Business Environment

It is human activity of converting resource into goods & service for purpose
bring about transaction that will result in profit to organization

It is a human activity
It process of converting raw material in to output

It is exchange
It is make profit

Resource
Land
Labor satisfaction the customer
Capital business unit
Organization

Business stand between resource & satisfaction

Utility means : satisfaction of human wants

Firm , place , time , service

Environmental constrains are

Domestic
International
 Firms
Inputs produce output
Finance activity
Marketing activity

Environment interface all activity

Micro environment

2 3 4

Marketing

1. Supplier
2. Customer
3. competitor
4. Public
5. Task management
h

Macro environment

Company
 Economic force
Natural force
Technology force
Political force
Cultural force

ORGANISATIONAL ENIORNMENT

: All elements existing outside the organization boundaries that have

potential affect the organization

Task environment:
The layer of the environment that directly influence the organization
operation& performance

General environment
The layers of external environment that affect the organization indirectly

Technological dimension:

This includes scientific & technological advancement in industry as well as

society at large

Socioculture dimension this representing demographic characteristics,

norms, customs

Economic dimension : this representing the over all economic health of

the country or region in which organization functions
Legal –political dimension: that representing federal , state ,& local
government regulation & political activities designed to control company
behavior

3 general environments

2 Task environment

1 Internal Envior
Nment

Task environment:
- Customers : people & organization in the environment who
acquire goods & service from the organization

- Competitors : other organization in the same industry or type of

business that provide goods & service

- Labor supply
- Suppliers
 -

General environment
- Technology
- Social & cultural
- International environment
- Legal /political

Economic Environment

1. General Economic Frame work

Capitalism
Socialism
Mixed Economy
Communism

2. over all economic trends

Growth rate
Recession
Whether the economy is robust?

3. Monetary and Fiscal Policy

Monetary policy

- Over all money supply in the economy

- Interest rate structure

Taxation and Public expenditure policies

-Industrial and licensing policies
-Macro economic management

4. Organisation of capital market

 Firms always need capital and countries have various organized
institutions to provide it for them.

5. Factor endowment

Kuwait and Abu Dhabi- richest countries in the world –each happens to be
sitting on a major oil field.
Switzerland very few resources but rich
Nether land because of factor endowment
Belgium

U.S.A
U.K Good resource base

India- fortunate enough-to have good resource base

6. Market size
Is one constraint crucial to firms

7. Social over head capital

- Power, transportation and communication
net work
- Transportation cheaper in U.S.A
- U.S.A social overhead capital-provided by private firms-the most
efficient they are the more efficient can be other firms

Political /Legal Environment

Types of Political Philosophies

Democracy and Totalitarianism

Public elect their representatives in a democratic form.

- Who then rule the country.
- Freedom of enterprise.

Authoritarian Societies
Individual expression is forbidden.
- Ruled by a pressure group
- Political, military of economic or by a dictator.
Ex: Russian communism.

Types of Economic Philosophies:

Capitalism( free to producer & consumes)

The philosophy of individualism.

- Private ownership of all agents of
Production.
Adam Smith ‘Laissez faire.’

Socialism (government has take all decision & create new policies)

The tools of production are to be organized, managed and owned by

society, with the benefit flowing to the public.
Public ownership of industries, especially producers goods industries.

Communism:
Abolish all private property and property rights to income
the state would own and direct all instrument of production.

Welfare state:
Modification of modern capitalism.
- Increasing degree of state regulation when certain deficiencies appear
in the economy.

Workmen’s compensation Law

Social security measures
State help to industry etc
 Mixed economy
Combination of both capitalism and socialism. Exestuations of both
public and private sectors

Legal En vironment
System Pervasive: Tax Law’s( it covering all

Inputs Firm 1
Output

Labour Laws Firm 2 Price controls

Pollution
Control
Consumer protection
Price controls Firm n Fraud and others
Capital Market
Controls.

Structural Laws
(Contract Law)
Law to control and regulate competition
(Foreign trade controls)

S l internal working of firm & relationship between different firms &

others makes agreements about all sought things buyer contract the seller
Advertising company which claim
2 law to : patient, trade mark, copy right, regulation
commission, foreign trade control

Sociological cultural environment

- How people be have and what attitude they have towards their work
their fellowmen and society,
- People believe god given lower productivity

- However industrial history- value change history because the logic as

the modern industrial statesis work

- more industrial wealth correct behavior

1 attitude towards industrial managerial mans

M-respected so in the u.s.a more efficient work

-view of Menageries poor more difficult to get the work done

2 attitudes towards authority as subordinates

- Respect the boss work can be get done
- American avoid two extremes
a) anquestining obedience
b) not paying attention

-good natured interaction blw superior and subordinate

3 Attitude towards achievement and work

Americans work a major virtue

more productive efficiency American rich

4 class structure and individual mobility

U.S.A

6) attitude towards scientific mind ,method

-we should have such attitude

Attitude towards task risk

Global international environment

Attitude towards foreigners

1 National ideology
In some countries become business as degrading and low status
Entering such countries becomes difficult

Some countries may have socialistic party - do not like pvt sector in profit
-entering those countries also become difficult

2 treaty obligation

3 power block

4 imports – export restriction

A). Legal rules controlling export and imports
B). Tariffs and quatas

6. Economics constrains some as constraints you have may be

A). General balance as payment situations
B). each country will have foreign trade pattern each country decides its
own export imports and implication is you suppose to know it
C). The membership of international organization IMF, world bank
WTO etc.,
Conclusion

