BUSINESS

ENVIRONMENT
(Under the guidance of Mrs. PRIYANKA GUPTA)

MBA- 1ST YEAR, SEM-2

 MEANING

 Business environment refers to those aspects of the surroundings business enterprise,

which affect or influence its operations and determine its effectiveness.

or

 Business environment refers to those internal & external factors which have effects on
the business in direct or indirect form.
 DEFINITION

 According to Keith Davis, “Business environment is the aggregate of all conditions, events
and influence that surrounds and affect it”.

or

 Arthur M. Weimer, “Business Environment encompasses the -climate' or set of conditions,

economic, social, political or institutional in which business operations are Conducted.”
TYPES
 INTERNAL
ENVIRONMENT

 Factors which are present inside from the organization.

 Controllable.

Management

Human Organization
Resource Structure
Internal
Factors

Profit & Organization

Cash Flow Culture
 EXTERNAL
ENVIRONMENT

 Factors which are present outside from the organization.

 Not controllable.

Economical

Trend Political
& &
Fashion Legal

External
Factors

Environmental
Or Technology
Climate

Social
 POLICIES
 To overcome or control business environmental situations.

Personal
Policies

Financial Poilicy

Marketing Policy

Production Policy

Technology Policy
TYPES OF BUSINESS ORGANIZATION

Any one forms may be adopted for establishing a business, but usually one form is
more suitable than other for a particular enterprise. The choice will depend on
various factors like the nature of business, the objective, the capital required, the
scale of operations, state control, legal requirements and so on.
The major types of business organization are as follows:
Sole proprietorship
Partnership firm
Joint hindu family
Co-operative society
 Joint stock company
 SOLE PROPRIETORSHIP
 Type of business where there is no legal distinction between the business entity and its
owner,
 So it best fits situations where the organization only has one owner.
 They are popular choice for small businesses due to the low initial costs. They are also
subjected less to taxation and regulation compared to other types of businesses.
 Examples –
 A local grocery store,
 A local clothes store
 An artist
 Freelance writer
 IT consultant
 Freelance graphic designer, etc.
 PARTNERSHIP FIRM

 A partnership constitutes a formal agreement between two or more individuals who

agree to run a business together.
 The partnership agreement clearly states the amount of authority, potential profits and
liabilities that each partner is due.
 Although the partners share benefits and responsibilities, one partner’s choices can
potentially affect the entire company.
 Examples –
 Amazon & American Express,
 Nike & Apple
 Spotify and Uber
 Red Bull & Go pro etc.
 JOINT HINDU FAMILY

 This is one of the classical methods of business structure in the nation. It is administered by
the Hindu Law
 The business is managed by the head of the family (eldest member) and he is called Karta.
However, all the members hold equal ownership over the property of an ancestor and they
are called as co-parceners.
 It is also known as Hindu Undivided Family Business.
 Examples –
 Reliance Industries Limited
 Tata Sons Private Limited
 Mahindra & Mahindra Limited
 Haldiram’s Private Limited
 COOPERATIVE

 A cooperative is a business that is operated solely for the benefit of those who own it and
use its services. This implies that the business distributes its generated earnings to its
members, also called user-owners. The company’s members typically vote to elect a
board of directors to make any necessary managerial decisions.
 Examples -
 Amul
 Shree Mahila Gruha Udyog (Lijjat Papad)
 Indian Farmers Fertiliser Cooperative ( IFFCO –
which is also one of the largest co-operatives in the
world)
 JOINT STOCK COMPANY

 A voluntary association of individuals for profit, having its capital divided into
transferable shares, the ownership of which is the condition of membership.
 A company is an incorporated association of persons formed usually for the pursuit of
some commercial purpose.
 Examples -
 Indian oil corporation Ltd.
 Tata motors Ltd.
 Reliance Industries Ltd.
What Is SWOT Analysis?

SWOT (strengths, weaknesses, opportunities, and

threats) analysis is a framework used to evaluate a
company's competitive position and to develop
strategic planning. SWOT analysis assesses internal and
external factors, as well as current and future potential.
 ● SWOT analysis is a strategic planning
technique that provides assessment tools.
● Identifying core strengths, weaknesses,
KEY TAKEAWAYS opportunities, and threats leads to
fact-based analysis, fresh perspectives, and
new ideas.
● SWOT analysis works best when diverse
groups or voices within an organization
are free to provide realistic data points
rather than prescribed messaging.
How to Do a SWOT
Analysis

SWOT analysis is a technique for assessing

the performance, competition, risk, and
potential of a business, as well as part of a
business such as a product line or division, an
industry, or other entity.
 SWOT Table

