economic environment of business (an introduction)
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ECONOMIC
ENVIRONMENT OFBUSINESS : AN
INTRODUCTION
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ECONOMIC ENVIRONMENT OF
BUSINESS {50 MARKS}COURSE CONTENT : 4 PARTS
PART I : The Fundamentals
{Before syllabus we would cover in deeper the
meaning of economic environment of business} The Scope & Subject Matter of Macroeconomics
An Introduction to the Economics of Growth & Development
An Introduction to the Indian Economy - Its Salient Features India's Gross Domestic Product & Net National Product (its
components & the significance of the same to growth)
Inter-Sectoral Distribution of the Gross National Product over
the Five Year Plans Period.
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PART II: The Economic Markets:
The Product Market & How it Affects India's Growth Potential
The Money Market & How it Behaves
The Capital Market & its Variability
The Money Market & the Role of Central Banking
How does Commercial Banking Effect Industry & Business
The Indian Labor Market & Levels of Unemployment &
Inflation since 1990
ECONOMIC ENVIRONMENT OF
BUSINESS {50 MARKS}
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PART III : Federal Budget
Objective is to expose the students to the various components of
the national budget and how these impact on the business world.
PART IV: India & the World
The capitalist world economy and India's position therein
since 1990
The World Bank , and IMF conditionalities leading to the
liberalisation - privatisation -globalisation exercise and beyond
India's balance of trade and fluctuations since 1990. How do
er figure in the world order.
ECONOMIC ENVIRONMENT OF
BUSINESS {50 MARKS}
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India's balance of payments and how its study can assist
corporate decision making. What is needed to improve the
situation, if at all it is poor.
The Business Cycle and how it is perceived to behave in the
immediate future. What business decision hinge on this analysis.
ECONOMIC ENVIRONMENT OF
BUSINESS {50 MARKS}
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Reference Text:
Economic Environment of Business, S.K.Misra and V.K.Puri,
Himalaya Publishing House, 2005
Business Environment, Francis Cherunilam, Himalaya
Publishing House, 2005 Business Environment ± Aswathappa, HPH (10)
Raj Aggrawal: Business Environment (Excel)
Adhikary, M: Economic Environment of Business in
India(Sultan Chand)
Indian Economy ± Datt & Mahajan (6)
Economic Environment of Business ± Veena Keshav Pailwar (6)
MACRO ECONOMICS
ECONOMIC ENVIRONMENT OF
BUSINESS {50 MARKS}
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Business Environment ± Aswathappa, HPH (10) :
Comprehensively deals with Business Environment : Groups to
deal with Application part + Material related to course revision.
Lot of examples related to points dealing with theoretical points.
Pailwar book: Indian economy related applications. In eachchapter; Importance from the viewpoint of Managerial
application (significance) is given. Groups to consult the same for
presentation.
Indian Economy: Latest information related to the data and
development still obsolete. You have to go for updating the same.
ECONOMIC ENVIRONMENT OF
BUSINESS {50 MARKS}
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Mode of teaching: Interfacing sessions:
Groups to discuss subjects + case studies +
Important observations in the subject.
Will teach principles for better understanding and
then Groups are to come well prepare for regular
discussion the applications.
Though paper is of 50 marks but most importantfor managers as it will give a fairly good idea
about the business environment and sharpen
capabilities of taking logical decisions.
ECONOMIC ENVIRONMENT OF
BUSINESS {50 MARKS}
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May not look exciting and challenging apparently
as managerial economics since no charts and
diagrams .
But then you need to remember lot of things with
capability to reproduce.
Data in books are obsolete . You need to update
them.
You need to update your study material with every
day developments appearing in financial papers so
that in exam you can produce best material.
ECONOMIC ENVIRONMENT OF
BUSINESS {50 MARKS}
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GROUP FORMATION:
ARE YOU COMFORTABLE WITH THE SAME
GROUPS OR WANT SOME CHANGE?
CRs to discuss with class and provide us namesand group.
Let us freeze them from very beginning.
ECONOMIC ENVIRONMENT OF
BUSINESS {50 MARKS}
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ECONOMIC
ENVIRONMENT OFBUSINESS : AN
INTRODUCTION
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INTRODUCTION : BUSINESS
CHALLENGES
INTRODUCTION:
Never before business environment was so Volatile and Dynamic.
