A.

Economic Objectives Profit earning Production of goods Creating Markets Technological improvements

B. Human Objectives Welfare of Employees Satisfaction of consumers Satisfaction of shareholders Helpful to government Utilizing resources properly

C. Social Objectives
Availability of goods Supply of quality goods Co-operation with government Creation of employment

D. Organic Objectives
Survival Growth Earn Recognition and prestige

E. National

Objectives Helping National efforts Development of small entrepreneurs National selfsufficiency Development of skilled personnel

Factors

having a bearing on the business. Can be predicted to some extent. Threat or opportunity. Business environment is the aggregate of all conditions, events and influences that surround and affect the business. -Kevin Davis

COMPONENTS OF BUSINESS ENVIRONMENT

INTERNAL ENVIRONMNENT

EXTERNAL ENVIRONMENT

Value System

MICRO ENVIRONMENT

MACRO ENVIRONMENT

Vision, mission & objectives

Human resources Management structure Internal power relationships

Suppliers
Customers Market Intermediaries Competitors Public

Political
Socio-cultural Technological Natural Demographic International

Miscellaneous factors

1.

SUPPLIERS Reliability Multiple supplier

CUSTOMERS Income level Quantity to be purchased Taste & preferences Age Personality & lifestyle Geographical area Education level

2.

3. Market Intermediaries

MiddlemenWholesalers,retailers. Marketing agenciesadvertising agencies,media firms,market research firm. Financial intermediariesbanks,insurance companies. Physical distributionwarehouses, transport agencies.

4. Competitors 5. Publics
Public is any group that has actual or potential interest in the business. To achieve this interest,it has its impact on the business. Media Public Local Public

1.
a)

POLITICAL ENV.
Political ideology of government Political stability in country Relation of government with other countries Defence & military policy Centre state government Thinking of opposition party

b) c)

d) e) f)

2. Socio-cultural env.

Family system Education Urbanization

Language
Caste System Religion Marriage

Habits & preferences

3. Technological Env.

4. Natural Env.

Climate & weather conditions Availability of natural resources Pollution control

5. Demographic env.

Size of population Age composition Sex Composition

Education level
Family size & structure Urban-rural population

6. International Env.

Globalisation Oil price hike International terrorism

Cultural exchange
International agreements & declarations

7. Economic Env. Economic conditions

Income level Distribution of income Demand & supply trends Size of market Industrial growth

Economic policies
Monetary policy Fiscal policy Export-import policy Foreign investment policy Industrial policy Industrial licensing policy

Economic System
Capitalism Socialism Mixed economy

1. VALUE SYSTEM

Set of value adopted and/or evolved by a person, organization, or society as a standard to guide its behavior in preferences in all situations. The value system of the founders and those at the helm of affairs has important bearing on : The choice of business Mission & objective of organization Business policies & practices

2. VISION,MISSION & OBJECTIVES

Vision statement outlines what the organization wants to be. It concentrates on the future. It is a source of inspiration.

Eg.
American Express Bank-To be most respected bank in the world Bluestar- To provide world class

engineering goods & services

A Mission statement tells you the fundamental purpose of the organization. It concentrates on the present. It defines the customer and the critical processes. It informs you of the desired level of performance. It is the enduring statement of purpose that distinguishes one business from other similar firms.

specific concrete VISION MISSION OBJECTIVES

3. MANAGEMENT STRUCTURE & NATURE

Organization structure Composition of BOD Extent of professionalism in the management

4. INTERNAL POWER RELATIONSHIP Support enjoyed by top management from employees, shareholders, BOD-Decision making 5. HUMAN RESOURCES 6. COMPANY IMAGE

7. MISCELLANEOUS FACTORS

Physical facilities Financial capabilities Technological capabilities Marketing resources

Macro Environment
Micro Environment
Internal Environment Business decisions

Process by which organizations monitor their relevant environment to identify opportunities & threats affecting their business. It helps : the organization to identify, understand and adapt to external issues; To anticipate the consequences of the environmental factors; To develop well thought out plans & policies

1.

2. 3. 4. 5.

Understand the current & probable changes in environment To provide input for decision making Appropriate Strategy Formulation Effective utilization of resources Other objectives: To identify the threats & opportunities in env. To identify strengths & weaknesses of business To diversify business in new areas & to keep the business dynamic To forsee impact of various components of business env.

Env. analysis

Decision making & strategy formulation Need for further analysis

Strategy implementation

1.
2.

3. 4.

Unexpected events Environmental analysis is not the only factor in strategy formulation Inaccurate data Too much dependence on information collected through env. analysis

1. 2. 3.

4.
5. 6.

7.
8. 9.