Strengths Weaknesses

1. What is our competitive advantage? 1. Where can we improve?

2. What resources do we have? 2. What products are underperforming?

3. What products are performing well? 3. Where are we lacking resources?

Threats Opportunities

1. What new regulations threaten operations? 1. What technology can we use to improve
operations?
2. What do our competitors do well?
2. Can we expand our core operations?
3. What consumer trends threaten business?
3. What new market segments can we explore?
SWOT Analysis of Amul

Weaknesses of Amul
1. High Operational Cost
Strengths of Amul 2. Lack of Success in Certain Areas of Portfolio Expansion

1. Investment in Technology 3. Frequent Legal Issues

2. Production Capacity
3. Market Share
4. Strong Brand Value Threats for Amul
5. Quality 1. Increasing Competition
2. Growing trend of Veganism in India
Opportunities for Amul

6. High per capita Milk consumption

7. International Expansion
8. Expansion of Product Portfolio
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1. Internal Environment
 a. Value System
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 The value system of the founders and those at the helm of affairs has important
bearing on the choice of business, the mission and objectives of the organization,
business policies and practices.
 The value system of JRD Tata and the acceptance of it by others who matter
were responsible for the voluntary incorporation in the Articles of Association of
TISCO its social and moral responsibilities to consumers, employees,
shareholders, society and the people.
 After the EID Parry group was taken over by the Murugappa group, one of the
most profitable businesses (liquor) of the ailing Parry group was sold off as the
liquor business did not fit into the value system of the Murugappa group 
 b. Vision, Mission and Objectives
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 The business domain of the company, priorities, direction of development,
business philosophy, business policy etc., are guided by the vision mission and
objectives of the company.
 Ranbaxy's thrust in to the foreign markets and development have been driven by
its mission "to become a research based international pharmaceutical
company".
 Arvind Mills' mission - "To achieve global dominance in select businesses built
around our core competencies through continuous product and technical
innovation, customer orientation and focus on cost effectiveness", - has driven
its future development strategy including the portfolio strategy, and indicated the
thrusts required in the functional areas to help achieve the mission.
 c. Management Structure and Nature
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 The organizational structure, the composition of the Board of Directors, extent of
professionalization of management etc., are important factors influencing
business decisions.
 Some management structures and styles delay decision making while some others
facilitate quick decision making.
 The share-holding pattern could have important managerial implications.
 There are very large companies where majority of the share is held by the
promoters (like Wipro) and there are large firms where the promoters' position is
very vulnerable (like the Tata group of companies).
 Financial institutions had large shareholding in many Indian companies.
 d. Internal Power Relationship
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 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.
 The relationship between the members of Board of Directors and between the
chief executive and the Board are also critical factors.
 e. Human Resources
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 The characteristics of the human resources like skill, quality, morale,
commitment, attitude etc., could contribute to the strength and weakness of an
organization.
 Some organizations find it difficult to carry out restructuring or modernization
because of resistance by employees whereas they are smoothly done in some
others.
 The involvement, initiative etc., of people at different levels may vary from
organization to organization.
 John Towers, M.D., Rover Group, observes that a Japanese company of 30,000
employees is 30,000 process improvers. In a Western company, it is 2,000 process
improvers and 28,000 workers.
 f. Company Image and Brand Equity
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 The image of the company matters while raising finance, forming joint ventures
or other alliances, soliciting marketing intermediaries, entering purchase or sale
contracts, launching new products etc.
 Brand equity is also relevant in several of these cases.
MEANING OF BUSINESS ENVIRONMENT AND
EXTERNAL ENVIRONMENT

MEANING OF BUSINESSS ENVIROMENT

Business environment may be considered as a set of
factors that influence the functioning and
effectiveness of a business.

MEANING OF EXTERNAL ENVIRONMENT

External environment are those factors which exists
outside the business firm .
EXTERNAL ENVIRONMENT
MICRO ENVIRONMENT MACRO ENVIRONMENT