Managing business is a daunting task in changing environment for the
managers.
Never before there were so many opportunities to strike and prosper
as they are seen now.
A MANAGER SHOULD HAVE FULL KNOWLEDGE OF
ENVIRONMENT IN WHICH HE/SHE IS OPERATING
BUSINESS ENVIRONMENT
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NATURE OF BUSINESS
NATURE OF BUSINESS:
It is organised efforts of enterprise to earn profit .
Business may vary in size in terms of no. of employees, salesrevenues etc.: small or big in size but all aim at making profits.
SAIL, TISCO has thousands of employees and their sales revenues
run in thousands of crores of rupees.
Small business units (viz. 1 or 2 working at home or 10 operating in
a retail store, 1,00,000 operating in a multiple units spread across the
country working they are all have major concern - to earn profits.
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NATURE OF BUSINESS
Businesses go beyond the objective of earning profit in a society;
It represents an institution in society.
Be it for the supply goods and services;
Creating job opportunities;
Offering better quality of life;
Contributing to the economic growth of the country and
putting it on the global map; Role of business is crucial .
Society cannot function without business.
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NATURE OF BUSINESS
SCOPE OF BUSINESS:
Vast Scope. Various activities are involved in bringing raw materials
to the factory and the product from there to the market constitute
business.
Automobiles:
Supplier of raw materials Manufacturer converting raw materials into inputs and
products.
Transport agent assists in moving materials to the
manufacturing places;
Banker to finance various activities
Advertising agencies tell about vehicles
Where they can be produced ;
Insurance agent
Other host of activities.
A long chain of activities.Business is people.
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NATURE OF BUSINESS
CHARACTERISTICS OF CONTEMPORARY BUSINESS:
Transition
Pressure of competition Immense Opportunities
Globalisation
Technology
Information
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
BUSINESS
TRANSITION
INFORMATION
TECHNOLOGYGLOBALISATION
OPPORTUNITIES
COMPETITION
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CHARACTERISTICS OF
CONTEMPORARY BUSINESSBUSINESS IN TRANSITION
For long time business was conducted in sheltered market
covering inefficiencies, low productivity and high cost.
In199
0s and ahead the process of liberalisation started andmost all protectionist measures were lifted.
In a globalised environment Indian business leaders find totally
new environment characterised by competition both from
within and from foreign business.
A TYPICAL BUSINESS LEADER IS SANDWICHED BETWEEN
THE COMPULSIONS OF THE NEW BUSINESS
ENVIRONMENT AND THE OLD PRACTICES OF DOING
BUSINESS.
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
What he needs to do ?
Rigid hierarchical and tall structure Flexible flat
and team based structures.
Family centric, closed minded and secretive
environment Dispersed ownership , open minded
and transparent environment.
Caste ridden superstitious laid back styles of
management Rational thinking and vibrant styles of
management.
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CHARACTERISTICS OF
CONTEMPORARY BUSINESSPRESSURES OF COMPETITION:
Indian businesses are competing among themselves and are
also exposed to outside competition from foreign firms.
Competition though unwelcome to managers , is a boon to
customers.
Earlier customers were squeezed, they paid high prices for
bad quality goods.
Producers maintained monopoly. (6-7 years wait for
telephone connection; 3-4 years to get cooking gas
connection , 8-10 years to get a new two wheeler and
the list goes on).
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
In changed scenario customer is the king ; lot of choices
for customers and at lower prices; service providers greets
customers.
Nature of delivery of services across the counters changed.Courteous handling of customers.
Competition helps rival firms.
Competing firms benefits from having strong domestic
and foreign rivals :
Competition defines new ways of doing business
Building new capabilities
Building new standards for CRM
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
IMMENSE BUSINESS OPPORTUNITIES:
BPO, CALL CENTRES, I.T., ITES, Wealth Management, Risk
Management, Private Banking new types of businesses.
Opportunities in traditional sector : viz. Industry.
Globally Competitive manufacturing possible in
India. Pharmaceuticals, chemicals, textiles , metals refining,
cement, auto and ancillaries; Exporting large amount of output.
Many MNCs look at India as export base. Suzuki and
Hyundai perceive India as a car club.
