Module 1 ppt
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The document discusses the business environment and its analysis. It defines business environment as all external factors that influence business operations and discusses its importance. It describes the four steps of environmental analysis as scanning, monitoring, forecasting, and assessment. The document also differentiates between the internal, micro, and macro external environment and provides examples of factors within each.
Module 1 ppt
- 2. Environment of Business Environment refers to something external to an individual or an organization Business Environment • Business Environment refers to all external factors which have direct or indirect bearing on the activities of business • The survival of a business firm depends on its innate strength resources at its command and its adaptability to the environment and the extent to which the environment is favorable to development of the firm.
- 3. Environmental Analysis Environmental Analysis and diagnosis give strategists time to anticipate opportunities and to plan to take optional responses to these opportunities. It also helps strategists to develop an early warning system to prevent threats or to develop strategies which can turn a threat to a firm’s advantage”. Firms which systematically analyze and diagnose the environment are more effective than those which do not. Process of Environmental Analysis: The analysis consists of four steps: Scanning : Detect early signals of possible environmental change and detect environmental change already underway. Monitoring : Purpose of monitoring is to assemble sufficient data to discern whether certain trends are emerging, identification of the trends and identification of areas for further scanning. Forecasting : It is concerned with developing projections of the direction, scope and intensity of environmental change. Assessment : To determine implications for the organization's current and potential strategy.
- 4. Environmental Scanning Environmental Scanning refers to the process of gathering large amount of information to measure and study the changes in the environment. Modes of Scanning • Systematic Scanning- Information related to markets and customers, changes in legislation, regulations which have a direct impact on organizational activities, government policies, etc • Ad-hoc Scanning- Conducting special surveys and studies to deal with environmental issues from time to time • Processed form Scanning- Using information in a processed form available from different sources inside and outside the organization
- 5. Features of Business Environment • Sum total of all factors external to the business firm and that greatly influence their functioning • Dynamic in nature • Includes customers, competitors, suppliers, government, social, cultural, political, technological and legal conditions. • Changes are unpredictable (exact nature) • Differs from place to place, region to region, etc.
- 6. Importance of Business Environment • Determining Opportunities and Threats • Giving Direction for Growth • Continuous Learning • Image Building • Meeting Competition • Identifying firm’s strength and Weakness
- 7. Economic Environment a) Economic Conditions (i) Gross Domestic Product (ii) Per Capita Income (iii) Market for goods and services (iv) Availability of capital (v) Foreign Exchange Reserves (vi) Growth of foreign trade (vii) Strength of Capital Market b) Economic Systems (i) Capitalism (ii) Socialism (iii) Mixed Economy c) Economic Policies (i) Monetary Policy (ii) Fiscal Policy (iii) Foreign Trade Policy (iv) Industrial Policy
- 8. Non-Economic Environment a) Social Environment b) Political Environment c) Legal environment d) Technological Environment e) Demographic Environment f) Natural Environment
- 9. Diagrammatic Representation of Business Environment Business Environment Internal External Environment Environment Micro Macro Environment Environment
- 10. BUSINESS ENVIRONMENT Macro Environment Micro Environment Internal Environment Financiers Mission / Objectives Suppliers Management Structure Economic Customers Internal Power Relationship Technological Competitors Physical Assets & facilities Global Public Demographic Mktg Intermediaries Socio-Cultural Business Political Decision Company image Human resources Financial Capabilities Technological Capabilities Marketing Capabilities
- 11. Internal Environment • Includes 5 Ms i.e. man, material, money, machinery and management, usually within the control of business. • According to the change in the functioning of enterprise business can make changes in the above factors. • Vision • Mission • Objectives • Management Structure • Human Resources • Financial Factors • Company Image and Brand Equity
- 12. External Environment Includes factors which are beyond control of Business Enterprise. Micro Environment The Micro environment consists of different types of stakeholders - customers, employees, suppliers, marketing intermediaries, competitors. It is also known as the Task Environment and Operating Environment and has a direct bearing on the operations of the firm. Changes in the micro environment will directly affect and impinge on the firm's activities. Macro Environment The macro environment consists of factors which are beyond the control of the business. There is a symbiotic relationship between business and the environmental factors, environmental factors are dynamic and a particular business firm, by itself, may not be in a position to change it’s environment. Macro Environment includes: • Political Environment • Technological Environment • Socio-cultural Environment • Global Environment.
- 13. Technological Environment • Technological is the systematic application of scientific or other organized knowledge to practical tasks. • Technological environment hold new technological innovation, new products, the state of technology, the utilization of technology for maximum inputs and outputs, the obsolescence of technology and the dynamic changes that frequently occur in technologies which enable firms to get a competitive advantage • Technology reaches people through business • Helps in increased productivity • Business needs to spend on R & D and keep up with the technological advances around them • Technology leads to introduction of new products and older products becoming outdated and redundant. • Technological advances leads to high expectations of consumers in terms of quality • Leads to system complexity • Demand for capital
- 14. Political Environment Political Environment refers to the influence exerted by the three political institutions ie. legislature, executive and judiciary in shaping, directing, developing and controlling business activities. • The constitution of a country • Political Organization • Political Stability • Image of the country and its leaders • Foreign Policy • Laws governing business • Flexibility and adaptability of laws • The Judicial System
- 15. Economic Environment Economic Environment refers to all forces which have an economic impact on Business. The economic environment consists of the demand dynamics, supply situation, pricing factors, degree of competitiveness, and impact of profitability. It includes the fiscal policy, monetary policy and the taxation policy, the FDI norms, the investment criterion and financing decisions. Economic environment includes: Growth strategy Industry Agriculture Infrastructure Money and Capital Markets Per capita and national income Population New Economic Policy .
- 16. Global Environment: The global environment refers to those factors which are relevant to business, such as the WTO principles and agreements; other international conventions/ treaties / agreements / sentiments in other countries etc. For eg hike in crude oil prices has a global impact etc. • World is becoming one market • Improving quality • Competition from MNC’s • Capital and technology transfers • Deciding which markets to enter and what products to manufacture • Adjusting the management process Socio-Cultural Environment: • Culture creates people • Culture and globalization • Culture determines people’s attitude to business and work. • Caste system • Spirit of collectivism • Education • Ethics in business • Social responsibility • Social audit • Corporate governance