Business Environment Unit 1 PDF

BUSINESS ENVIRONMENT Dr Smitha Pillai Prof & Head Department of Management The Bhopal School of Social Sciences (BSSS College) Bhopal, M P Syllabus Introduction to business environment: Classification of business e...

BUSINESS ENVIRONMENT Dr Smitha Pillai Prof & Head Department of Management The Bhopal School of Social Sciences (BSSS College) Bhopal, M P Syllabus Introduction to business environment: Classification of business environment, Factors affecting business, Role of environment in business, Significance and Nature of Business Environment, Elements of Environment – Internal and External. Economic and Political Environment of Business: Economic Policy-Old & New Economic Policy, Significance and elements of economic environment, Role of government in Business, economic systems, Economic Planning in India, New Industrial Policy Legal and Technological Environment: Legal Environment – legal factors affecting business and its components. Technological Environment- introduction, how technology affects business, Brick and Click approach. E- Commerce-Concept, features, significance and limitations. Socio-Cultural Environment: Meaning, Characteristics, Components, Scope, relationship between society and business. Role &effect of culture on business, social responsibility of business Global Business Environment, Strategies for Going Global, Pros & Cons of Global Markets. EXIM Procedures, FTAs, FDI, FII, and Foreign Trade Policy Introduction to BE: Meaning Refers to all those internal and external factors which affect business or decision making in business. However, the term is often used to refer to the external factors Contd… The extent to which the environment is conducive to the development of the individual. The survival and success of a business firm depend on its innate strength and its adaptability to the environment and the extent to which the environment is favorable to the development of the organization. Nature of Business Environment Factors internal to the firm-controllable factors (it can alter or modify such factors) Factors external to the firm-uncontrollable factors(economic factors, socio-cultural factors, government, legal factors, demographic factors etc..) 3 levels of BE Internal Environment Micro environment/task environment/ operating environment Macro environment/ general environment / remote environment Internal Environment Value System Mission and Objectives Management Structure and Nature Internal Power Relationship Human Resources Company Image and Brand Equity Value System The extent to which the value system is shared by all in the organization is important factor contributing to success Mission and Objectives The business domain of the company, priorities, direction of development, business philosophy, business policy etc are guided by the mission and objectives of the company. Management structure and Nature The organizational structure, the composition of the Board of Director, the extent to professionalization of management etc.. Are important factors influencing business decisions. Internal Power Relationship Factors like the amount of support the top management enjoys from different levels of employees, shareholders and Board of Directors have important influence on the decisions and their implementation. Human Resources The characteristic of HR like skill, quality, morale, commitment, attitude etc would contribute to the strength and weakness of an organization. John Towers, MD Rover Group, BMW Engine Plant observes that a Japanese Company of 30000 employees is 30000 process improvers, In a western company it is 2000 process improvers and 28000 workers. And in an Indian Company? Company Image and Brand Equity The image of the company matters raising finance, forming Joint ventures or other alliances, soliciting marketing intermediaries, entering purchase or sale contracts, launching new products etc.  https://youtu.be/Pns6GDsotVM?si=HYN2VBZYA7UdBIyK https://youtu.be/Pns6GDsotVM?t=317 Miscellaneous Factors Physical assets and facilities R & D and Technological capabilities Marketing Resources Financial factors External Environment Micro Environment – Suppliers, customers, competitors, marketing intermediaries, financiers, Publics Macro Environment- External Custom Environment ers Economic Supplier Socio/ s cultural Compet Demograp itors his Micro Macro Political/ Publics govt Financier Natural s Technologi Marketin cal g global Intermedi Political Environment The political and government environment is of paramount importance of business. The fact that it is often politics that determines economic and business policies. Economic Environment Business fortunes and strategies are influenced by economic characteristics and economic policy dimensions such as the structure and nature of the economy, the stage of development of the economy, economic resources, the level of income, the distribution of income and assets. Global economic linkages, economic policies etc Social factors The type of product to be manufactured and marketed, the marketing strategies to be employed, the way the business should be organized and governed, the values and norms it should adhere to etc are all influenced by the social structure and the culture of a society. Demographics Size of population, Population growth rate Age composition Ethnic composition Spatial distribution of population Family size Family life cycle, income levels, ethnic composition, religion etc Technological Environment Technology is one of the important determinants of success of a firm as well as the economic and social development of a nation. Technology should be described as systematic knowledge for the manufacture of a product, for the application of a process or for the rendering of a service and does not extend transactions involving mere sales or lease of goods. Technology includes not only knowledge or methods that are necessary to carry or to improve existing production and distribution of goods and services, but also entrepreneurial expertise and professional know-  Geographical and ecological factors, such as natural resource endowments, weather and climate conditions, topographical factors, locational aspects in the global context, port facilities etc…. Factors Influencing Business Decision? Econo mic env demog Socio- raphic Busine cultural ss decisio n geogr techno aphica logical l Factors influencing Business decision Internal environment External environment