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
India has potential to emerge as the second global
manufacturing base after China .
First wave $460 Mn. (McKinney) covered low technologyproducts like garments, toys etc.
Second of $1.6 trillion yet to come.
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
Commodity Business:
Yet another area where Indian companies are in a
stronger position . L.N. Mittal in Steel, Ambanis in Polyester,
K.M. Birla in Viscose Fibre and Bharat Forge in forgings are some
names .
3 reasons for enviable and commanding position of
industrialists:First Low Cost production
Second Confidence these entrepreneurs love ± Confidence
derived from their increased competitiveness and global outlook
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
Third, Countries which were traditionally centres of
manufacturing are finding their competitiveness eroded by
other low cost countries.
(In Europe a number of small auto components manufactures are
selling out and are being taken over by the likes of Bharat forge.
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
Globalisation:
Going International is yet another trend followed by modern
business houses .
Political boundaries are no barriers to business.
Production facilities are being set up in different countries
and products are being sold through a global network.
Gradually business houses are exposed to global
competition which augurs well for the consumers.
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
Internationalisation and Globalisation is fast becoming imperative
for modern business (triggers for globalisation)
Technological innovations Crumbling trade barriers
Global flow of capital & technology
Information Explosion
Intensity of market competition
Changing life style
Demand for New Products.
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
Technology:
Business is characterised by increasing use of technology.
It influences ways of Organising production functions
Marketing of products
Communication among employees
Hiring and motivating employees
Organising Finance function
INFORMATION: Recognition of information needs.
Major Improvements in Data Processing, information systems
analysis and preparation of effective records and reports.
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
Vital reason for progress in the area of business is the availability
of the computer and electronic devices that have
made feasible the quick and accurate gathering,
processing and distributing information.
Information technology itself has undergone revolutionary changes.
FROM HAND WRITTEN SHEET OF BUSINESS TO TYPING TO
STENCIL CUTTING TO PHOTOCOPYING TO FLOPPIES TO
CYBERSPACE«..
As businesses are globalised online communication
across the world would be highly useful .
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
BUSINESS OBJECTIVES:
VISION:
³ BROAD AND HAZY EXPLANATION OF WHY THE FIRM
EXISTS AND WHERE IT IS TRYING TO REACH´
Where do we go from here?
What changes lie ahead in the business landscape?
What differences will these changes make to the company¶s present
business?
VISION GIVES ORGANISATION A SENSE OF PURPOSE AND
A SET OF VALUES THAT UNITE EMPLOYEES IN A COMMON
DESTINY.
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CHARACTERISTICS OF
CONTEMPORARY BUSINESSInfosys Vision´ To be globally respected corporation that provides
best of breed business solutions, leveraging
technology, vendors and societyµ
MISSION:Mission Statement outlines the fundamental purpose of the
organisation. A vision becomes tangible to as a mission statement.
Most of the organisations ± manufacturing, services, infrastructure
have describe their own mission statement in writing.
It seeks to give a definite meaning to vision.
If vision seeks answers to the question ´where to go from
here?µ mission answers ´what business we are in the
right nowµ
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
ELEMENTS OF MISSION STATEMENTS:
1. Customer needs or What is being satisfied
2. Customer groups or Who is being satisfied
3. Company·s activities, technologies and
competencies or How the firm goes about creating
and delivering value to customers and satisfying
their needs
3. The company·s concern for survival , its
philosophy, its self concept and its concern for
public image.
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
Mission statements are highly personalised-
unique to the organisation for which they are
developed. It is therefore normal that differentfirms in same industry has different mission
statements.
OBJECTIVES:
Mission statements are more specific than vision
statements but they are not to be taken as
concrete directions for action.
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CHARACTERISTICS OF
CONTEMPORARY BUSINESS
BUSINESS OBJECTIVES:
Mission Statements are more specific than vision
statements but are not to be taken as concrete
directions for actions.
Objectives render mission statements more
concrete
A typical business unit seeks to achieve more than
one objective and there are always restraints to
attainment of some objectives.
