Continuous interaction analysis

There is a close and continuous interaction between the business and its environment. This interaction helps in strengthening the business firm and using its resources more effectively. As stated above, the business environment is multifaceted, complex and dynamic in nature and has a far-reaching impact on its survival and growth. To be more specific, proper understanding of its social, political, legal, and economic environment helps the business in the following ways: 1. Identifying firm s strengths and wea!ness: "usiness environment helps to identify the strengths and wea!nesses in view of the technological and global development. #. $etermining opportunities and threats: The interaction between the business and its environment would identify opportunities for and threats to the business. It helps the business enterprise for meeting the challenges successfully. %. &iving $irection for growth: The interaction with the environment leads to opening up new frontiers of growth for business firms. It enables the business to identify the areas for growth and expansion of their activities. '. (eeping "usiness )nterprise Alert: )nvironment study is needed as it !eeps the business unit alert in its approach and activities. In the absence of environmental changes, the business activities will be dull and lifeless. The problems * prospects of business can be understood properly through the study of business environment. This enables an enterprise to face the problems with confidence and secure the maximum benefits of business opportunities available. +. ,ontinuous -earning: )nvironmental analysis ma!es the tas! of managers easy in dealing with business challenges. The managers are motivated to continuously update their !nowledge, understanding and s!ills to meet the predicted changes in realm of business. .. Image "uilding: )nvironmental understanding helps the business organi/ations in improving their image by showing their sensitivity to the environment within which they are wor!ing. 0or example, in view of the shortage of power many companies have set up ,aptive 1ower 1lants 2,113 in their factories to meet their own re4uirements of power. 5. 6eeting ,ompetition: It helps the firms to analy/e the competitor s strategy and formulate their own accordingly. 7. (eeping business flexible and dynamic: 8tudy of business environment is needed for !eeping business flexible and dynamic as per the changes in the environmental forces. This will enable the development of business organi/ation. 9. :nderstanding the future prospects and problems: "usiness environment enables to understand future problems and prospects of business in advance. This enables the organi/ation

to be more research oriented to ma!e positive contributions toward the organi/ational goals and enables them to face the problems boldly and also ta!e its benefit of favorable situations. 1;. 6a!ing the business socially acceptable: )nvironment study enables the businessmen to expand the business and also ma!e it acceptable to different social groups. "usiness organi/ations ma!e positive contribution for maintaining ecological balance by studying social environment. 11. )nsures optimum utili/ation of resources: The study of business environment is needed as it ensures optimum use of resources available. 0or this, the study of economic and technological environment enables the organi/ation to ta!e full benefit of government policies, concessions provided and technological developments and so on. 1#. )nsures survival and growth: "usiness environmental informs about suitable changes to be effected in business policies. This helps the business organi/ation to grow and prosper. 1%. 6aintaining adaptability to changes: "usiness environment guides the organi/ation about socio-economic changes and the organi/ation must accordingly adapt these changes. This enables the business, organi/ation to survive for a longer period. + 6a<or ,omponents of "usiness )nvironment = "usiness 8tudies

by 8aritha 1u<ari "usiness )nvironment

The ma<or components of a good business environment are listed below:

$imensions of business environment mean all the factors, forces and institutions which have direct or indirect influence over the business transactions.

"usiness 8tudies Image ,ourtesy : images;'.olx.com.p!>ui>-?obs.<pg

&eneral )nvironment is the most important dimension of business environment as businessman cannot influence or change the components of general environment rather he has to change his plans and policies according to the changes ta!ing place in general environment. 2i3 )conomical )nvironment: )conomic )nvironment consists of &ross $omestic 1roduct, Income level at national level and per capita level, 1rofit earning rate, 1roductivity and )mployment rate, Industrial, monetary and fiscal policy of the government etc. )conomical )nvironment The economic environment factors have immediate and direct impact on the businessman so businessmen must scan the economic environment and ta!e timely actions to deal with these environments. )conomic environment may put constraints and may offer opportunities to the businessman. After the new economic policy of 1991, lots of opportunities are offered to businessmen. The common factors which have influenced the Indian economic environment are 2a3 "an!ing sector reform has led to many attractive schemes of deposits and lending money. The "an!s are offering loans at very nominal rate of interest and with minimum formalities to be completed. 2b3 @ecent changes in economic and fiscal policy of country have encouraged A@Is and foreign investors to invest in Indian companies. 2c3 -ots of economic reforms are ta!ing place in leasing and financing institutions. The private sector is allowed to enter in financial institutionsB as a result customers are gaining. 8ome Aspects of )conomic )nvironment: 1. @ole of 1rivate and 1ublic sector #. @ate of growth of &$1, &A1, and 1er ,apita Income %. @ate of 8aving and Investment '. "alance of Trade +. "alance of 1ayment .. Transport and ,ommunication 8ystem 5. 6oney 8upply in the )conomy 7. International $ebt 2ii3 8ocial )nvironment:

