2. What is Business?
• It is a continuous production and distribution of
goods and services with the aim of earning
profits under uncertain market conditions.
• It is a form of regular activity conducted with an
objective of earning profits for the benefit of those
on whose behalf the activity isconducted.
3. ObjectivesofBusiness
• Profit
• Growth
• CustomerSatisfaction
• EmployeeSatisfaction
• Quality products andservices
• Market Leadership
• Employment creation
• Service to Society
...
4. BUSINESS ENVIRONMENT
• It refers to the aggregate of all the conditions,
events and influences that surround and affect
a business.
• Business environment consists of all the
external and internal factors which have an
impact on the functioning, performance and
decision making of a business.
5. CharacteristicsofBusinessEnvironment
• Businessenvironment is complex in nature.
• It is constantly changingprocess.
• It isdifferent for different businessunits.
• It hasboth longterm and short term impact.
• It is veryuncertain.
• Inter-relatedcomponents.
7. InternalEnvironment
• The factors which can be controlled by
company or
• Primary factors which directly affect the
growth of organization….. men, material,
money
, machines and management.
8. T
ypesofInternalEnvironment/ Internal
factors
1. V
alueSystem
2. Mission & Objectives
3. Management Structure andNature
4. Internal Powerrelationship
5. Human Resources
6. CompanyImage
7. Capital Assets and financial position of the
company
8. Human and industrial relation
9. ExternalEnvironment
• Those factors which are beyond the control of
business enterprise are included in external
environment.
• ExternalEnvironment isdivided into twoparts
1. Micro Environment: The environment
which is close to business and affects its
capacity to work is known as Micro
Environment.
2. Macro Environment: It includes factors that
create opportunities and threats to business
units. Following are the elements of Macro
10. MicroEnvironment
• Suppliers
• Customers
– Wholesalers
– Retailers
– Industries
– Government and OtherInstitutions
– Foreigners
• Market Intermediaries
– Middleman
– MarketingAgencies
– Financial Intermediaries
• Competitors
• Public and media
11. MacroEnvironment
• Economic Environment: It is very complex and
dynamic in nature that keeps on changing
with the change in policies or political
situations. It hasthreeelements:
– EconomicConditions of Public
– EconomicPoliciesof thecountry
– EconomicSystem
– Other EconomicFactors:Infrastructural Facilities, Banking,
Insurancecompanies,moneymarkets,capital markets etc.
12. MacroEnvironment
• Non-Economic Environment: Following are
included in non-economicenvironment:
1. Political Environment: It affects different
businessunits extensively. Components are
• Political Belief of Government
• Political Strength of theCountry
• Relation with othercountries
• Defenseand Military Policies
• Centre StateRelationship in theCountry
• Thinking Opposition Parties towards BusinessUnit
13. MacroEnvironment
2. Socio-CulturalEnvironment
Influence exercised by social and cultural factors, not within the
control of business, is known asSocio-Cultural
Environment.
These factors include: attitude of people to work, family
system,caste system,religion, education, marriage
etc.
3. T
echnologicalEnvironment
A systematic application of scientific knowledge to practical
task is known astechnology.
Everyday there has been vast changes in products, services,
lifestyles and living conditions, these changes must be analysed
by every businessunit andshould accept these changes.
14. MacroEnvironment
4. Natural Environment
– It includes natural resources, weather, climatic conditions,
port facilities, topographical factors such as soil, sea, rivers,
rainfall etc.
– Every business unit must look for these factors before
choosingthe location for their business.
5. DemographicEnvironment
– It is a study of perspective of population i.e. its size,
standard of living, growth rate, age-sex composition, family
size, income level (upper level, middle level and lower
level), education leveletc.
– Every business unit must see these features of population
andrecognizetheir various needsandproduceaccordingly.
15. MacroEnvironment
6. InternationalEnvironment
– It is particularly important for industries directly
depending on import orexports.
– Thefactors that affect the businessare
• Globalization
• Liberalization
• Foreign businesspolicies
• Cultural exchange
16. Nature of business environment
The nature of Business Environment is simply and
better explained by the following approaches:
Nature
of BE
System
approach
Social
responsibili
ty approach
Creative
Approach
17. (i) System Approach
In original, business is a system by which it produces
goods and services for the satisfaction of wants, by
using several inputs, such as, raw material, capital,
labour etc. from the environment.
18. (ii) Social Responsibility Approach:
In this approach business should fulfill its
responsibility towards several categories of the society
such as consumers, stockholders, employees,
government etc.
19. (iii) Creative Approach:
As per this approach, business gives shape to the
environment by facing the challenges and availing the
opportunities in time. The business brings about
changes in the society by giving attention to the needs
of the people.
20. Significance of Business Environment
Help to understand internal Environment
Help to Understand Economic System:
Help to Understand Economic Policy:
Help to Understand Market Conditions:
Assistance in Planning
Helps in Improving Performance
Coping with Changes
21. Help to understand internal Environment:
It is very much important for business enterprise to
understand its internal environment, such as business
policy, organization structure etc. In such case an
effective management information system will help to
predict the business environmental changes.
22. Help to Understand Economic System:
The different kinds of economic systems influence the
business in different ways. It is essential for a
businessman and business firm to know about the role
of capitalists, socialist and mixed economy.
23. Help to Understand Economic
Policy:
Economic policy has its own importance in business
environment and it has an important place in
business. The business environment helps to
understand government policies such as, export-
import policy, price policy; monetary policy, foreign
exchange policy, industrial policy etc. have much effect
on business.
24. Help to Understand Market
Conditions:
It is necessary for an enterprise to have the knowledge
of market structure and changes taking place in it. The
knowledge about increase and decrease in demand,
supply, monopolistic practices, government
participation in business etc., is necessary for an
enterprise.
25. Coping with Changes
The business must be aware of the ongoing changes in
the business environment, whether it be changes in
customer requirements, emerging trends,
new government policies, technological changes. If the
business is aware of these regular changes then it can
bring about a response to deal with those changes.
26. Helps in Improving Performance
Enterprises that are thoroughly scanning their
environment not only deal with the changes presented
but also flourish with them. Adapting to the external
forces help the business to improve the performance
and survive in the market.