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BUSINESS OBJECTIVES
BUSINESS
GOALSJoy of
Creation
Challenging
Market
Leadership
Employee
Satisfaction& Development
Growth
Quality of products
and servicesPower Profit
Service to
Society
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BUSINESS OBJECTIVES
PROFIT:
Main incentive,
Motivator,
Strong sustainer,
Judicious allocator of resources,
Objective indicator of productivity and a solid basis for
growth
Expansion and survival
Enables business to achieve other objectives too. Not all enterprises are interested in making profits. Viz.
Hospitals, Schools, charitable trust, , Government agencies
Non profit organisation customarily rely on gifts,
endowments, receipts from money raising projects subsidies
or taxes for sustenance.
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BUSINESS OBJECTIVES
Profit should really be beginning and not end in
itself.
Acting as seed for new products, more plants,
more dividends, more tax payments, more jobs and
more opportunities.
Profit should promote well being of society.
´promoting only products with high margins (toearn profits), ignoring research and failing to
provide working conditions satisfactory to
employees may in the ultimate bring about the
demise of an enterpriseµ
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BUSINESS OBJECTIVES
GROWTH:
Growth is another primary objective of business:
The strategies adopted to achieve growth are:
(a) Add more products/markets
(b) Diversify into new areas
(c) Integration ± forward or backward
(d) Increase market share
(e) Expand markets or(f) Cut down costs and increase productivity.
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BUSINESS OBJECTIVES
POWER:
Business houses have vast resources (in the form of money ,
materials, men and knowhow) at their command.
Next to top officials of Govt. perhaps it is the business people
who enjoy considerable clout.
Several enlightened business men have used their power for the
good of society. About JN Tata Time of India April 13, 1912wrote ³He was above all a patriot´. .. ³who made no public
speeches. To his mind wealth and the industry which led to
wealth were not ends in themselves but means to an end, the
stimulation of the latent resources of the country and its
elevation in the scale of nations.´
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BUSINESS OBJECTIVES
EMPLOYEE SATISFACTION AND DEVELOPMENT :
³If you want to plan for a year plant corn. If you want to plan
for 30 years plant a tree. But if you want to plan for 100 years
plant men´ So goes a Chinese proverb.
Concern for employees continues to be an important
aspect of management.
TATAs are legend in pursuing this objective. Implementation of Labour Welfare measures
Safety and Security measures
Training and development.
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BUSINESS OBJECTIVES
QUALITY PRODUCT AND SERVICES :
Persistent quality of products earns brand loyalty, a vital
ingredient of success.
Hindustan Lever is flourishing because of the high quality of its
products (Liril, Vim, Lifebuoy, Rin, Sunlight, Close up , Lux,
Rexona etc.)
Buyers consider them safe, high quality and reasonably priced.
They have excellent R& D facilities behind brands.
Quick Money can come through short cuts but such enterprises
will not survive for long.
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BUSINESS OBJECTIVES
MARKET LEADERSHIP:
To earn market leadership and a niche for oneself innovation is
the key factor.
Innovation may be in product, advertising, distribution,
finance or in any other field.
Blow Plast retains its market leadership by introducing soft
luggage & bags.
Hindustan Lever earned leadership in tooth paste by
introducing mouth washer in its Close up. Asian Paints adopted unconventional channels for the sale of its
products
Ambanis of Reliance Textiles introduced convertible
debentures which have become attractive.
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BUSINESS OBJECTIVES
CHALLENGING:
Business offers vast scope and poses formidable challenges.
The worth of an individual is tested more in business than in
any other profession.
JOY OF CREATION:
It is through business strategies that new ideas and innovations
are given a shape and are converted into a useful products andservices for the benefit of customers.
Some of the areas of future focus in next 2-3 decades would be:
Readily available artificial human organs except brain.
Means of transportation without an automobile perhaps an
individual flying machine.
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BUSINESS OBJECTIVES
Drugs to cure or prevent cancer and the common cold.
A personal telephone no longer than cigarette pack that can be
used from any location
A pocket size computer/Laptops.
Clothing that can be cleaned by placing it in a cleaning
chamber for one minute.
A synthetic material to replace wood.
SERVICES TO SOCIETY:
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BUSINESS OBJECTIVES
SERVICES TO SOCIETY:
Providing safe and quality goods at reasonable prices
Providing employment.
Patronising cultural and religious activities.
Maintaining and protecting ecology and
Supporting less privileged sections of people in society.
