and buying pattern.
The organisation cannot survive without customers. It will
cease to exit. A consumer occupies the central position in
the marketing environment. According to Peter F. Drucker
“ The aim of business is to create and retain customers”.

56. Key points that should be considered as
follows :
❖ Who are the customers/consumers ?
❖ What benefit they are looking for ?
❖ What are their buying patterns ?

57. COMPETITOR
Competitor is the other business
entities that compete for the same
resources, markets as well as
consumers. A study of the
competitive scenario & threats from
competition is essential.
Competition may be Direct or Indirect. Direct competition
is between organisations who are engaged in same
business activity whereas competition between a holiday
resort & a car manufacturing company for available
discretionary income of affluent customers is Indirect
competition.

58. Key points that should be considered as follows :
❖ Who are the competitors ?
❖ What is their present strategy & business
objectives ?
❖ Who are the most aggressive & strongest
competitors ?

59. ORGANISATION
Individuals occupying different
postions or working in different
capabilities in organisations
consists of individuals who come
from outside. The objectives, goals
and resource availabilities of a
firm occupy critical position in a
micro environment.
An organisation comprises of the following :

60. ▪ Owners : They are individuals, shareholders, groups or
organisations that have key stake in the organisation.
▪ Board Of Directors : BOD is elected
by the shareholders and is charged
with overseeing the management
to ensure that it is being run
in a way that serves best the
shareholder’s interest.
▪Employees : they are the people who actually do work
in an organisation and thus considered as major force of
the organisation.it is important for the organisation that
employees embrace the same values and goalsas the
organisation.

61. MARKET
The market is larger than the
customers. It is to be studied in
terms of :
• actual & potential size
• its growth prospects and
• market attractiveness.
The marketer should study the
trends & developments and also
the success key factors of the
market.

62. Key points to be considered are as follows :
❖Cost structure of the market.
❖Price Sensitivity & Technological Structure of
the market.
❖The existing distribution system of the market.
❖Is the market mature ?

63. SUPPLIER
Supplier form an important component of micro
environment. They provide
raw materials, equipments,
services and so on. Suppliers
with their own bargaining
power affect the cost structure
of the industry. They
constitute a major force that
shapes the competition in the industry. Also,
organisations have to take major
decisions on “outsourcing” or “in-house production”
depending on the supplier environment.

64. MARKET INTERMEDIARIES
Intermediaries bridge the gap
between the organisations and the
consumers. They are in the form of
Stockists, Wholesalers and
Retailers. In many cases,
consumers are not even aware of
the manufacturers of the
products they buy. Stores such as
Reliance Trends, Vishal Mega Mart,
Big Bazaar, Big Basket are
increasingly becoming popular in
big cities.

65. PUBLIC CAPITAL MARKET
MERCHANT
BANKER
STOCK
BROKER UNDERWRITER
DEPOSITED BY
PARTICIPANT
TRANSFER
AGENT
PORTFOLIO
MANAGERS
VENTURE
CAPITALSMUTUAL FUNDS
CREDIT AGENCY
FINANCIERS
INTERMEDIARIES
INTERMEDIARIES

66. MACRO ENVIRONMENT
Macro or External Environment refers to all the
forces that are a part of a larger periphery and
distantly affects the organization and the micro
environment. The elements of macro environment
affect all the firms operating within an industry. It
comprises of :
 Demographic Environment
 Economic Environment
 Socio-Cultural Environment
 Political Environment
 Technological Environment
 Global Environment

67. MACRO
ENVIRONMENT
DEMOGRAPHIC
ENVIRONMENT
ECONOMIC
ENVIRONMENT
POLITICAL
ENVIRONMENT
SOCIO-CULTURAL
ENVIRONENT
TECHNOLOGICAL
ENVIRONMENT
GLOBAL
ENVIRONMENT

68. Macro environment has broader dimensions, within a
Macro environment in which the Industry is operating, it
needs to address the following issues :
• Who are their threats in the competitive world in which
they operate & why ?
• Which areas in technology might pose a threat to their
current product range & why ?
• The bargaining powers of suppliers and consumers ?
• The type of competition they are facing and their
perceived threats & weaknesses ?

69. DEMOGRAPHIC ENVIRONMENT
The term “Demographic” denotes
characteristics of population in an
area, district, country or I the world.
Factors such as general age profile,
sex ratio, income, education, growth
rate affect the business with
different magnitudes.
Organizations need to address the following issues :
▪ What demographic trends will affect the market size of
the industry ?
▪ What demographic trends represent opportunities or
threat ?

70. DEMOGRAPHIC
ENVIRONMENT
Population
Size
Geographic
Distribution
Ethnic Size
Income
Distribution

71. POPULATION SIZE
Population size itself is a matter of “
critical importance” and changes in the
make-up of population has more
implications such as Changes in Nation’s
birth rate &/or family size, Increases or
decreases in total population, Effects of
rapid population growth on natural
resources and food supplies.
ETHNIC MIX
This reflects the ethnic make-up of the
population and has implications for both
company’s potential customers and
workforce. Issues to be addressed
include what changes in the ethnic mix of
the population imply for product and
service design & delivery.
GEOGRAPHIC DISTRIBUTION
Population shifts from one region of the
nation to another and this has a clear
impact on the competitive strategy of the
organization. For example, companies
have to consider relocation if population
shifts have a significant impact on the
availability of qualified workforce.
INCOME DISTRIBUTION
Changes in the individual and group
purchasing power and discretionary income
often results in consumptions and savings
pattern of the people. Tracking, Forecasting
and Assessing changes in the income patterns
may identify new opportunities for the
companies.

