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Vastness
Globalisati
Characteristi
on
cs of
Business
Information
Change: Change and change is the common feature of today’s business. The dynamic
business environment expects changes in the types of business practices, products and
services offered by the business. Depending upon the situation a business organisation has to
change its products and services, organisational structure, practice etc. If there is a single
word that can best describe the dynamic business, it is change. Development of research and
development facilities and the fast growing economies expects change in the business
practise and the products and services offered by the business. The new inventions and the
changing customer preferences forces business organisations to introduce new way of
business practices and introduce new products and services which best suits the current
market.
Vastness: Mass production and mass marketing are the order of the day. Machines already
replaced manual labours in the manufacturing process and all business activities. The bulk
production lead to competition and aggressive marketing. Business need to find new channels
of distribution to meet the global market and to expand the market. MNCs and mega projects
are common in the present economic scenario. The effects mass production and existence of
big business houses are very vast.
Science: Scientific inventions will offer more and more opportunities to the business
organisation. Research and development is the integral part of the present day’s business. R
and D activities are very common in the modern business. With the help of R and D activities
business organisations started producing new products and services and modernised its old
products and services. Development of information technology revolutionised the business
practice today.
Information: Another common features of contemporary business is the need for and use of
large information. Information is wealth for the modern business. Efficient management of
information become very vital for the success of business. Information collection, data
processing, information analysis, and preparation of records and reports plays crucial role in
the effective decision making process of an organisation. Management information system
become a common features of modern business organisations for the effective management
of information.
Government Intervention: The LPG policy of the government forced more and more
government intervention in the present business environment. Active participation of more
and more private players in the economic activities demand government intervention to
protect the interest of nation, consumers, nature, etc. Irrespective of the types of the
economies governments monitors, controls and regulates the economic activities in one or
other forms.
BUSINESS OBJECTIVES:
Objectives render mission statements more concrete. In other words, mission statements seek
to make a vision more specific and objectives are attempts to make mission statements more
concrete. Mission statements are more specific than vision statements, but are not to be taken
as concrete directions for action. In short, they are compatible to each other. Objectives,
therefore, represent the operational side of an organisation.
Sometime a business unit seeks to achieve more than one objective and there are always
restraints to the attainment of some objectives. Further the objectives of a business
organisations vary with the passage of time with the change in business environment.
However most of the contemporary business organisations wish to achieve certain common
objectives.
1. Profit: Earning profit is the primary goal of any business enterprise in the business world.
Profit is the main incentive, motivator, strong sustainers for doing business and survival.
Profit enables a businessman to realise his other objectives too along with the organisational
objectives.
In profit making enterprises, profit should not be the end in itself. Profit should be the
beginning acting as seed money for more products, more plants, more dividends, more tax
payments, more jobs, more opportunities and expansion of business. Profits should promote
the well-being of all the rich and the poor; privileged and less privileged; consumers and
producers and investors and non-investors. Ignoring this and over-emphasizing profit may
bring early closer to a business enterprise.
Profit
Market
leadership
Business
Objectives
3. Power: Big Business enterprises have vast resources in terms of money, materials, men
and technology at its command. With the help of these resources business
enterprises/businessman acquire enormous economic and political power. It is the business
people who enjoy considerable power in country. The late Aditya Birla used to assert that he
built his empire to get more power. Several enlightened businessmen have used their power
for the good of society. One such illustration in our country was J.N.Tata, was a pioneer in
industry, research, health care, art, literature and in many other areas. His name inspires
admiration and respect. It is hard to imagine what would have happened to the industrial map
of our country if J.N.Tata had not been born in 1839 in a family of Parsi priests in Gujarat.
To his mind, wealth and the industry which led to wealth were not ends in themselves, but
means to an end, the stimulation of the latent resources of the country and its elevation in the
scale of nations.” They render all sort of services with its power to the society whenever it
demands.
4. Employee Satisfaction and Development: “If you want to plan for a year, plant corn. If
you want to plan for 30 years, plant a tree. But if you want to plan for 100 years, plant men”-
so goes a Chinese proverb. Caring for employee satisfaction and providing for their
development has been one of the objectives of enlightened business enterprises.
5. Quality Products and Services: Providing quality products and services is yet another
objective of business. It is also a prerequisite for the survival of a business enterprise. Those
who insisted on and persisted in quality survived competition and stayed ahead of others in
the market. Persistent quality of products earns brand loyalty, an important ingredient of
success. Hindustan Unilever is flourishing mainly because of the quality of its products.