GOOD CORPORATE CITIZENSHIP:
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BUSINESS OBJECTIVES
GOOD CORPORATE CITIZENSHIP:
It implies that business unit complies with the rules of the land,
pays taxes to Government regularly, discharges its obligations
to society and cares for its employees and customers.
Unethical practices are anathema to the Tatas. Quoting JRD
TATA ³ This factor has also worked against our growth. What
would have happened if our philosophy was like that of some
other companies which do not stop at any means to attain theirends«« I have often thought of that and I have come to the
conclusion that if we were like these other groups , we would be
twice as big as we are today. What we have sacrificed is a 100%
growth.´
S SS O C S
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BUSINESS OBJECTIVES
Read Critics of Business:
Homework:
Group 1 to discuss table 1.1- 1.2, Box 1.1 to 1.4
WHAT IS ENVIRONMENT
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WHAT IS ENVIRONMENT
Environment refers to all external forces which have a bearing
on the functioning of business.
³Environment factors or constrains´ ³ are largely if not totally,
external and beyond the control of individual industrial
enterprises and their managements.
These are essentially the µgivens¶ within which firms and their
managements must operate in a specific country and they vary
often greatly from country to country´
Glueck and Jauch : ³The environment includes factors outside
the firm which can lead to opportunities for or threats to the firm
. Although there are many factors, the most important of the
sectors are socio economic technological supplier, competitors
and government.
WHAT IS ENVIRONMENT
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WHAT IS ENVIRONMENT
6 Factors of business environment:
Political ± legal Economic
Socio Cultural
Technological
Global
Natural
ECONOMIC ENVIRONMENT: Refers to all forces that have an
impact on business:
Industrial Production, Agriculture, Planning , Basic economic
philosophy, Infrastructure , National Income, Per CapitalIncome, Money Supply, Price Level, Population, Savings, Stages
in the economic development and trade cycles are major factors.
Business obtains all its needed input from the economic
environment & it absorbs the output of business units.
TABLE
WHAT IS ENVIRONMENT
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WHAT IS ENVIRONMENT
TECHNOLOGICAL ENVIRONMENT: It is systematic application of scientific or other organised
knowledge to practical tasks.
It is through business that technology reaches people.
Technology changes fast and to keep pace with it business men
should be ever alert to adopt changed technology in that
business.
WHAT IS ENVIRONMENT
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WHAT IS ENVIRONMENT
POLITICAL ENVIRONMENT:
This refers to the influence exerted by the 3 political institutions
viz. legislature, executive and the judiciary in shaping, directing,
developing and controlling business activities.
The legislature decides on a particular course of action ;
executive ±also called government implement whatever is decided
by the Parliament.
Judiciary functions as the watchdog in order to ensure that both
the legislature and the executive function in public interest and
within boundaries of the Constitution.
WHAT IS ENVIRONMENT
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WHAT IS ENVIRONMENT
GLOBAL OR INTERNATIONAL ENVIRONMENT:
A Manager must understand that
Safe and protected markets are no more there;
That the world is becoming small in size thanks to advancedmeans of transport and communication facilities;
That learning of foreign languages is a necessity;
That acquiring familiarity with strange and changing currencies
is a must
That facing legal and political uncertainties is inevitable.
and that their products to meet different customer needs and
tastes would only help companies survive amides intense
competition.
WHAT IS ENVIRONMENT
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WHAT IS ENVIRONMENT
SOCIALAND CULTURAL ENVIRONMENT :
It refers to the influence exercised by certain factors which are
beyond the company¶s gate.
It includes;
People¶s attitude to work and wealth;
Role of family; marriage; religion and education;
Ethical issues and
Social responsiveness of business.
WHAT IS ENVIRONMENT
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WHAT IS ENVIRONMENT
BUSINESS = PRODUCT OF Technological
Political ±legal
Economic,
Social ±cultural and
Natural factors
amides which it functions.
3 FEATURES:
3 features are common to the web of relationship between business
and its environment1. There is symbiotic relationship between business and its
environment that is business is influenced by its environment
and in turn to a certain degree it will influence the external
forces. Similarly political legal environment influences economic
environment and vice versa .