Example Good Infrastructur e Disciplin ed Liberalizati labour on Chinese Favorable Economy Low business Environme Labour nt cost Huge domestic market , fast Disciplin growing economy , ed high per labour capita Income Components of BE-The Macro Environment Economic Environment Economic Policies Industrial Policy Trade Policy Foreign Exchange Policy Foreign Investment and Exchange Policy Fiscal Policy Monetary Policy Contd.. Economic Conditions Political Environment Economic Environment ECONOMIC ECONOMIC ECONOMIC CONDITIONS SYSTEM POLICIES INTEREST RATES AND ECONOMIC CURRENCY GROWTH EXCHANGE RATES Economic Environment contd… Refers to Broad characteristics of the economic system in which a business operates Business has economic relations with the government, capital market, household sector and global sector These sectors together influence the trends and structure of an economy 2023-24 Contd.. (i) Economic Conditions : The general economic conditions prevailing in the country viz national income, per capita income, economic resources, distribution of income and assets, economic development etc are important Incomedeterminants Levels of the business strategies Distribution of Income GDP trends Fiscal Policy Demand & supply trends Price trends Trade & BOP trends Foreign Exchange (ii) Economic System : The economic system of a country may be capitalist, socialist, communist or mixed DO YOU KNOW ? The capitalist economy is said to be a liberal economy because the free market determines the demand, supply and price of the market. There is no direct interference of the government in this economy. Some classic examples of capitalist economies are the U.S.A., U.K., Germany, and Singapore. Some states are capitalistic, but countries like Norway, Sweden, Denmark, Iceland, and Finland follow socialism strictly. They are purely socialistic countries. These five Nordic countries are examples of the Socialist Economy. They distribute the income equally according to their hard work and contribution. DO YOU KNOW ? Communism was pitted against capitalism, which relies on democracy and the production of capital to form a society. Prominent examples of communism were the Soviet Union and China. The Soviet Union collapsed in 1991 but China has drastically revised its economy to include some capitalism. A mixed economy consists of both private and government/state-owned entities that share control of owning, making, selling, and exchanging good in the country. Two examples of mixed economies are the U.S. and France.  On December 25, 1991, the Soviet hammer and sickle flag lowered for the last time over the Kremlin, thereafter replaced by the Russian tricolor. Earlier in the day, Mikhail Gorbachev resigned his post as president of the Soviet Union, leaving Boris Yeltsin as president of the newly independent Russian state. 1989-1992 (iii) Economic policies-https://www.youtube.com/watch? v=WYaIXWd9a2U Economic policies of the government of India suggest the system for taxation, and also the budget of this county, not only that but also it includes the currency and the rate of interest. The market of labour and also the national ownership are an integral part of economic policies of India. India has various economic policies which are industrial policy, trade policy, monetary policy, fiscal policy, Indian agricultural policy, industrial policies, International trade policy in India, exchange rate management policy, EXIM policy.  Trade Policy: The foreign trade policy of India focuses on enhancing the share of India in universal trade from 2.1% to 3.5%. Monetary Policy : This policy in India majorly deals with the monetary authority of this country and it includes the central bank. It handles the allocation and also the supply of money, rate of interest in order to present the high growth of the economy in India. Fiscal Policy : This policy controls taxation and the decision of expenditure from the perspective of the government of India. This government takes strong steps to strengthen the control of the expenditure of this country. Through the initiative of this government, the contribution of the resources and the principles of the market have been improved. Indian Agricultural Policy This policy mainly includes the reformation of the land in India. The strategies regarding agriculture and the use of innovative technology in agriculture are also the concern of this policy. Most importantly, the policy of prices of the goods, security and safety of the foods, and also the public distribution system, service regarding non-firms are also an integral part of this policy. Industrial Policies Regarding these policies, the industrial policy resolution was taken in 1948 to add democratic socialism to the structure of the economy in India. The new policies regarding industries suggest the expansion of the responsibilities of the states under India, decrease of the threats of nationalization and all. International Trade Policy This policy includes free trade in India. Free trade suggests the smooth trade of a country. In the mid 19th century, the government of India modified the trade international trade policies. The main aim of these policies is to make the economy of the country India strong. Exchange Rate Management Policy This policy is also known as the pegged exchange rate. This policy includes the flexibilities in the exchange rate. There is the upper and lower limit of the exchange rate. If the up and down rate is 1%, then the rate of exchange is in a normal state. The main purpose of these policies regarding exchange rate is to assure stability regarding foreign trade and capital movement. EXIM Policy EXIM policy suggests the export and import policies in India. Through these policies, the guidelines have been fixed regarding export and import. The government of this country India introduced these policies for five years in the control of the development and regulation act 1992 regarding foreign trade. iv) Economic Growth Increased economic growth rate and increase in consumption expenditure , lowers the general pressure within an industry and offers more opportunities than debt. v) Interest Rates and Currency Exchange Rates The rate of interest affect the demand of the products in the economy when general goods are purchased on borrowed funds Currency exchange rates have a direct impact on the business environment  https://www.youtube.com/watch?v=gbi6EfPFJCY IDENTIFY? Rachel Reeves, First Woman UK Finance Minister