To frame policies To ensure optimum utilization of resources To analyze competitors strategies & formulate counter-measure To keep business dynamic & innovative To provide input for decision-making To find out the strengths of business To find out the weaknesses of business To find out the opportunities available to business To find out threats posed to business

10. To know the internal environment 11. To understand market conditions 12. To adjust with technological advancements 13. To understand international events & their impact in business 14. To understand economic policies of govt. & their impact on business 15. To understand political situation & its effects on business 16. To forsee the impact of socio-cultural factors

It refers to the responsibility of decision-makers to take action which helps society & serve own interests. Social responsibility of business means responsibility of business towards customers, workers, shareholders & the community. -As per declaration in International Seminar on Social Responsibility

Social responsibility is to pursue those policies & decisions or to follow those lines of actions which are desirable in terms of its objective & value of our society .
-H.R. Bowen

No discrimination in employment Support for educational institutions Help for charitable causes Modernizing facilities Controlling use of hazardous products

Good public image Avoidance of government interference Moral justification To avoid class conflicts Consumers consciousness Business is a part of society Long term interest of business

Increase in prices Lack of skill to solve social problems Meeting social responsibility deviates from main objectives Shortage of time Regular burden Opposition by other firms in the same industry

Owner
Community Employees

Suppliers

Social responsibility of business

Consumers
Government

To ensure safety of capital To ensure fair & reasonable return on their capital Timely payment of dividend To treat shareholders equally To ensure proper utilisation of invested capital

Giving them appropriate remuneration Providing clean work atmosphere & good working conditions Respecting individual dignity Providing medical facilities, housing, canteen, leave, retirement benefits,etc Adopting incentive system for wage payment Giving them a share of profit as bonus Giving job security Promoting workers participation in management Solving labour problems on time Providing training to employees Providing opportunity for promotion & development

To make available good quality goods at cheap rates To avoid misleading advertisements & bring out reality in advertisements To avoid adulteration To provide after-sale service & to handle customers complaints quickly & carefully To make goods according to the liking & tastes of consumers To make goods available to the consumers at the nearest point

To ensure regular supply of goods & services

To avoid unfair trade practices To discourage monopolistic tendencies

To pay taxes honestly & not to indulge in tax evasion To perform business in lawful manner & observe rules laid own by government Not to exploit government machinery by unfair means i.e. not to bribe government employees

Business enterprises should develop & maintain healthy relations with suppliers Payment to suppliers should be made well on time

To make available opportunities for employment To avoid polluting the environment & work for the improvement of local environment To contribute to the raisin of standard of living To be a partner in social development by establishing charitable institutions, dispensaries, educational institutions,etc Not to resort to indecent advertisements To provide high quality products to society To preserve & promote social & cultural values To take safety measures against possible health hazards

An economy refers to an organizations through which people earn their living. An economic system refers to those norms & rules or institutions which direct an economy

Economic System Capitalism Socialism Mixed Economy

Capitalism is a system in which property is privately owned & economic decisions are privately made. -Fergusan & Krips Capitalism refers to that economic system in which factors of production are privately owned & profit motive is the guiding principle of all production activities.

Private property Freedom of enterprises Competition Profit motive Sovereignty of the consumer Labour as a commodity

Rich variety of goods & services Proper use of resources Inducement to work Efficient production Increase the standard of living Automatic Growth of entrepreneurship Economic freedom

Unequal distribution of wealth Class struggle Exploitation of labour Wasteful competition Business fluctuations & unemployment Disregard of public welfare Lack of co-ordination

Socialism is a kind of system under which the economic system of the country is controlled & regulated by the government so as to ensure welfare & equality of opportunity to the people of the society. MAIN FEATURES: Social & collective ownership Set objectives Economic planning Government control Lack of competition Social welfare Limited private sector

Better solution to basic problems No wasteful advertising No cyclical fluctuations Rapid & balanced economic development No class struggle & exploitation of labour Equitable distribution of income

No proper basis of cost calculation End of consumers sovereignty Difficulty in implementation of plans No importance to personal efficiency & productivity Lack of freedom Veil of secrecy Less initiative

 Mixed

economy is that economy in which both public & private institutions exercise economic control

-Samuelson MAIN FEATURES : Co-existence of private & public sector Planned economy & government control Private property & economic equality Profit motive & social welfare

Economic freedom & capital formation Competition & efficient production Efficient allocation of resources Advantages of planning Economic equality Freedom of exploitation

Uncertainty Inefficient planning Lack of efficiency Corruption Constrained growth Black money Wastage

 Industrial

policy regulates & controls the industrial development in a country. It deals with all government principles, rules, procedures & policies which affect industrial development of the country.