TABLE
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WHAT IS ENVIRONMENT
2. These environment factors are dynamic. They keep on changing asyears roll by so does business.
3. A particular business firm by itself may not be in a position to
change the environment. But along with other firms business
will be in a position to mould the environment in its favour to a
large extent.
KNOWING THE ENVIRONMENT:
The environment provides a mass of ambiguous information. What should be done to make out the relevance of the
information
What is to be accepted and what is rejected.
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GLOBALEXTERNAL
ENVIRONMENT
INTERNAL
ENVIRONMENT
ENVIRONMENT
OF BUSINESS
WHAT IS ENVIRONMENT
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WHAT IS ENVIRONMENT
3 concepts seek to answer these questions:
1. Enacted Environment
2. The Domain consensus and
3. The task environment.
ENACTED ENVIRONMENT:
It is organisation¶s own environment out of the total external
environment
Chooses those on which to react and not on entire environment.
Domain & domain Consensus : Domain is a part of enacted
environment which the organisation carves out for itself.
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WHAT IS ENVIRONMENT
Firm delineates its own territory out of the environment.
- Range of products offered
- Population served and
- Services rendered.
Organisation focuses on these 3 areas only.
WHY DOMAIN CONSENSUS:
As an organisation has many stakeholders-owners, employees,customers, government , public , suppliers and lenders, Domain
Consensus is formed when all the stakeholders agree upon the
domain of the organisation.
If Domain consensus is not reached it can create conflicts and
vissiate growth environment.
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WHAT IS ENVIRONMENT
Task Environment :
The range of products to be offered
The technology to be employed and
The productive strategies to be used to counter the global
competition.
It is the task environment needs constant surveillance though
elements outside are not ignored but are not paid less attention.
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WHAT IS ENVIRONMENT
OBJECTIVES AND USES OF STUDY:
Environmental Analysis has 3 basic goals.
Analysis should provide an understanding of current and
potential changes (long term perspective) taking place in the task environment.
It should provide inputs for strategic decision making.
Facilitate and foster strategic thinking in organisations typically
a rich source of ideas and understanding of the context in which
organisation is operating.
It should challenge the current wisdom by bringing fresh
viewpoints into the organisation.
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ENVIRONMENTALSCANNING
STRATEGYFORMULATION
STRATEGYIMPLEMENT
ATION
EVALUATION
&
CONTROL
WHAT IS ENVIRONMENT
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WHAT IS ENVIRONMENT
Benefits of environmental study:
1. Development of broad strategies and long term policies of the
firm.
2. Development of action plans to deal with technological
advancements3. To foresee the impact of socio economic changes of the national
and international levels on the firm¶s stability
4. Analysis of competitors strategies and formulation of effective
counter measures5. To keep oneself dynamic.
THUS the managers can concentrate on these few instead of having
to deal with all the environment opportunities and threats in the
pressure cooker environment.
WHAT IS ENVIRONMENT
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WHAT IS ENVIRONMENT
µFIRMS WHICH SYSTEMATICALLY ANALYSE ANDDIAGNOSE THE ENVIRONMENT ARE MORE EFFECTIVE
THAN THOSE WHICH DON¶T´
PROCESS OF ENVIRONMENTAL
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PROCESS OF ENVIRONMENTAL
ANALYSIS
1. SCANNING a. Surveillance of all environmental factors and
their interactions in order to
Identify early sign of possible environmental change and
Detect environmental changes already in way.
2. MONITORING Tracking environmental trends, sequences of
events or streams of activities.
3. OUTCOMES EMERGE:a. Specific description of environmental trends or patterns to be
forecast.
b. Identification of trends for further monitoring and
c. The identification of areas for further monitoring
PROCESS OF ENVIRONMENTAL
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PROCESS OF ENVIRONMENTAL
ANALYSIS
These output become inputs for further forecasting.
3. FORECASTING :
Scanning and Monitoring provide a picture of what has already
taken place or what is happening
Strategic Decision requires a future orientation.
Hence forecasting is an essential element in environmental
analysis.
PROCESS OF ENVIRONMENTAL
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PROCESS OF ENVIRONMENTAL
ANALYSIS
1. Forecasting is concerned with developing plausible projections of
the direction, scope and intensity of environmental change:
How much time it will take a particularly new technology to
reach the market place?
Are current life style trends likely to continue.
