introduction to business environment module - 1 semester- iii jan – 2011
TRANSCRIPT
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Introduction to Business Environment
Module - 1 Semester- III Jan – 2011
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Instructions
15 sessions
Semester End Exam - 60 marks
Class Participation and Attendance - 10 Marks
Class Test & Case Study - 15 marks
Group Presentations and Vivas - 15 marks
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Course Content Introduction to Business Environment
Contemporary Scenario of Business Nature of Modern Business Economic Factors Socio cultural Factors Technological Factors
The Fundamentals Scope and Subject matter of Macroeconomics An introduction to Economics of Growth and
Development Concept of HDI
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Course Content
Macroeconomic Environment of Business : National
Economic System Economic Fluctuations Economic Indicators Macroeconomic Policies: Fiscal & Monetary Federal Budget
Financial Environment of Business: National Indian Financial System Financial Markets Current trends in Banking
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Course Content
Industrial Environment: National New Industrial Policy-1991 Privatization & Disinvestment Industrial sickness Role of Small Scale Industries
India & World Technology Transfer & Multinational Companies Strategies for going global Foreign Investments India & BOP India & WTO Economic Integration
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References Business Environment by Vivek Mittal Business Environment – Managing in a
Strategic Context by John Kew & John Stredwick
International Business Environment- Francis Cherunilam
Business Environment – Misra & Puri Essentials of Business Environment – K.
Aswathappa Business Environment - Francis Cherunilam
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Business may be understood as the organized efforts of enterprises to supply consumers with goods and services for a profit
What is Business???
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Contemporary Business goals Profit (Bottom-line) Growth Market Leadership Customer satisfaction Employee satisfaction Quality Products & Services Service to Society
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Characteristics of Business
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Indian companies – Fortune 500 8 Indian companies have made it to Fortune 500
list in 2010. These are:Indian Oil Corporation Reliance Industries Tata Steel Tata MotorsBharat PetroleumHindustan PetroleumState Bank of IndiaONGC
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Contd..
The league of 500 elite companies for 2010 is topped by U.S. retailer Wal-Mart Stores, followed by oil giant Royal Dutch Shell and another oil major, Exxon Mobil, in that order.
A total of 54 Chinese companies made it onto the list this year. Out of which three are in fortune 10 list
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Rank CompanyRevenues
($ millions)Profits
($ millions)
1 Wal-Mart Stores 408214 14335
2 Royal Dutch Shell 285129 12518
3 Exxon Mobil 284650 19280
4 BP 246138 16578
5 Toyota Motor 204106 2256
6Japan Post Holdings
202196 4849
7 Sinopec 187518 5756
8 State Grid 184496 -343
9 AXA 175257 5012
10China National
Petroleum (CNPC)
165496 10272
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Government Control
To correct market failures in case of externalities
To create stable business conditions (stimulate Aggregate Demand) through monetary & fiscal regulation
To provide Public goods
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Diversification as a growth strategy Diversification strategies are used to expand
firms' operations by adding markets, products, services, or stages of production to the existing business.
When the new venture is strategically related to the existing lines of business, it is called Concentric diversification.
Conglomerate diversification occurs when there is no relationship between the new and old lines of business; the new and old businesses are unrelated.
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Diversification: Vertical or Horizontal?
Vertical integration occurs when firms undertake operations at different stages of production.
When a firm diversifies closer to the sources of raw materials in the stages of production, it is following a backward vertical integration strategy.
Forward diversification occurs when firms move closer to the consumer in terms of the production stages.
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Globalization
It is a phenomenon which permits mobility of factors of production across globe except land.
Refers to a process of deepening economic integration, increasing economic and growing economic interdependence between countries in the world economy.
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Nature of Competition
Monopoly Duopoly Monopolistic competition Oligopoly
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BUSINESS CHALLENGES
Managing Bottom line
Meeting stakeholders expectations
Developing and retaining top talent
Creating a customer responsive organization
Diminishing time to market
Market agility
Pricing and quality
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What do you mean by Business Environment???
The environment of any organization is “ the aggregate of all conditions, events and influences that surround and affect it.”Characteristics of Business Environment: Complex Dynamic Multi-faceted Far- reaching impact
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Why Study Business Environment
Development of broad strategies to ensure sustainability
To foresee the impact of socio-economic changes at the national and international levels on firm’s ability
Analysis of competitor’s strategies and formulation of effective counter measures
To keep oneself dynamic
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Types of Environment
Internal Environment External Environment
Micro environment Macro environment
Economic Non Economic
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Internal Environment
Refers to all the factors that are within an organization
which impart strengths or cause weaknesses of
strategic nature.
Controllable factors. These include:
Value system
Mission and Objectives
Management Structure and Nature
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Components of Internal Environment
Human Resources
Company Image and Brand Equity
Other Factors
Physical Assets and Facilities
R & D and Technological Capabilities
Marketing Resources
Financial Resources
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External Environment
Includes all factors outside the organization which provide opportunities or pose threats to the organization
Uncontrollable factors
Consists of Micro and Macro environment
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Micro Environment
“It consists of the factors in the company’s immediate environment that affect the performance of the company”.