Deployment of natural resources Increased industrial production Modernisation Balanced industrial growth Balanced regional development Balancing small & large scale industries Determination of area of operation Harmonious industrial relations Optimum utilisation of foreign assistance

 Industrial

policy,1948 Industrial policy,1956 Industrial policy,1977 Industrial policy,1980 Industrial policy,1991

 SALIENT

FEATURES: Free from licensing system Role of public sector Disinvestment in public sector undertakings Foreign investment Changes in MRTP(monopolies & restrictive trade practices)act Workers participation in management Creation of production capacity Promotion of industries in rural areas Reservation of small scale industries

CRITICISM:
Against the Nehruvian model of development Abuses of multinational corporations Guided by International Financial Institutions Favourable to large monopolies Concentration & disparities of income & wealth

Free from red tapism Reduction in corruption Encouraging competitiveness Generation of employment Benefits to consumers Rapid growth

 The

fiscal policy is that plan of economic policy which is concerned with raising revenue through taxation & other means & deciding on the level & pattern of public expenditure.

 Basic

necessities of the government Redistribution of income & wealth Functional financing Affecting macro variables Supply side economics

 Economic

stability Economic growth Full employment Capital formation Reduction in the inequalities of income & wealth Enhancing public sector investment Proper allocation of resources Price stability

 Public

revenue Public expenditure Public debt Budgetary policy

REVENUE BUDGET TAX REVENUE +NON TAX REVENUE = REVENUE EXPENDITURE TAX REVENUE:income,expenditure,property,capital, commodities,services NON-TAX REVENUE:currency,coinage,interest receipts, dividends EXPENDITURE:general administration,social & community services,economic services

CAPITAL BUDGET CAPITAL RECEIPTS:net small savings,pf,special deposits,net recovery of loans & advances to states,U.Ts & public sector undertakings CAPITAL EXPENDITURE:loan to states & U.Ts ,economic development,social & community development,defence

 Multiple

taxes Direct : income tax,corporation tax,estate duty,wealth tax Indirect : excise & customs duties,sales tax More dependence on indirect taxes Simplification & rationalisation of direct taxes Major source of income Progressive rates of direct taxes Enlarging the tax net

 Huge

deficit financing Increasing unproductive revenue expenditure Mounting burden of subsidies Higher shares of indirect taxes in gross tax revenue Higher burden of interest payments Increasing burden of public sector

1) EXPORTING
Exporting is the appropriate strategy when one of more of the following conditions prevail: Volume of foreign business in not large enough to justify the production in foreign market Cost of production in foreign market is high Foreign market is characterized by production bottlenecks infrastructural problems,suppliers Political or other risks of investment in oreign country Co. has no permanent interest in the foreign market. Foreign investment is not favoured by the foreign country

Firm in one country permits a firm in another country to use its intellectual rights(patents,trade mark, copyrights, technology, marketing skills,etc) Advantages: No capital investment,no knowledge & marketing strength,no govt. intervention Eg.:GE of USA licensed its gas turbine technology to foreign producers

A company doing international marketing contracts with firms in foreign countries to manufacture or assemble the products while retaining the responsibility of marketing the product.

Advantages:
Co. does not have to commit resources for setting up production facilities Frees the co. from investing in foreign countries Less risky to start up with Enables the marketer to

Disadvantages: Loss of potential profits from manufacturing Less control over manufacturing Not suitable for hightech products-technical secrets Risk of developing potential competitors.

 Company

gives its managers to another company to manage that company for certain period of time. Adv: clients are provided with mgmt skills not available locally & no need to build up skills Disadv: overdependence,loss of control

 Set

up plant in foreign land,give technology, expertise-once all done ,return back to home land for a fee Oil refineries,steel mills,cement fertilizers plants,construction projects.

 Adv:

Complete control over production & quality & less risk of developing potential competitors Disadv: High cost of production. Problems: Restrictions on type of technology, non availability of skilled labour, infrastructural problems.

 Contract

between two companies Sharing-technology, capital,resources Types: Sharing of ownership & management Licensing & franchising Contact manufacturing Management contract

 When

there are no commercial transactions between 2 nations because of political reasons , a firm in one of these nations which wants to enter the other market will have to operate from a third country base. Taiwanese entrepreneurs found it easy to enter China though bases in Hong Kong Rank Xerox entered USSR though Indian JV Modi Xerox.

 Share

resources Mutual benefits Reducing competition Larger market share

 Enhance

long term competitive advantage of the firm by forming alliances with its competitors, existing or potential in critical areas, instead of competing with each other.

 Government High

policy & procedures

cost Poor infrastructure Obsolescence Resistance to change Poor quality image Supply problem Small sizes Lack of experience Limited R&D & marketing research Growing competition