Business Environment Neeraj Sharma

INTRODUCTION
Business Environment Consists of all those factors that affect negatively or positively on the business or have any kind of bearing or impact on business. Business Environment consists of two sets of two set of factors: Internal Environment. External Environment. However the business environment is synonymous with External environment. External environment consists of : Micro Environment. Macro Environment.

Internal Environment

Internal Environment/ Vision

The internal environment consists of the following factors: 1.Vision: It is a picture of a desired future state in which it wants to see itself so as to drive itself forward. Vision defines the organizations purpose, in terms of the organizations values rather than bottom line measures (values are guiding beliefs about how things should be done.) The vision communicates both the purpose and values of the organization. For employees, it gives direction about how they are expected to behave and inspires them to give their best. Shared with customers, it shapes customers understanding of why they should work with the organization.

Vision Statement
"COCA COLA s VISION is to achieve sustainable growth, we have established a vision with clear goals. Profit: Maximizing return to shareowners while being mindful of our overall responsibilities. People: Being a great place to work where people are inspired to be the best they can be. Portfolio: Bringing to the world a portfolio of beverage brands that anticipate and satisfy peoples; desires and needs. Partners: Nurturing a winning network of partners and building mutual loyalty. Planet: Being a responsible global citizen that makes a difference. "GMs vision is to be the world leader in transportation products and related services. We will earn our customers enthusiasm through continuous improvement driven by the integrity, teamwork, and innovation of GM people."

2.Mission
It is the basic purpose of the organization for which it exists. Mission defines the organization's purpose and primary objectives. Its prime function is internal to define the key measure or measures of the organizations success and its prime audience is the leadership team and stockholders. Wal-Mart (1990) "Become a $125 billion company by the year 2000" Sony (1950's) "Become the company most known for changing the worldwide poor-quality image of Japanese products" Boeing (1950) "Become the dominant player in commercial aircraft and bring the world into the jet age" Ford Motor Company (early 1900's) "Ford will democratize the automobile"

3.Values/ Value System:

It includes the principles and ethics that drive the organization. The business policies and practices. The value system at Tatas includes social and Moral responsibilities to consumers, employees, shareholders, society and the people. At Infosys, the trust of employees is the most important for successful leadership.and leadership by example. Money is not the only motivator; respect, dignity, fairness and inclusiveness are essential to get the best out of employees. Every employee must feel an inch taller

4. Goals/ Objectives
The goals and objectives are targets that the organization is trying to achieve Goals are broad objectives are narrow. Goals are general intentions; objectives are precise. Goals are intangible; objectives are tangible. Goals are abstract; objectives are concrete. Goals can't be validated as is; objectives can be validated. Goals are Specific, Measurable, Achievable, Realistic and Time Framed.

5. Strategy
The approach that the organization is adopting to achieve the goals that support the strategy. "Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations".

5. Strategy
In other words, strategy is about: Where is the business trying to get to in the longterm (direction) Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope) How can the business perform better than the competition in those markets? (advantage)? What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)?

5. Strategy
What external, environmental factors affect the businesses' ability to compete? (environment)? What are the values and expectations of those who have power in and around the business? (stakeholders). Strategy at various level of business are Corporate Strategy, Business Unit Strategy and Operational Strategy.

6.Behaviours/ Human Resources:

The way in which people in the organization act in terms of what they do and say that brings the strategy and desired culture to life. The human resources include skill, quality, morale, commitment, and attitude which contribute towards the strength and weakness of an organisation.

External Environment
Organizations are impacted by two sets of external factors: the macro and micro environment. Sometimes called the near and the far environment. External Environment factors are uncontrollable factors that influence an organization's decision making, and affect its performance and strategies. Factors that influence a company's or product's development but that are outside of the company's control. For example, the micro environment could include competitors, changes in interest rates, changes in cultural tastes, or government regulations. The Macro environmental factors include the economic, demographics, legal, political, and social conditions, technological changes, and natural forces.

The macro and micro environment

Micro Environmental Factors

Micro Environmental Factors/Customers

These are internal factors close to the company that have a direct impact on the organisations strategy. These are also known as Task Environment or Operating Environment. These factors include: 1.Customers: The major task of business is to create, maintain and sustain customers; monitor and satisfy customers. Organisations survive on the basis of meeting the needs, wants and providing benefits for their customers. Failure to do so will result in a failed business strategy.

1.Customers
Customers include individuals, households, industries and other commercial establishments. For example customers of Music System may include individuals, families, restaurants, discotheque owners etc. Customer loyalty is thing of past and customers switch to competitors easily due to oligopolistic market. While choosing customers a company should consider profitability, dependability, stability of demand, growth prospects and extent of competition.

2.Employees
Employing the correct staff and keeping these staff motivated is an essential part of the strategic planning process of an organisation. Training and development plays an essential role particular in service sector marketing in-order to gain a competitive edge. This is clearly apparent in the airline industry.

3.Suppliers
Suppliers are the providers of raw materials and components of finished products to the company. Reliable and efficient suppliers are important for growth of business and for its hassle free operation. Better supplier relationships is one way of ensuring competitive and quality products for an organisation. To obtain better supplies companys give great importance to vendors and backward integration. For example Maruti Udhyog Limited has created its own ancilliaries for supply of components. Any increase in raw material prices will have a poor on impact on the marketing mix strategy of an organisation. Prices may be go up as a result of it.