1. each nation is sovering and independent it would like to control it

owns exports and import

2. These regulations are not the same as domestic constraints

Technological environment

1. scientific and technological advancement in the inudtry as well as

the society at large;-
organization must incorporate technological advances
Ex: 1. Use of computer
2. Japanese film less camera
3. Beverage industry was planning for self- chilling can

Technoligical advances- change the rules as gain—every industry has

to respond

Advantages__
1. Greater variety of products
2. Greater productivity
3. more leisure – less work
4. Higher standard of living

Disadvantages____
1. Urbanization
2. pollution
3. traffic problem

Organization- environment relationship

Environmental factor:- creates uncertainty the decision makers find
difficult to arrive correct decision or current
1. Adapting to the environment
a. boundary spanning –to gather information and reduce
uncertainty Ex. Delta Airline
 b. Forecasting and planning—An effort to spot trends that
enable managers to predict the future events
c.

Industrial policy
The pattern as industrialization planned by the govt is indicated through the
industrial policy
It also defines regulation at pvt industries.

Industrial policy at 1948

First systematic and comprehensive industrial policy defined the role at

public and private sector

Mixed economy
Features
1. Control and regulation at pvt sector
-classified the industries in the 4 broad categories to define the role all
public and private sectors.
A). defense and strategic industry
- Exclusive monopoly at the state =govt

B). Basic and key industries

All new units will be started by the govt-existing units will be continued
for a period up to years after which the question as nationalization will
be decided.

Government controlled sphere

 C) Twenty other important industry like heavy chemical, cotton taxtial
sugar etc.m are to be run by pvt enterprise and regulated by the state
no threat and nationalization
c) Residual industry :-Are to be run by pvt enterprise under
general control as the state

Nehru –mohalnabi (the second plan)

The industrial policy resolution 1956

0n the April 13 1956

Reasons
1) The constitute as India was adopted with directive principal as
state policies and guaranting fundamental rights

2) The govt as India introduced economic planning

3) Socialistic pattern as the society - Avadi congress resolution

4).The more ambition second plan with greater emphasize on

industrialization

Main feature

Re-classified industries into 3

Schedule A ( 17 industries)

The basic & strategic industries

Arms & ammunitions

Ship building
Railways transport
The government has assumed responsibility of these industries

-------- Did not contain threat of nationalism

B. Schedule B

Consisted of 12 industries

Machine tools
Fertilizer

These industries will be progressively state owned & new started by

government

----the private sector should help public sector

Schedule C

Residual industries

The development these industries is left initive an enterprise of private

sector

Cottage & small scale industries

Reduction of reasonable disparity

Technical & managerial development

 Fiscal policy ( Keynes)

Making use of the budgetary policy ( that is taxation & expenditure ) to

bring about certain desire change in economy like fully employment
Economic growth & stability

Fiscal policy : it related

Taxation
Government expenditure

To promote full employment & control inflation by regulating level

Of demand in economy

Objectives
In developed countries this is help regarding to full employment
With price stability

In under development objective has been economic growth

Before 1930

Not much importance & government expenditure kept minimum

After 1930
Keynes popularize the use of policy called fiscal policy
“ general theory” or general theory of employment & interest

Fiscal policy can instrument to increase aggregate demand & employment

Increase in aggregate demand result the increase national income how we

know through the below table
 C+I+G
C+I
C

45
Y y2 x
Income

I = investment
G= government expenditure
C= consumption

increase aggregate demand by increase government & reduce personal

tax
-----------such step are taken during depression

Reduce in the aggregate demand by reduce government expenditure &

increase personal taxation

-----------boom or inflation condition in the economy

Role fiscal policy in under developed country

Capital formation or accelerations of investment

Employment creation ( incentive )
Redistribution ( reduce inequality income )
balance of payment ( Favorable payment )

1 ]Environment……………… various activities firm

Ans: Interface

2 ]……….. Stand between resource & satisfaction

Ans: Business

3] Important utilities are Firm, place, time, …………..

Ans: service

4]……………..environment covers within the organization boundaries

Ans : internal

5] Which is not belonging to task environment?

1 . Supplier
2 .Customer
3 . Competitor
4 Task management
 5 Legal& Political

Options : 1 2 3 4 5

Ans 5

6]…………….. All elements existing outside the organization

boundaries that have potential affect the organization

Ans : Organization environment

7]………………… The layer of the environment that directly influence

the organization operation& performance

Ans : Task environment

8] …………The layers of external environment that affect the organization

indirectly

Task environment
General environment
Internal environment

Ans general environment

9]……………. people & organization in the environment who acquire

goods & service from the organization

Ans : customer

10] Other organization in the same industry or type of business that provide
goods & service--------------
 Ans: Competitors

11]The availability of people for hire by organization means -----------

Lab our supply

12]Representing demographic characteristics, norms, customs

………………….
Ans: Socioculture dimension

13] Representing the over all economic health of the country or region in
which organization functions
…………………..
Ans: Economic dimension

Legal –political dimension: that representing federal , state ,& local

government regulation & political activities designed to control company
behavior

15]. Over all economic trend

Growth rate
Recession
Robust

Modification of modern capitalism.

Welfare state