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Micro Environment Factors
SuppliersCustomersMarketing IntermediariesCompetitors
PublicsFinancial Community
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Micro Environment of a typical car manufacturer
ComponentsSupplier
Customers
Car DealersCompetitors
Stakeholders
CarManufacturer
PotentialSupplier
PotentialCustomers
Customers
PressureGroups
ForSupplies
ForCustomers
PotentialDealers
Government
LocalCommunities
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Macro Environment
It comprises general trends and forces that may not immediately affect the organization but sooner or later will alter the way organization operates.
Macro Environment :- Economic Non Economic
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Economic Environment
Economic stages that exists at a given time in a country Economic system that is adopted by a country for
example. Capitalistic, Socialistic or Mixed Economy Economic planning, such as five year plans, budgets,
etc. Economic policies for example, monetary, industrial and
fiscal policies Economic Indices such as National Income, Per Capital
Income, Disposable Income, Rate of growth of GNP, Distribution of Income, Rate of savings, Balance of Payments etc.
Economic Problems Functioning of economy
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Non Economic Environment
Regulatory Environment
Socio- Cultural Environment
Demographic Environment
Technological Environment
Political Environment
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Non- Economic Environment
Cultural Environment
Social Customs & Rituals and practices
Lifestyle patterns
Family structure
Role & position of men, women, children and aged in family & society
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Non- Economic Environment
Demographic Environment
Growth of population
Age Composition
Life Expectancy
Sex Ratio
Fertility and Mortality rates
Inter-state migration
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Macro Environment
Technological Environment
Sources of technology
Technological development
Impact of technology
Political Environment
Political parties in power
Political Philosophy
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Macro Environment
Regulatory Environment
Constitutional framework
Policies relating to pricing and foreign investment
Policies related to the public sector, SSIs, development of backward areas and control of environmental pollution
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International Environment
Important factors that operate at global level which have an impact on organization are:
Growth of world economy
Distribution of world GDP
International institutions IMF,WTO ILO
Economic relations between nations
Global human resource-nature and quality of skills, mobility of labor
Global technology and quality standards
Global demographic patterns
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WTO and its relevance for Indian companies
The main guidelines of WTO are: Trade without discrimination Growing market access Promotion of fair competition
The response of Indian government to WTO constitutes the following actions
Reduction of tariffs Opening Indian markets for Global Players Rationalizing industrial licensing and removal
of controls on the size of operations
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WTO and its relevance for Indian companies
The impact of WTO on Indian companies is likely to include the following : Increasing competition Consolidation of activities in core competence
areas Improvements in infrastructure to negate structural disadvantages. Shake out of minor players and M&As to gain
global scale.
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Overview of Business Environment
MACRO ENVIRONMENT
ECONOMIC Environment
MICRO ENVIRONMENT
BUSINESS
Internal Environment
Values, Mission & Objectives.
Human Resources,Co. Image & Brand Equity
TECHNOLOGICAL FACTORS
MARKETING INTERMEDIARIES
DEMOGRAPHIC FACTORS
SOCIAL CULTURAL FACTORS
Non - Economic Environment
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Environmental Analysis
Environmental ScanningThe process by which organizations monitor their opportunities and threats affecting their business is known as environmental scanning
SWOT Analysis
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Tools for Analyzing the Environment
PEST Analysis PESTLE STEEPLE
S - Social T - Technological E - Economic E - Environmental P - Political L - Legal E - Ethical
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Global Competiveness Index The World Economic Forum has ranked
139 economies in its 2010-2011 Global Competitiveness Report.
In overall competitiveness India scores a passable 51st place. It ranks notably ahead of Latin America’s powerhouse Brazil (58) and way ahead of its neighbors Pakistan (123), Sri Lanka (62) and Bangladesh (107), but behind China (27).
Switzerland tops the chart and USA is on 4th position due to economic instability from 2007-10
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Delhi tops 2010 ranking of India's most competitive city
Chennai cornered the second position in the list ahead of Mumbai , which dropped to third place from second position last year.
Chennai's ranking improved on the back of good performance under all the sub-indices used to benchmark the cities, particularly its educated workforce and logistics infrastructure, while Mumbai's fall was primarily due to the worsening state of its physical infrastructure.
Bengaluru is at fourth place in the list, followed by Kolkata, Hyderabad , Ahmedabad, Pune, Nagpur and Jaipur.
Ahmedabad and Pune have emerged as the most competitive tier-two cities in India.
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Questions for Case Study
Prepare the environmental threats and opportunity profile (ETOP) for Arvind Mills.
Prepare the strategic advantages profile (SAP) for Arvind Mills.
On the basis of ETOP and SAP, propose strategic alternatives before Arvind Mills.
List down all components of Internal & External Environment of Arvind Mills & identify its strengths & Weaknesses
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Thank You