4.Shareholders
As organisation require greater inward investment for growth they face increasing pressure to move from private ownership to public. However this movement unleashes the forces of shareholder pressure on the strategy of organisations. Satisfying shareholder needs may result in a change in tactics employed by an organisation. Many internet companies who share prices rocketed in 1999 and early 2000 have seen the share price tumble as they face pressures from shareholders to turn in a profit. In a market which has very quickly become overcrowded many have failed.

5.Media
Positive or adverse media attention on an organisations product or service can in some cases make or break an organisation.. Consumer programmes with a wider and more direct audience can also have a very powerful and positive impact, hforcing organisations to change their tactics.

6.Competitors
The name of the game in marketing is differentiation. What benefit can the organisation offer which is better then their competitors. Can they sustain this differentiation over a period of time from their competitors?. Competitor anlaysis and monitoring is crucial if an organisation is to maintain its position within the mar

Macro Environment
PESTEL AnalysisToday's world is a rapidly changing place. Developments across a range of factors will have an impact on your business or industry. The classic PESTEL framework (political, economic, social, technological and Legal) identifies five major categories of external factors that affect the ability of your organization to survive and prosper. The far or macro environment relates to: Political Economic Socio-cultural Technological Environmental Legal

Political Environment
The political environment of the business includes national and international political factors which can affect its operations. These factors are called political as they principally originate from the actions of governments which can be at a local or foreign level. This category also includes the methods of thinking, and beliefs of all natures which can influence the behaviour of governments and citizens opposing the company without them emanating directly from a government (example: nationalism).

Political Environment
For the business, the analysis of this political environment is important, as it principally consists of managing the risk that government actions do not influence international operations in a negative way and influence management in a more or less strong way. It includes minimum wage laws, environmental protection laws, worker safety laws, union laws, copyright and patent laws, anti- monopoly laws, municipal licences and laws that favour business investment

Economic Environment
The economic environment includes various economic factors, such as employment, productivity, income, wealth, inflation, interest rates, GDP, per capita income, economic growth, unemployment rate, inflation rate, consumer and investor confidence, inventory levels, currency exchange rates, trade balance, financial and political health of trading partners, balance of payments etc.

Economic Environment
These factors influence the spending patterns of individuals and firms. The economic environment comprises of: Income and wealth: Income in an economy is measured by GDP, GNP and per capita income. High values of these factors show a progressive economic environment. Employment levels: High employment represents a positive picture of the economy. However, there are many forms of unemployment, including partial employment and disguised unemployment. Productivity: This is the output generated from a given amount of inputs. High levels of productivity support the economic environment.

Social Environment
Social environment of business means all factors which affects business socially. It includes demographic factors such as population size and distribution,age distribution, education levels, income levels, ethnic origins, religious affiliations. Attitudes towards materialism, capitalism, free enterprise, individualism, role of family, role of government, collectivism; role of church and religion, consumerism, environmentalism, importance of work, pride of accomplishment, cultural factors including diet and nutrition and housing conditions.

Social Environment
Every business works in a society, so societies ' different factors like family, educational institutions and religion also affects business as follows: 1. Family and Culture:- Family is basic part of society from the birth of a person and up to death , he lives in family so personal decision of buying and selling of goods are affects from family . In the culture of a family, it may happen that parent does not allow to use any product, then sale of such product will decrease, so businessman must analyze different families needs . Many occasion of family like marriage of any family membe , can increase the demand of goods .

Social Environment
2. Educational institutions :- Educational institutions are also main part of societies . They provide good knowledge, education, awareness , thinking what should students buy or not to buy . Suppose if a student is habitual to drink the tea and if his teacher advice him that this is harmful to his health after his guidance students can avoid todrink tea after this the sale of tea will decrease. 3. Religion :- Like family and education institution , religion is also effects the business socially . Religion means the system in which group of persons trust in God. Different religions have different principles, rules and regulations in which they sacrifice to use some products and to eat some food, in Hindu religion, they never use leather products. They affects the sale of leather industries. So, businessman must analyze the targeted audience and after listening their religious thoughts, he should produce the

Social Environment
3. Religion :- Like family and education institution , religion is also effects the business socially . Religion means the system in which group of persons trust in God. Different religions have different principles, rules and regulations in which they sacrifice to use some products and to eat some food, in Hindu religion, they never use leather products. They affects the sale of leather industries. So, businessman must analyze the targeted audience and after listening their religious thoughts, he should produce the goods.

Technological Environment
It includes efficiency of infrastructure, including: roads, ports, airports, rolling stock, hospitals, education, healthcare, communication, etc., industrial productivity,new manufacturing processes, new products and services of competitors, new products and services of supply chain partners, any new technology that could impact the company, cost and accessibility of electrical power.

Legal Environment
This includes the framing of laws in the country. Whether the laws are liberal or conservative. A business friendly environment will have liberal laws encouraging globalisation of business. For example in India we are liberalising various laws so as to liberalise and globalise business according to the changing global needs. We have replaced FERA by FEMA. Introduced The Competition Act in this law restrictive trade practices have been taken away from MRTPC, Act which has been repealed now.