72. ECONOMIC ENVIRONMENT
The “Economic Environment”
refers to the nature and
direction of the economy in
which a company competes
or may compete. It
includes general economic
conditions in the region &
nation, conditions in the resource
market that influences the supply
to the enterprise, their cost, quality, availability and
reliability of supplies.

73. • Level of disposable income
• Interest & tax rates
• Government budget deficits
• Availability of credit
• Inflation rate & Money market rate
• Consumption patterns
• Price fluctuations
• Stock market trends
• Import/Export Factors
• Monetary & Fiscal policies
• OPEC policies
• Unemployment Trends
• Coalitions of countries/regional blocks
Key Economic Factors

74. SOCIO-CULTURAL ENVIRONMENT
It comprises of factors related to
human relationships and the
impact of social attitudes & cultural
values which has bearing on the
business of the organization.
It is a complex of factors
such as social traditions, values &
beliefs, level & standards of literacy
education, the ethical standards &
state of society, the extent of social
stratification, conflict &
cohesiveness and so forth.

75. Some of the important factors & influences operating in
this environment are :
▪ Social concerns, such as role of business
in the society, environmental pollution,
corruption, use of mass media & consumerism.
▪ Social attitudes & values, social customs, changing
lifestyle patterns & materialism.
▪ Education levels, awareness & consciousness of rights,
work ethics of members of society.
▪ Family structure & changes in it, family values.

76. POPULATION
EDUCATION
EMPLOYMENT
HEALTH
INSURANCE
&
DISABILITY
HOUSEHOLD
EXPENSE
DEMOGRAPHIC
& SOCIAL
STATISTICS

77. TECHNOLOGICAL ENVIRONMENT
One of the important factor that is controlling & changing
people’s life is technology. It can act as both opportunity
& threat to a business.
Business & Technology are
highly interrelated &
interdependent. The fruits
of research & development
of technology will be available
to the society through business
only & also improves the quality
of life of the society. Hence, technology is patronized by
business.

78. The following factors are to be considered for
technological environment :
 The pull of technological change.
 Opportunities arising out of
technological innovation.
 Risk & uncertainty of technological development.
 Role of R&D in a country and government’s R&D
budget.

79. TECHNOLOGY
AWARENESS of
marketable invention
TECHNOLOGY
ACQUISITION by self
generation or transfer
TECHNOLOGY
ADAPTATION minor
modifications for
specific needs
TECHNOLOGY
ADVANCEMENT
innovation involving
major modifications of
acquired technology
TECHNOLOGICAL
ABANDONMENT
obsolescencing ENVIRONMENT
factors affecting
technology user
Promotion

80. POLITICAL ENVIRONMENT
Political-Legal environment is partly general to similar
enterprises and partly specific to an individual
enterprise. It includes factors like
general state of political
development, the degree of
politicalization of business &
economic issues, the level of
political morality, the law &
order situation, political stability, the level of government
intervention in the Economy & the Industry, Government
policies (Fiscal, Monetary, Industrial, Labour & Export-
Import policies),

81. specific legal enactments and framework in which
the enterprise has to function & the degree of
effectiveness with which they are implemented.
There are three important elements of Political-
Legal Environment :
▪ Government
▪Legal System
▪Political Groups

82. Govt.
• The type of govt. running a
country is a powerful
influence.
• Taxes & Duties levied by the
govt. are critical areas
affecting the business.
Legal
System
• Companies prefer to carry out
business in a country having
sound legal system.
• They need to have good
working knowledge of major
laws protecting consumers,
competitions & organizations.
Political
Groups
• There may sporadic
movements against certain
products or services or
companies.
• They pressurize companies to
emphasis more on consumer’s
rights.
Political-Legal
Environment

83. GLOBAL ENVIRONMENT
Today’s competitive landscape requires that companies
must analyse global environment as it is also rapidly
changing. The new concept of “Global Village” has
changed how individuals
& organizations relate to
each other. Further,
migratory habits of the
workforce as well as
increased offshore operations are changing the dynamics
of business operations. The need to think & act from
Global perspective is universal.

84. The factors that should be assessed are :
▪ Potential positive & negative impact of significant
events such as sports meet or a terrorist attack.
▪ Identification of both important emerging global
markets and global markets that are changing.
▪ Differences between cultural and institutional
attributes of individual global markets.

85. CONCLUSION

86. Each business operates in a unique environment.
Environment not only influences business but
also gets influenced by it. No business can
function free of interacting and influencing forces
that are inside or outside its periphery.
“It is not the strongest of the species that
survives, nor the most intelligent, but the one
most responsive to change”.
- Charles Darwin