Business Environment

P.S.Mohanakumar

Concept
The term business Enviornment refers to the totality of all relevant forces , to and beyond the control of , an individual business enterprise and its management. These exercise a significant and meaningful influence on the life and growth pattern of individual enterprises

Concept
Business environment means the aggregate of all conditions , events, and influences that surround and affect it

Major categories
Economic Environment- mp.,f.p, industrial policy, economic system etc. Non-Economic Environment- social, cultural. Political. legal, technological factors Internal External

Internal Factors
Organizational Resourses R&D and Technological capabilities Financial capability Marketing capability Operations capability

Note: B.E. generally refers to external enviornment

Role of Corporate policy maker

Functions matching the need of society Adapt to dynamic conditions of the society Match organisational policy and resourses with Social needs Social responsibility of business A business policy should be matched with specific needs of the customer, producers and society at large

Importance of the study

Helps to develop broad strategies and long term policies. Enables to analyse competitors strategy. Will keep organisations dynamic in approach. Forsee impact of socio economic changes at the national and international level

Different Layers
1. 2. 3. 4. 5. 6. 7. International Environment Domestic Macro economic environment Economic system Economic stability Competitive environment Socio- cultural Non- economic

8. demographic 9. economic Policy 10.Growth & distribution Environment 11.External 12.input providers 13.Customer 14.rivals 15. Government

Anatomy of Indian Economy- The Road Ahead

Features of Indian economy Economic Reforms- market Economy Tariff and Trade reforms Foreign Investment Regime Agricultural sector Industrial sector Service sector Social sector- Poverty, unemployment, Education Health Care

International Environment
Growth of world economy. Interdependence between nations. Multilateral agencies. International laws,Treaties, agreements, codes etc. Cultural factors across countries. International market structure

Risks in business environment Domestic economic sources

1. Changes in Industrial licensing policy 2. Variations in interest rate 3. Variation in national income and sect oral contribution 4. Changes in income and wealth distribution 5. Infrastructure 6. Unemployment and poverty

Risk-Social and cultural sources

1. Changes in family pattern- nuclear, joint family 2. Changes in quality and level of education. 3. Changing religious and ethical values. 4. Changing life styles and living conditions. 5. Economic nationalism

Risk-External sources
1. 2. 3. 4. B.O.P Exchange rate. Variability of export and imports. Composition and direction of Exports and Imports 5. MNCs and FDI 6. Regional Groups. 7. Exchange control

Risks
Security Risk-Militant groups Political stability risk Legal and regulatory risk Macro-economic risk Tax policy risk- VAT,MAT Labor market risk Financial risk Infrastructure risk