lec 1 - business environment

8/10/2019 Lec 1 - Business Environment

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BUSINESS ENVIRONMENT


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Instructions

45 hours lecture sessions

Mid-Semester Exam 30 marks

End-Semester Exam - 45 marks

Attendance - 05 Marks

Assignment & Case Study - 10 marks

Group Presentations - 10 marks


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Course Content

Introduction to Business EnvironmentContemporary Scenario of BusinessNature of Modern BusinessEconomic FactorsSocio cultural FactorsTechnological Factors

The FundamentalsScope and Subject matter of Macroeconomics

An introduction to Economics of Growth andDevelopmentConcept of HDI


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Course Content

Macroeconomic Environment of Business : NationalEconomic SystemEconomic FluctuationsEconomic Indicators

Macroeconomic Policies: Fiscal & MonetaryBudget

Financial Environment of Business: NationalIndian Financial SystemFinancial MarketsCurrent trends in Banking


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Course Content

Industrial Environment: NationalNew Industrial Policy-1991Privatization & DisinvestmentIndustrial sickness

Role of Small Scale Industries

India & WorldTechnology Transfer & Multinational CompaniesStrategies for going globalForeign InvestmentsIndia & BOPIndia & WTOEconomic Integration


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Suggested Readings:

Business Environment by Vivek MittalBusiness Environment Managing in a StrategicContext by John Kew & John Stredwick

International Business Environment- FrancisCherunilamBusiness Environment Misra & Puri

Essentials of Business Environment K. AswathappaBusiness Environment - Francis Cherunilam


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Chapter 1

Overview of Business

Environment


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Business is an economic activity, which is relatedwith continuous and regular production anddistribution of goods and services for satisfying

human wants.Business may be understood as the organized

efforts of enterprises to supply consumers withgoods and services for a profit

What is Business???


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Exchange of goods and servicesDeals in numerous transactionsProfit is the main objectiveBusiness skills for economic successRisks and uncertaintiesBuyers and sellersConnected with production of goods andservicesMarketing and DistributionSatisfy human wants

Features of Business


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Contemporary Business goals

Profit (Bottom-line)GrowthMarket LeadershipCustomer satisfactionEmployee satisfactionQuality Products & ServicesService to Society


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Indian companies Fortune 500

8 Indian companies have made it to Fortune 500 list in2014. These are:

Indian Oil CorporationReliance IndustriesTata SteelTata MotorsBharat PetroleumHindustan PetroleumState Bank of IndiaONGC


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Contd..

Globally, Wal-Mart has pushed energy giantRoyal Dutch Shell to the second position in the2014 list, followed by Chinese majors -- SinopecGroup and China National Petroleum -- at thirdand fourths spots, respectively.Exxon Mobil is ranked fifth, taking the totalnumber of US companies on the list to 128. Thereare 95 Chinese firms and 150 from Europe on the

list, which ranks firms across the world on thebasis of their annual revenues.IOC is the only Indian company featuring in thetop 100 at the 96th position, although down from88th last year.


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Rank Company Revenues($ millions) Profits ($ millions)

1 Wal-Mart Stores 476294 16022

2 Royal Dutch Shell 459599 16371

3 Sinopec Group 457201 8932

4 China NationalPetroleum 432007 18504

5 Exxon Mobil 407666 32580

6 BP 396217 23451

7 State Grid 333386 7982

8 Volkswagen 261539 12071

9 Toyota Motor 256454 18198

10 Glencore 232694 -7402

Top 10 companies Fortune 500


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Meaning of Business Environment

Business Environment consists of all those factors thathave a bearing on the business, such as the strengths,weaknesses, internal power relationships and

orientations of the organisation; government policies andregulations; nature of the economy and economicconditions; socio-cultural factors; demographic trends;natural factors; and, global trends and cross-borderdevelopments.


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Why Study Business Environment

Development of broad strategies to ensuresustainabilityTo foresee the impact of socio-economic changes at

the national and international levels on firms ability Analysis of competitors strategies and formulation ofeffective counter measuresTo keep oneself dynamic


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Types of Environment

Internal EnvironmentExternal Environment

Micro environmentMacro environment

EconomicNon Economic


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Types of Environment


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Internal EnvironmentRefers 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 InternalEnvironment

Human ResourcesCompany Image and Brand EquityOther Factors

Physical Assets and FacilitiesR & D and Technological CapabilitiesMarketing ResourcesFinancial Resources


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External Environment

Includes all factors outside the organization whichprovide opportunities or pose threats to theorganization

Uncontrollable factorsConsists of Micro and Macro environment


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Micro Environment

It consists of the factors in the companys immediate environment that affect theperformance of the company.

The micro environment is also known as theTask Environment and Operating Environmentbecause the micro environmental forces have adirect bearing on the operations of the firm.


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Micro Environment Factors

SuppliersCustomers

Marketing IntermediariesCompetitorsPublics

Financial Community

Micro Environment of a typical car


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Micro Environment of a typical carmanufacturer

ComponentsSupplier

Customers

Car DealersCompetitors

Stakeholders

CarManufacturer

PotentialSupplier

PotentialCustomers

Customers

PressureGroups

For

Supplies

For

Customers

PotentialDealers

Government

LocalCommunities


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Macro Environment

It comprises general trends and forces thatmay not immediately affect the organizationbut 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 countryEconomic system that is adopted by a country, for example,Capitalistic, Socialistic or Mixed EconomyEconomic planning, such as five year plans, budgets, etc.Economic policies for example, monetary, industrial andfiscal policiesEconomic Indices such as National Income, Per CapitalIncome, Disposable Income, Rate of growth of GNP,

Distribution of Income, Rate of savings, Balance ofPayments etc.Economic ProblemsFunctioning of economy


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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 infamily & society


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Non- Economic Environment

Demographic Environment

Growth of population

Age Composition

Life Expectancy

Sex Ratio

Fertility and Mortality ratesInter-state migration


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Macro Environment

Technological Environment

Sources of technology

Technological development

Impact of technology

Political Environment

Political parties in powerPolitical 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 ofenvironmental pollution

Global Environment

rules and regulations of WTO, IMF, WB, SAARC, G20other international bodies / conventions / treaties /agreements / declarations / protocols etc.


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Nature of Competition

MonopolyDuopolyMonopolistic competitionOligopoly


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Competitive Structure of Industries


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Competitor Analysis

Competitor analysis seeks to find answers tocertain basic questions such as:

Who are the competitors of the firm?

What are the current strategies of thecompetitors?What are their future goals and likely strategies?What drives the competitor?Where is the competitor vulnerable?How are the competitors likely to respond to thestrategies of others?


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Framework for Competitor Analysis

Porter has suggested a framework forcompetitor analysis, consisting of fourdiagnostic components:

future goals,current strategy,assumptions

1. The competitor's assumptions about itself.2. The competitor's assumptions about the industryand the other companies in it.

capabilities


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Environmental Analysis Process

Environmental analysis is the study of theorganizational environment to pinpointenvironmental factors that can significantly

influence organizational operations.The analysis consists of four sequential steps:

ScanningMonitoringForecasting

Assessment


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Importance of Environment Analysis

The benefits of environmental analysis are asfollows;

The very idea of environmental analysis makes oneaware of the environmental organization linkage.Development of broad strategies and long-term policiesof the firm.Development of action plans to deal with technologicaladvancements.To foresee the impact of socio-economic changes at thenational and international levels on the firms stability.

Analysis of competitors strategies and formulation ofeffective countermeasures.

lec 1 - business environment

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