Some of its products like Liril, Vim, Lifebuoy, Surf, Rin, Sunlight, Signal, Close-up,
Rexsona, Pears and others have become household names throughout the country. These
products are accepted by buyers as safe, of high quality and reasonably priced. Behind its
quality products, Hindustan Lever has an excellent Research and Development (R&D) set-up
and a high degree of professional management.
There are other business people who believe in quick money. Quick money comes through
shortcuts. These are the people who give us bulbs that do not give al least 100 light hours of
service, leaky taps and adulterated goods. Such enterprises will not survive for long period.
For Ratan Tata running business has been a challenge. Confessed Tata in an interview thus:
“I have asked myself this quite often. I don’t have monetary ownership in the company in
which I work and I am not given to propagating the position I am in. I ask myself why I am
doing this and I think it is perhaps the challenge. If had an ideological choice, I would
probably want to do something more for the uplift of the people of India. I have a strong
desire not to make money but to see happiness created in a place where there isn’t.
8. Joy of Creation: It is through business strategies new ideas and innovations are given a
shape and are converted into useful products and services for the benefit of customers.
Although it may be too difficult to list all the products and services that business houses have
provided us til now, it is interesting to mention that in the coming two or three decades,
following will receive considerable attention from researchers and business people:
Will there be a greater joy to a businessman coming out with a drug which can cure cancer?
Its available in the market will be of benefit to those who need it.
9. Service to Society: Business is a part of society and has several obligations towards it.
Some of them are:
10. Good Corporate Citizenship: Good corporate citizenship implies that the business unit
complies with the rules of the land, pays taxes to the government regularly, discharges its
obligations to society and cares for its employees and customers.
Bending rules of the land, evading tax payments by under-invoicing exports and dubious tax
planning; cornering licences at the cost of others; adulteration of quality products; and
indulging in other unethical practices may earn money. But such practices hardly speak
highly of corporate citizenship.
CRITICS OF BUSINESS
No doubt business enterprises provide enormous services to the society. There is also the
negative side to it and the critics are not lagging behind in pointing out the shortcomings of
business. The criticisms are many, but all are based on one idea, viz., people in business
place profits before enduring values such as honesty, truth, justice, love, devoutness, aesthetic
merit and respect for nature. Specific criticisms are the following:
A business does not function in a vacuum. It has to act and react to what happens outside the
factory and inside the factory. The factors that happen outside the business are known as
external factors or forces and the factors that happen inside the business are known as internal
factors. Internal factors will affect the main internal functions of the business and possibly the
objectives of the business and its strategies.
Business environment refers to the surroundings and circumstances, which influence business
operations. The business environment consists of the factors and forces to which an industry
belongs to. This environment consists of forces and factors internal or external to a business
firm. Many theorists have classified them as internal environment and external environment.
Internal Environment: The skill and ability of employees, their attitude to work, relations
between managers and subordinates etc. may be regarded as internal environment of
business. It also consists of Customers, Suppliers, Board of Directors, and Lenders. These are
important factors, which may affect business operations. But these are within the control of
the businessman. By taking suitable steps the conditions can be improved or the business can
convert the internal factors favourable to them by efficient management.
Mission/
Objectives
Marketing Promoters
Capability Values
Technological
Capability Managment
Structure
Internal
Environment
Internal
Financial
Power
Capabilities
Relationship
Physical
Human
Assets &
Resources
Facility
Company
Image/Brand
Equity
External Environment: The External environment consists of factors and forces which are
beyond the control of the organisation; they are Economic environment, technical
environment, legal environment, political environment, cultural environment and Task
Environment.
The micro environmental forces have a direct bearing on the operations of a business
enterprise. It is quite obvious that the micro environmental factors are more intimately linked
with the company than the macro factor. Some of the micro factors may be influence a
particular business.
Suppliers
Publics Customers
Micro
Environmental
Factors
Financiers Competitiors
Market
Intermediaries
All the micro evironmental factors influence the effective working of any business
organisations. A business can manage these peoples with good relationships. Except
competitiors all other micro environmental forces are directly connected with the business,
hence efficient management of these forces are very much essential for the success of any
business. Understanding the competition is also very much required for the successful
marketing of products and services in the market.
Macro Environmental Factors: Macro environmental factors and forces which are beyond
the control of the organisation; they are Economic environment, technical environment, legal
environment, political environment, cultural environment and natural environment. Since
these forces are beyond the control of business, organisations need to change or adjust its
policy, practice according to the changing macro environmental forces.
