INTRODUCTION

Business is an institution which functions amongst various conditions and forces external to it. Integral part of the social system Business activity greatly influence social attitudes,values,outlooks,custom es etc.

BUSINESS

DEFINITION

Social institution performing a social mission and having a broad influence on the way people live and work together

-> Davis & Blomstorm Point out three ideas 1. Value 2. Viability 3. Public visibility

OBJECTIVE OF BUSINESS
The main objective maximization of a firm is not profit maximization, but , sales maximization,subject to minimum profit constraint. ->William J. Boumal

TYPES OF OBJECTIVES

Business objectives classified into four 1. Economic objectives 2. Social objectives 3. Primary & secondary objectives 4. Short run & long run objectives

ECONOMIC OBJECTIVES
1.
2. 3. 4. 5.

Survival Return on Investment Growth Innovation Market Share

SOCIAL OBJECTIVES
Concerned with the needs and wants of the society Serve the interest of the society Justify the survival & growth of the enterprise-Mostly long term

COMPARISION B/N ECONOMIC & SOCIAL OBJECTIVES

1.

Economic
1.

Social

Primarily concerned with the economic health of the enterprise

Concerned with the needs &welfare of the society

2.

Serve the economic motive of the stock holders

2.

3.

Mostly enterprise oriented or enterprise centered

3.

Serve the interest of the society Social oriented It is mostly long-term Social objectives justify economic objectives

4.

Important both in the short term and long term

4.

5.

Achievement of economic objective is necessary for the survival & growth of the enterprise

5.

PRIMARY AND SECONDARY OBJECTIVES

SHORT-RUN AND LONG RUN OBJECTIVES

PRIMARY OBJECTIVES
GEORGE GOYDER

The extention development and improvement of business and building up of its financial independence The payment of fair &regular dividends to the shareholders Payment of fair wages under best possible condition to workers The reduction of price to consumers

SECONDARY OBJECTIVES

To provide bonus for the workers To assist in promoting amenities of the locality To assist in developing the industry of which the firm is member To promote education, research & development in the techniques of the industry

Short run & Long run Objectives

The short run objective is a strategy to help achieve the primary or long run objective such as profit Long run objectives means making profit for the company where as short run objective includes development of the local community, serving society

Factors affecting Objectives:

Forces in the environment Internal forces

The value systems of the top executives

Changing Concepts of Business

In past, profit maximization was the only motive. In modern outlook, profit is only secondary.

Professionalisation

It imparts a certain social responsibility and dignity to management A professional is one who possess systematic knowledge & skill to perform certain functions He has enormous responsibilities, socially bounded by the ethics of his profession It makes business more efficient, dynamic & socially resposible

Business Ethics
The term refers to the system of moral principles & rules of conduct applied to business & should be conducted according to certain self-recognised moral standards. Four Issues in Business: Is it the truth? Is it fair to all concerned? Will it build goodwill & better friendship? Will it be beneficial to all concerned?

Ethical Principles:

Do not deceive or cheat customers Do not destroy or distort competition Ensure sincerity & accuracy in advertising Make accurate business records available

Role of Trade Association

It has three important ways in promoting Business

Education & Persuasion Code of Ethics Moral Sanctions

In the business circles, there has been a growing awareness of the need for professionalizing management & as a result many family concerns have been taken steps for this purpose

Definition
Business Environment refers to all those internal and external factors which impact the functioning /performance of a firm and/or its decision making.

