Business

BUSINESS ENVIRONMENT

Business Environment mainly refers to external forces that impact business. Such forces include political-legal ,technological ,cultural ,economic and physical.

Factors under External Environment

All the factors that provides opportunities or pose threats to an organization make up its external environment.

* DEMOGRAPHIC ENVIRONMENT

* SOCIAL ENVIRONMENT

* CULTURAL ENVIRONMENT

* POLITICAL ENVIRONMENT

* ECONOMIC ENVIRONMENT

* FINANCIAL ENVIRONMENT

* TRADE ENVIRONMENT

* TECHNOLOGICAL ENVIRONMENT

* LEGAL ENVIRONMENT

* REGULATORY ENVIRONMENT

* TAX ENVIRONMENT

* ETHICAL ENVIRONMENT

External environment consists of 1. Micro Environment 2. Macro Environment

1. Micro Environment

* Micro environment is called as the task environment and operating environment.

* Micro environment forces have a direct bearing of the operation of the firm.

* These factors are present in companies environment and affect on the performance of the companies.

* Includes - suppliers ,marketing intermediaries .competitors,customers and public.

Micro environment are more intimately linked to company than macro.

 Suppliers :

o Those who supply inputs,raw material and components

o Uncertainty in supply compels high inventory cost.

o India maintains stocks of 3 to 4 months were as Japan maintains for few hours.

o Eg : Nirma -believes of the logic that captive production plant for raw material is best for cost control.(backward integration)

o Co feel outsourcing is more beneficial

o Risk to depend on single supplier

o Globally companies are resorting to partenering relationship marketing.

 Customers:

o Business exists because of customers

o Monitoring customers sensitivity is perquisite

o The choice of customer by the firm can be on

a. Relative profitability

b. Dependability

c. Stability of demand

d. Growth prospects

o Today customer is global customer as exposed to global products.

 Competitions:

o Competition includes not only with competitors of same product but all those who compete for discretionary income of consumers.

o Eg : the competiton for T V firm may not be only from other T V manufacturing but also from 2wheelers , refrigerators,cooking ranges,stereo sets etc,bank schemes.

o To influence basic desire of customer

o Generic competition: If the customer decides to spend discretionary income on recreation , he come across alternatives like, TV ,stereo ,2 in 1,3 in 1 P C etc.

o It is competition among alternative.

 Marketing Intemediary:

o Firms that aid the company in promoting,selling and distributing its grads to final buyers.

o Includes middlemen,agents,merchants,distribution firms,warehouses,transportation firms,marketing,financial intermediaries ,insurances etc.

 Financiers

o Financiers of the company

o Their financial capability,policies, strategies.attitudes,ability to provide non financial assistance.

 Public

o Public is any group that has actual or potential interest I or impact on organizations ability to achieves its interest.

o Media publics,citizens action publics,local publics etc,consumers publics

o Issues against companies

o Tarnishing the image by media

o Environmental pollution

o Chills labour,sweat labour,cruelty against animals.

2. Macro Environment

* Macro environment consists of larger societal forces that affect on companies micro environment.

* Micro environment forces have a direct bearing of the operation of the firm.

* These factors are present in companies environment and affect on the performance of the companies.

* Includes - suppliers ,marketing intermediaries .competitors,customers and public.

Factors under Internal Environment

The internal environment comprises the resources ,synergy and distinctive competencies of a firm.These together determine its organizational capability in terms of its strengths and weaknesses existing in the different functional areas - marketing, operations,personnel,financial,technical,etc.

Needless to mention that internal environment is constantly influenced by the external environment.

* STRATEGY

* STRUCTURE

* MARKETING CAPABILITY

* OPERATION CAPABILITY

* PERSONNEL CAPABILITY