Business environment

Business environment consists of all those factors that have an impact on business ,such as the strengths ,weakness ,internal power relationships and orientations of the organization, government policies and regulations ,nature of the economy, economic conditions cultural demographic natural and global trends and cross border developments.

Types of Business environment

Internal promoter, shareholders value, mission ,objectives, management structure ,internal power relationship,co.image,brand equity, physical assets ,R&D ,Human resources, marketing capabilities.

External business environment

Micro environment- customers, suppliers ,competitors,publics,financiers,marketing intermediaries Macro environment-economic ,social ,demographic, political ,natural ,technological and global factors.

Competitive structure of industries

According to Michael porter there are five basic competitive forces Rivalry among the existing firms Threat of new entrants Threat of substitutes Bargaining power of suppliers Bargaining power of buyers

Environment analysis and strategic management

SWOT analysis

Stages of environmental analysis

Scanning the environment to detect warning signals. Monitoring specific environmental trends. Forecasting the direction of future environmental changes Assessing current and future environmental changes for their organization.

Approaches to environmental analysis

1.Outside in approach or macro approach takes a very broad view. 2.The inside-out approach or micro approach take a very narrow view.

Scenario analysis
It is a technique used to forecast the occurrences of complex environmental events. It is a detailed description of how certain events may occur in the future and their consequences on the organization.

Steps to develop scenarios

Identify the strategic environmental issues Select the most important issues Prepare a preliminary description of these issues. Draw out the implications of these issues on the organization performance. Develop detailed description of the future in the form of scenarios.

 Discuss the scenarios with the top management and refine them Develop the contingency action plan for each scenario.

Techniques for environmental analysis

Verbal and written information Search and scanning Spying.

Steps in environmental forecasting

1. Identification of relevant environmental variables 2. Collection of information 3. Selection of forecasting techniquesquantitative vs. qualitative. 4. monitoring

Types of forecasting
Economic forecast-on parameters like GDP, per capita income, growth rate, investment and output trends in different sectors. Short term economic forecast is used for demand and sales forecasting and marketing. Both quantitative and qualitative methods are used for economic forecast. Like time series and judgment models.

 Social forecasts-based on population growth, age structure, ethical ,rural urban distribution, migration, family life style ,expenditure pattern. Political forecast-political parties ,internal power structure. Technological forecast-innovation, diffusion and penetration of technologies.

Techniques for environmental forecasting

Econometric models use complex regression models and time series models to relate economic occurrences in areas of corporate activity. Trend exploration-time series models assume that past is used to predict the future. Scenario development by the following methods like premises, systems diagram ,critical site ,newspaper headline, logical possibilities , judgment, brain storming ,Delphi and strategic issues analysis.