8ocial )nvironment consists of the customs and traditions of the society in which business is existing. It includes the standard of living, taste, preferences and education level of the people living in the society where business exists. 8ocial )nvironment Image ,ourtesy : ltgov.georgia.gov>sites>ltgov.georgia.gov>files>imported>vgn>images>our.?1& The businessman cannot overloo! the components of social environment as these components may not have immediate impact on the business but in the long run the social environment has great impact on the business. 0or example, when the 1epsi ,ola ,ompany used the slogan of C,ome AliveD in their advertisement then the people of a particular region misinterpreted the word C,ome AliveD as they assumed it means ,oming out of &raves. 8o, they condemned the use of the product and there was no demand of 1epsi ,ola in that region. 8o, the company had to change its advertisement slogan as it cannot survive in mar!et by ignoring the sentiments of the people. In India also, there are many 8ocial reforms ta!ing place and the common factors of Indian 8ocial )nvironment are: 2a3 $emand for reservation in <obs for minority and women 2b3 $emand for e4ual status of women by paying e4ual wages for male and female wor!ers 2c3 $emand for automatic machines and luxury items in middle class families 2d3 The social movements to improve the education level of girl child. 2e3 Eealth and 0itness trend has become popular. Aspects of Social Environment: 1. Fuality of life #. Importance or place of women in wor!force %. "irth and $eath rates '. Attitude of customers towards innovation, life style etc. +. )ducation and literacy rates .. ,onsumption habits 5. 1opulation 7. Tradition, customs and habits of people

2iii3 1olitical )nvironment: 1olitical environment constitutes all the factors related to government affairs such as type of government in power, attitude of government towards different groups of societies, policy changes implemented by different governments etc. The political environment has immediate and great impact on the business transactions so businessman must scan this environment very carefully.

1olitical )nvironment The businessman has to ma!e changes in his organisation according to the changing factor of political environment. 0or example, in 1955 when ?anata &overnment came in power they made the policy of sending bac! all the foreign companies. As a result the ,oca ,ola ,ompany had to close its business and leave the country.

The common factors and forces which have influenced the Indian political environment are:

2a3 The government in Eyderabad is ta!ing !een interest in boosting I.T. industry, as a result the state is more commonly !nown as ,yber bad instead of Eyderabad.

2b3 After the economic policy of liberalisation and globalisation, the foreign companies got easy entry in India. As a result the ,oca ,ola which was sent bac! in 1955 came bac! to India. Along with ,oca ,ola, 1epsi ,ola and many other foreign companies are establishing their business in India.

Aspects of 1olitical )nvironment: 1. 1resent political system #. ,onstitution of the country %. 1rofile of political leaders '. &overnment intervention in business +. 0oreign policy of government

.. Galues and ideology of political parties

2iv3 -egal )nvironment:

-egal environment constitutes the laws and various legislations passed in the parliament. The businessman cannot overloo! the legislations because he has to perform his business transactions within the framewor! of legal environment.

-egal )nvironment Image ,ourtesy : images.flatworld!nowledge.com>lau>lau-fig1%H;;#.<pg The common legislation passed which has affected the business transactions are Trade 6ar! Act, )ssential ,ommodity Act, Ieights and 6easures Act, etc. 6ost of the time legal environments put constraints on the businessman but sometimes they provide opportunities also. The common instances of Indian legal environment which have influenced business transactions recently are:

1. $eregulation of capital mar!et has made it easy for businessman to collect capital from primary mar!et.

#. @emoval of control from the foreign exchange and liberalisation in investment is encouraging foreign investors and A@Is to invest in Indian capital mar!et.

%. Advertisement of alcoholic product is prohibited.

'. ,ompulsory to give statutory warning in Tobacco production.

+. $elicencing policy of industries.

8ome Aspects of -egal )nvironment:

1. Garious laws and legislative acts.

#. -egal policies related to licensing.

%. -egal policies related to foreign trade.

'. 8tatutory warnings essential to be printed on label.

+. 0oreign )xchange @egulation and 6anagement Act.

.. -aws to !eep a chec! on Advertisements.

2v3 Technological )nvironment:

Technological environment refers to changes ta!ing place in the method of production, use of new e4uipment and machineries to improve, the 4uality of product. The businessman must closely monitor the technological changes ta!ing place in his industry because he will have to implement these changes to remain in the competitive mar!et.

Technological )nvironment Image ,ourtesy : scm-l%.technorati.com>11>;7>;1>'7.7+>8oftware$evelopment.<pgJ tK#;11;7;1#;;#1% Technological changes always bring 4uality improvement and more benefits for customers. The recent technological changes of Indian mar!et are:

1. $igital watches have !illed the prospects and the business of traditional watches.

#. ,olor T.G. technology has closed the business of blac! and white T.G.

%. Artificial fabric has ta!en the mar!et of traditional cotton and sil! fabrics.

'. 1hoto copier and Lerox machines have led to the closure of carbon paper business.

+. 8hift in $emand from vacuum tubes to transistors.

.. 8hift from steam locomotives its diesel and electric engine.

5. 0rom typewriter to Iorld 1rocessors.

8ome Aspects of Technological )nvironment:

1. Garious Innovations and Inventions.

#. 8cientific Improvements.

%. $evelopments in IT sector

'. Import and )xport of Technology.

+. Technological Advances in ,omputers.