internal external env[1] by prabhjot

8/8/2019 Internal External Env[1] by PRABHJOT

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BUSINESS

ENVIORNMENT


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Business Environment

TBUSINESS ENVIRONMENT ISSUM TOTAL OF ALL THOSEFACTORS, CONDITIONS,SITUATIONS OR

SURROUNDINGS WHICHDIRECTLY AFFECT THE

WORKING OF BUSINESS


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DEFINI IONSACCORDING O KEI H DAVIS,"ENVIRONMEN OF HE BUSINESS MEANS

HE AGGREGA E OF ALL CONDI IONS,

EVEN S AND INFLUENCES HASURROUND AND AFFEC I .|

IN HE WORDS OF B. O. WHEELER,

"BUSINESS ENVIRONMEN IS HE O ALOF ALL HINGS EX ERNAL O FIRMS AND

INDIVIDUALS WHICH AFFEC HEIR

ORGANIZA ION AND OPERA IONS"


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Why Do We Study Business

Environment Firms can identify opportunities and getting

the first mover advantage

Firms can identify threats and early warning

signals

To Coping with rapid changes

For Improving performance

Meeting Competition Continuous Learning

Identifying Firms Strength and Weakness


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Types of business Enviornment


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IN ERNAL ENVIRONMEN

IT determines the potential of a company tomeet the environmental challenges

These factors are :

CULTURE

STRATEGY

IMAGE

ORGANIZATIONALSTRUCTURE

HUMAN RESOURCE


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The Internal Environment

Review current objectives, strategy &

performance

Evaluate the availability of resources Understand the strengths &

weaknesses of your organizational

culture & structure


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Micro environment

Supply chain managementVendor development

manpower

material

suppliers of services

warehousing and storage

finance and credit


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customers

Choosing a correct market segment is

very important


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Desire competition

Generic competition

product formcompetition

Brand competition


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Intermediate Agencies

Helpful in formulating and operationalisingthe marketing strategy


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Regulatory Agencies


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Macro environment

It refers to the general and overall

environment within which entity operates

The macro forces are generally more

uncontrollable than micro environment.


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THE MACRO ENVIRONMENT

The macro environment relates to:

Political

EconomicGlobal EnvironmentSocio-Cultural

Technological

Legal

These influences may impact your business,now or in the future.


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Macro Environment = General/Remote

Environment

Success of an organization depends upon

its adaptability to the environment.

Example of cost of importedcomponent

going up because ofdepreciation of the

domestic currency, solution may lie with

domestic manufacture of the component.


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Political Enviornment


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It comprises political stability and the

policies of the government. Ideological

inclination of political parties, personal

interest of politicians, influence of partyforums etc. create political environment.

For example, Bangalore established itself

as the most important IT centre of Indiamainly because of political support.


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THE POLICIES RELATED TO GOVERNMENT

OR CONSTITUTIONAL MAY AFFECTTHEBUSINESS.

FOR EXAMPLE, POTENTIAL GOVERNMENTLEGISLATION

MAY ALLOW BUSINESSES TO REGISTERTHATTHEY DO

NOTWANTTO RECEIVE UNSOLICITED CALLS. THIS MAY

RESTRICTCOLD CALLING ON A BUSINESS TO BUSINESS

BASIS.

.


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A stable political system is a primary

factor for economic development


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Economic influences relate to the economy as a whole.

Rates of interesthave an impact for example on

levels of borrowing.

The strength of the stock markethas an impact on

types of investment made.

ECONOMIC


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ECONOMIC ENVIRONMENT

EconomicConditions

EconomicPolicies

EconomicSystem

Level of income

Level of Saving

Level of Spending

No. Of Suppliers

Extent of competition

Industrial Policy

Monitory Policy

Imports-Export Policy

Trade Policy

Tax Policy

Capitalist Economy

Communist Economy

Mixed Economy


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Eg: Industrial policy ,1991

Liberlisation

Privatisation

globalisation


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Liberalisation

It refers to the process of eliminatingunnecessary controls and restrictions

(i) abolishing industrial licensing requirement

in most of the industries (ii) freedom in fixing prices of goods and

services

(iv) simplifying the procedure for imports and

exports;

(v) reduction in tax rates

(vi) simplified policies to attract foreign

ca ital and technolo to India


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Result

high growth rate, easy availability of goods

at competitive rates, a healthy and

flourishing stock market, high foreign

exchange reserve, low inflation


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Privatization

It refers to reducing the role of public

sector by involving the private sectors

in most activities.

Due to the policy reforms announced in

1991, the expansion of public sector

has literally come to a halt and the

private sector registered fast growth inthe post liberalised period.


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Globalisation

It means integrating the economy of a countrywith the world economy. This implies free flow

of goods and services, capital, technology and

labour across national boundaries.

.