Meaning

Business ecology = Human ecology Influence of internal and external environment on business

Business & Environment

Internal Environment

Business Decision

External Environment

Types of Environment

Internal Factors/Environment
External Factors/Environment - Micro Environment - Macro Environment

Internal Environment

Value system Vision, Mission and Objectives Management Structure and Nature Internal Power Relationship Human Resources Company Image and Brand Equity

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Miscellaneous Factors - Physical assets & Facilities - R & D &Technological Capabilities - Marketing Resources - Financial Factors

External Environment

Micro Environment - Suppliers (Vertical Integration/Backward Integration) - Customers - Competitors (Desire, generic & Brand competitions) - Marketing Intermediaries - Financiers - Publics

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Macro Environment - Economic Factors - Social/cultural Factors - Demographic Factors - Political Factors/ Govt. Factors - Natural Factors - Technological Factors - Global Factors

Competitive Structure of Industries

Five Forces Model Michael Porter

Rivalry among existing firms Threat of new entrants Threat of substitutes Bargaining power of suppliers Bargaining power of buyers

Rivalry among existing firms

Number of firms, market share, strengths etc State of growth of industry Fixed or storage costs Indivisibility of capacity augmentation Product standardization and Switching Costs

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Strategic stake Exit barrier Diverse competitors Switching Costs Expected Retaliation

Threat of new entrants

Government Policy Economies of scale Cost disadvantages independent of scale Product differentiation Monopoly elements Capital requirements

Threat of substitutes

Limit the potential returns in an industry Close or distant substitutes

Bargaining power of Suppliers

Extent of concentration and domination in the supplier industry Importance of the product to the buyer Importance of the buyer to the supplier Extent of substitutability of the product Switching costs Extent of standardisation or differentiation of the product

Bargaining power of buyers

Volume of purchase relative to total sale of seller Importance of the product to the buyer Extent of standardization or differentiation Switching costs Profitability of the buyer Extent of buyers information

Strategic Groups
A strategic group is the group of firms in an industry following the same or similar strategy along the strategic dimensions.

E.g. Organized and unorganized sectors

Competitor Analysis

Who are the competitors of the firm? What are the current strategies of the competitors? What are their future goals and likely strategies? What drives the competitor? Where is the competitor vulnerable? How are the competitors likely to respond to the strategies of others?

Competitor Response Profile The competitor response profile seeks

to predict the competitors offensive moves and defensive capabilities.

Value Chain of a firm

Primary Activities 1. Inbound Logistics 2. Operations 3. Marketing and Sales 4. Services Support Activities 1. Procurement 2. Technology Development 3. Human Resource Management 4. Firm Infrastructure

PEST Analysis

Political Economical Social Technological

Strategic Management Process

Determination of Mission Establishment of objectives SWOT Analysis Consideration of Strategic Alternatives Choice of Strategy Implementation (Corporate, Functional & SBU Level Strategy) Evaluation and Control

Strategic Business Unit (SBU)

A SBU is an operating division of a firm which serves a distinct product/market segment or a well defined set of customers or a geographic area. The SBU is given the authority to make its own decisions within corporate guidelines as long as it meets corporate objectives.

Stages of Environmental Analysis

Scanning Monitoring Forecasting Assessment

Approaches to Environmental Analysis

Outside in (macro approach) Inside out (micro approach)

Techniques for environmental analysis

Verbal and written Information Search and scanning Spying Formal Forecasting

Benefits/Importance of Environmental Analysis

Makes aware of environmentorganization linkage Identify firms present and future threats, challenges and opportunities Understand the transformation of the industry Factors which influence the business Identification of risks Formulation and modification of strategies Keeps managers informed, alert and dynamic

Steps in Environmental Forecasting

Identification of relevant environmental variables Collection of Information Selection of forecasting Technique Monitoring

Types of Forecasting

Economic Forecasts Social Forecasts Political Forecasts Technological Forecasts

Techniques for environmental Forecasting

1. 2. 3. 4. 5.

Econometric Techniques Trend Extrapolation Scenario Development Premising Method Systems Diagram Method Critical Site Method The newspaper Headline Method Logical Possibilities Method

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Judgement Models Brain Storming Delphi Method Strategic Issues Analysis

Limitations of Environmental Forecasting

Selection of Variables Selection of Functional Form Estimation of values Opinion collected from people