Forecasting is well focused and is much more deductive and complex
activity.
PROCESS OF ENVIRONMENTAL
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PROCESS OF ENVIRONMENTAL
ANALYSIS
4. ASSESSMENT:
Assessment involves identifying and evaluating how and why
current and projected environmental changes affect or will
affect strategic management of the organisation.
Assessment tries to answer questions such as what are the
key issues presented by the environment and what are the
implications of such issues for the organisation?
PROCESS OF ENVIRONMENTAL
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PROCESS OF ENVIRONMENTAL
ANALYSIS
Linkages among Stages:
Though conceptually scanning , monitoring,
forecasting and assessment are separate
activities but they are inextricably intertwined
PROCESS OF ENVIRONMENTAL
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PROCESS OF ENVIRONMENTAL
ANALYSIS
scanning
Monitoring
Assessment
Forecasting
Though they are separate
Activities yet they are
inextricably interwined
LIMITATIONS OF ENVIRONMENTAL
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LIMITATIONS OF ENVIRONMENTAL
ANALYSIS
1. Environmental Analysis does not foretell the future nor iteliminates uncertainty.
2. It provides only input in strategy development and testing and
does not guarantee organisational effectiveness.
3. The potential of environmental analysis is often not realisedbecause of how it is practised.
4. Too much reliance is often placed on the information collected
through environmental scanning. µparalysis through analysis
syndrome¶
NORTON COMPANY : An industrial abrasives manufacturer
and a competitor of 3M in US the US Norton faithfully studies
environment and followed all management models, systems and
procedures.
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LIMITATIONS OF ENVIRONMENTAL
ANALYSIS
Inspite of all Norton¶s state of the art management systems itsperformance remained disappointing. In 1990 it was absorbed
into the French giant, Compagnie de Saint- Gobain.
3M achieved success but followed a different path. Company didnot get caught by the paralysis syndrome. Leaders place little
emphasis on top down planning and control.
Instead they nurtured the innovative ideas of sales engineers and
sales representative thereby building an entrepreneurial enginethat generated a stream of profitable new products and
promising new technologies.
By mid 80s 3 M was reporting sales 8 times those of its old
competitor.
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LIMITATIONS OF ENVIRONMENTAL
ANALYSIS
3 M was named 5th times in 6 years to Fortune¶s list. Of 10 most
admired corporations.
ENVIRONM FACTORS AND THEIR FEATURES
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ENVIRONM. FACTORS AND THEIR FEATURES
Global
Environment
Technological
Environment
Economic
Environment
Political
Environment
Socio Cultural
Environment
Natural
Environment
Increasing
Opportunity as
world has
become 1 mkt.
Tech. reaches
people through
business
Growth
Strategy
Role of
Legislature
Culture creates
people
Manufacturing
Depends on
physical
inputs.
Improving
Quality
Increased
Productivity
Economic
System
Role of
Executive
Culture &
Globalisation
Mining &
Drilling
depends onnatural depos.
Competition
from MNCs
Need to spend
on R &D
Industry Role of
Judiciary
Culture
determines
Goods & Serv.
Agriculture
depends on
Nature
Capital & Tech
Transfer
Fast Changing
Technology
Agriculture Constitution of
India
People¶s
attitude tobus. & work
Trade between
2 regionsdepends on geo
factors
Deciding which
mkt to enter &
how
Rise & decline
of products &
organisations
Infrastructure New Direction
for Govt. role
Caste System Transp &
Commun.
Depends on
geo. factors
KNOWING THE ENVIRONMENT
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KNOWING THE ENVIRONMENTGlobal
Environment
Technological
Environment
Economic
Environment
Political
Environment
Socio Cultural
Environment
Natural
Environment
Adjusting the
management
process
High Expect-
actions of
consumers
Money &
Capital
Markets
-- Spirit of
collectivism &
individualisatio
n
--
India & WTO Problem of
techno
structure
Per Capita &
National
Income
- Education
--- System
Complexity
Population Family &
Marriage
Increased
regulation &
stiff opposition
New Economic
Policy
Authority
Demand forCapital
Scientific Spirit
Social Change Ethics in
Business
Social
Responsibility
Social Audit
LIMITATIONS OF ENVIRONMENTAL