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The government has adopted various

measures such as reduction in custom

duties, removal of quantitative restrictions

or quotas on exports and imports,

facilitating foreign investment and

encouragement of foreign technology


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Impact of Government Policy on

Business and Industry

Increasing competition

More demanding customers

Rapidly changing technologicalenvironment

Necessity for change

Threat from MNC


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Socio-cultural

Culture may be defined as a some total of knowledge, belief,

art, morals, laws, customs and other capabilities and habits

acquired by individuals It also decides the type of goods and

services to be supplied, employer- employee relations


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The social environment reflects the

expectations of different social classes

operating in the society. It specify lifestyle,social values, spending habits, social

awareness etc.


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For example, during festive seasons thereis an increase in the demand for new

clothes, sweets, fruits, flower, etc. Due to

increase in literacy rate the consumers arebecoming more conscious of the quality of

the products. Due to change in family

composition, more nuclear families with

single child concepts have come up. This

increases the demand for the different

types of household goods


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TECHNOLOGICAL


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use of the internet.

advances in mobile

phones.

Bluetooth.

wireless networks.

data management.

customer relationship

management systems.

Technological influences include


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Technological environment

consists ofa) State of domestic or indigenous

technology,

b) Facilities for Research andDevelopment,

c) Technical Collaborations etc.


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Business enterprises have to analyse

technology environment, technology

options, cost-benefits of technologyalternatives, adopt and absorb new

technology, use it to collect data, design

product, improve productivity and finally

serve the consumer in a better way.


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TECHNOLOGICAL FACTORS


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Many businesses are

impacted today by

environmental issues.

Corporate social

responsibility is now

higher on the public'sagenda.

Organizations such as

Shell and Nike have

been affected by

adverse publicity

relating to

environmental issues.


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Legal Enviornment

This refers to set of laws, regulations,

which influence the business organisations

and their operations. Every business

organisation has to obey, and work within

the framework of the law. The important

legislations that concern the business

enterprises include: (i) Companies Act, 1956

(ii) Foreign Exchange Management Act,

1999


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The Working Time

Directive, Paternity

Leave and Minimum

Wage are examples of

this.

In certain industries

there are legal

constraints imposedbyregulatory or watchdog

bodies.


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The objectives ofregulatory environment isto prevent exploitation of

consumers, employees,investors, to ensurebetter utilization of naturalresources, to control

environmental pollutionand finally preserved theecological balance.


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The gaming industry is an example of one sector which has been

impacted by changes in the far external environment. Traditionally

betting shops such as William Hill have always been a 'horses and

dogs' business. As recently as 1999 this made up 80% of its

business. The proliferation of sports and topics that people can now

place bets on has led to huge changes in the world of

gambling. The twin forces of technology and deregulation have also

altered things. Gamblers can now place bets on the internet, via

interactive TV, on WAP-enabled mobile phones, via high street

shops or call centers. Bookmakers now open on Sundays and in theevenings to cater for different work and leisure patterns. There are

proposals on the table to further modernize the gambling laws in this

country which relate back to 1960s license and regulate the industry.


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Some analysts argued that the overwhelming marketshare that Microsoft held was a major impediment toinnovations in the software industry. Microsoft was

not only a leading player, but also the standardsprovider for the industry. By controlling thestandards, the company was in a position to curbinnovations. Microsoft, however, maintained that itsdominance of the market was due to its superiorproducts and not because of any unfair market

practices.

In 2000, the US Department of Justice (DOJ) ruledthat Microsoft be split into two smaller companies toprevent it from indulging in anti competitive

practices. However, in June 2001, the US Court ofAppeals reversed this ruling, but said that Microsoftdid have a monopoly in the market and had violatedUS antitrust laws. In August 2001, Microsoftappealed to the US Supreme Court to overturn theruling that Microsoft was an illegal monopoly. A final

verdict on the case was expected by October 2001.


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THE TRIAL BEGINS

In October 1997, the DOJ began antitrustinvestigations to determine whether Microsoft wasviolating a 1994 consent decree by compelling PCmakers to ship its Internet browser free with

Windows 95. Joel I. Klein, Assistant Attorney General for the

antitrust division, remarked, "This kind of product-forcing is an abuse of monopoly power--and we willseek to put an end to it." Justice Thomas Penfield

Jackson of the US District Court heard the case and,in May 1998, gave both the parties five months togather 12 witnesses each, and to fight the suit.


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Microsoft Antitrust Case

The government viewed Microsoft as a paranoidmonopolist, someone who gets up in the middleof the night and shoots at any movement.

-Harry Edwards, Chief Judge, US District Court

for Appeals for the District of Columbia.

"The Sun was definitely shining in Seattle.Today's ruling really does go a long way toward

positively resolving th

is matter for Microsoft, forour customers, partners, and shareholders."

-Steven Ballmer, CEO, Microsoft, commenting onthe US Court of Appeals for the District ofColumbia reversing the District Court ruling that

Microsoft be broken into two companies

internal external env[1] by prabhjot

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