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Unit 3
Environmental Analysis
The environment of business is the
aggregate of conditions, events and
influences that surround and affect it.
The organisation is the part of a broader
social system, it has to work within the
framework provided by the society and
its constituents
Business Environment
1. Form of govt.
2. Political stability
3. Attitude towards foreign companies
4. Laws on various matters
• Legislations regarding price control, tax policy,
wages, licensing policy, export – import
influence how mangers will formulate and
implement strategies
• Regulations relating to customer protection or
environmental protection and maintaining
ecological balance have created complication for
business
• Changes in indl. Policies, fiscal policy directly
affect the business. For eg. Liberalization
created opportunities to diversify and expand
and at the same time created threat by
increased competition.
International Business
Multinational organisation operates in more complex
environment, as they have to keep in mind the global events
and changes taking place in their host countries as well.
Important factors includes:-
1. Economic conditions of the host country
2. Cultural factors
3. Availability of raw material and manpower
4. Laws of host country
5. Political stability and regulatory mechanisms.
Supplier
Customer Marketing
Intermediaries
Industry
Environment
Financial Institutions
/ Creditors Competitor
Skilled
Workforce
Supplier
• Number of competitors
• Rate of industry growth
• Product or service characteristics
• Amount of fixed costs
• Capacity
• Diversity of rivals: Raymond's or Reebok
Threat of Substitute Products or Services-
products that appear different but can satisfy the
same need as another product
• Large purchases
• Backward integration
• Alternative suppliers
• Low cost to change suppliers
• Buyer earns low profits
• Product is unimportant to buyer