Suppliers Demography
Customers Natural
Market intermediaries Legal
Competitors Political
Technological
Economic
PESTELE
INTRODUCTIO
N
Macro environment refers to the set of conditions
that exist in the economy as a whole, rather than in
a particular sector or region. In general, the macro
environment includes trends in the gross domestic
product (GDP), inflation, employment, spending,
and monetary and fiscal policy.
FORCES OF MACRO
ENVIRONMENT
TECHNOLOGICAL
FACTOR
◦ In the times we live in, technology is constantly
changing it is important that the business can keep
up with the changes. Technology does not only
confine to computers and IT services. It includes
products, manufacturing processes, techniques etc.
◦ The technological developments can be a
huge advantage for a firm
SOCIO-CULTURE
◦FACTOR
The social values and culture of an environment play a huge
role in the functioning of the company. So when the social
environment changes it can have a direct or indirect effect on
the company.
◦ For example in recent time society has seen a shift, and people
no longer retire at 60. They work five to ten years more after
sixty. So this has had a huge impact on companies.
DEMOGRAPHIC
FACTOR
Denotes characteristics of population in area (race,
age, income, educational attainment, asset ownership,
employment status, Size, growth rate, age
composition, sex composition of population, family
size, educational levels, economic stratification of
the population, language, caste, religion, and
location)
ECONOMIC
FACTOR
◦ The economic conditions of the economy and the performance of
a business have a very close relationship. A business depends on
the economy for all its inputs and factors of production. It also
sells its products and services in the same market.
◦ A market is never in one stable condition. It is always in a flux. If
there is a boom in the market then all businesses will benefit from
the favorable conditions.
ECOLOGY AND
PHYSICAL FACTORS
◦ Ecology and physical environment play a huge part in the
performance of any business. This is especially true for
manufacturing/production companies. Let us take the
example for global warming.
◦ This change in our physical environment has started affecting
the rainfall in certain regions. This in turn may affect the crops
and cause a shortage in raw materials such as jute, cotton,
rubber etc
POLITICAL AND LEGAL
FACTORS
The political environment of a
country is the combination of three
branches of the government –
legislature, executive and the
judiciary. The political environment
of a country will mainly depend on
the political beliefs and ideologies
of the party in power at the state
and central levels.
 OBJECTIVES
• WHAT IS BUSINESS ENVIRONMENT?
• WHAT IS INTEGRATION?
• WHAT IS GLOBAL INTEGRATION?
• HISTORY OF GLOBAL INTEGRATION?
• WHAT ARE THE ELEMENTS OF GLOBAL
INTEGRATION?

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WHAT IS BUSINESS ENVIRONMENT?
• BUSINESS ENVIRONMENT REFERS TO
ANY KIND OF INTERNAL AND
EXTERNAL FORCES WHICH HAVE AN
EFFECT ON THE FUNCTIONING OF THE
BUSINESS IN A POSITIVE OR NEGATIVE
WAY.

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WHAT IS INTEGRATION?
• INTEGRATION IS A STATE OF AFFAIRS
OR A PROCESS INVOLVING ATTEMPTS
TO COMBINE SEPARATE ECONOMIES
INTO LARGER ECONOMIC REGIONS.
• INTEGRATION MEANS COMBINING AND
JOINING OF DIFFERENT ENTITIES.

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 WHAT IS GLOBAL INTEGRATION ?
• GLOBAL INTEGRATION
MEANS THE PROCESS
WITH WHICH THE
LOCAL INDIAN MARKET
OPEN UP TO GLOBAL
ECONOMY.
• IT IS THE DEGREE TO
WHICH THE COMPANY
IS ABLE TO USE THE
SAME PRODUCTS AND
METHODS IN OTHER
COUNTRIES.
• IT IS THE SITUATION IN
WHICH SEPARATE
MARKETS FOR THE
SAME PRODUCTS
BECOME 1 SINGLE
MARKET.
• EXAMPLE: TWITTER,
YOUTUBE, AMAZON,
FACEBOOK 43
HISTORY OF GLOBAL
INTEGRATION
• THE ECONOMY OF INDIA HAS
DEVELOPED DRASTICALLY SINCE
INDEPENDENCE FROM THE BRITISH
RULE.
• IN 1947, GOVERNMENT PRIORITIES WERE
TO FOCUS ON SOCIAL UPLIFTMENT OF
PEOPLE ERADICATING POVERTY.
• THEN, THE GOVERNMENT STARTED
ESTABLISHING ITS OWN INDUSTRIES.
• GOVERNMENT ENDED UP WITH A
BALANCE OF PAYMENT CRISIS IN 1991.
• AS A RESULT, INDIA ADOPTED RADICAL
MEASURES TO INTEGRATE ITS ECONOMY
WITH OTHER NATIONS.
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ELEMENTS OF GLOBAL INTEGRATION

LIBERALIZATION PRIVATIZATION GLOBALIZATION

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 ELEMENTS OF GLOBAL INTEGRATION
(INDIA’S BUSINESS ENVIRONMENT BEGAN IN 1991)

LIBERALIZATION PRIVATIZATION GLOBALIZATION

LIBERALIZATION REFERS IT IS THE TRANSFER OF IT IS THE SYSTEM OF
TO THE REMOVAL OF THE OWNERSHIO, PROPERTY OR INTERACTION AMONG THE
RESTRICTIONS AND BUSINESS FROM THE COUNTRIES IN ORDER TO
BARRIERS SET BY THE GOVERNMENT TO THE DEVELOP THE GLOBAL
GOVERNMENT. PRIVATE SECTOR IS TERMED ECONOMY
PRIVATIZATION.

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