Global
Environment
Macro
Environmental
Factors
Socio-Cultural
Environment
Economic Environment
The economic environment consists of the demand dynamics, supply situation, pricing
factors, degree of competitiveness, and impact of profitability. It has the fiscal policy,
monetary policy and the taxation policy, the FDI norms, the investment criterion and
financing decisions.
Technological environment
Technological environment hold new technological innovation, new products, the state of
technology, the utilization of technology for maximum inputs and outputs, the obsolescence
of technology and the dynamic changes that frequently occur in technologies which enable
firms to get an competitive advantage.
Legal environment
The legal environment plays a very important role, the laws of the country, the judicial
system and the laws which affect business should be carefully concerned, for example there
might be a sudden prohibition of tobacco and laws will get stricter, in this case the company
should foresee all the aspects of legal environment. Every business organisation has to obey,
and work within the framework of the law. The important legislations that concern the
business enterprises include:
Besides, the above legislations, the following are also form part of the legal environment of
business.
Political environment
The political environment is a very important factor that needs to be taken into consideration,
the example of Augusto Pinochet serves as a classic example, Political lobbying, the practices
of the ruling parties and the stability of the ruling parties plays a very role as in developing
countries the political system keeps on changing. The political environment includes
regulatory burden and red tape, taxes, levels of political corruption, public works services,
labour market regulation, policy predictability, property rights, contract enforcement,
regulations controlling start up and bankruptcy, competition law, and entry to finance and
infrastructure markets.
Social and cultural factors of nation affect the activities of the business. These factors include
attitude of the people to work, attitude to wealth, family, marriage, religion, education, ethics,
human relations, social responsibilities etc. Culture is, the thought and behaviour patterns that
member of a society learns through language and other forms of symbolic interaction their
customs, habits, beliefs and values, the common viewpoints, which bind them together as a
social entity. Cultures change gradually picking up new ideas and dropping old ones, but
many of the cultures of the past have been so persistent and self-contained that the impact of
such sudden change has torn them apart, uprooting their people psychologically.”
Culture is:
Derived mostly from the climatic conditions of the geographical region and economic
conditions of the country.
A set of traditional beliefs and values which are transmitted and shared in a given
society. A total way of life and thinking patterns that are passed from generation to
generation
Norms, customs, art values etc.
Global Environment
Companies operating internationally must understand the business environment of the host
countries they are operating in. Today there are thousands of MNCs which operate in many
parts of the globe. Such companies should familiarise themselves with the languages, cultures
and the business environments of the countries in which they are operating.
The global business environment can be defined as the environment in different sovereign
countries, with factors exogenous to the home environment of the organization, influencing
decision making on resource use and capabilities. This includes the social, political,
economic, regulatory, tax, cultural, legal, and technological environments.
The political environment in a country influences the legislations and government rules and
regulations under which a foreign firm operates. The economic environment relates to all the
factors that contribute to a country's attractiveness for foreign businesses. Every country in
the world follows its own system of law. A foreign company operating in that particular
country has to abide with its system of law as long as it is operating in that country. The
technological environment comprises factors related to the materials and machines used in
manufacturing goods and services. Receptivity of organizations to new technology and
adoption of new technology by consumers influence decisions made in an organization.
As firms have no control over the external environment, their success depends upon how well
they adapt to the external environment. A firm's ability to design and adjust its internal
variables to take advantage of opportunities offered by the external environment, and its
ability to control threats posed by the same environment, determine its success.
Natural Environment
The natural environment includes geographical and ecological factors that influence the
business operations. These factors include the availability of natural resources, weather and
climatic condition, location aspect, topographical factors, etc. Business is greatly influenced
by the nature of natural environment. For example, sugar factories are set up only at those
places where sugarcane can be grown. It is always considered better to establish
manufacturing unit near the sources of input. Further, government’s policies to maintain
ecological balance, conservation of natural resources etc. put additional responsibility on the
business sector.
External Environmental factors and their features
As firms have no control over the external environment, their success depends upon how well
they adapt to the external environment. A firm's ability to design and adjust its internal
variables to take advantage of opportunities offered by the external environment, and its
ability to control threats posed by the same environment, determine its success.
Markets are changing all the time. It does depend on the type of product the business
produces, however a business needs to react or lose customers.
Environmental Analysis
Business analysis, as a discipline, has a heavy overlap with requirements analysis, but focuses
on identifying requirements in the context of helping organizations to achieve strategic goals
through internal changes to organizational capabilities, including changes to policies,
processes, and information systems. Business analysis helps an organization to improve how
it conducts its functions and activities in order to reduce overall costs, provide more efficient
use of resources, and better support customers. It introduces the notion of process orientation,
of concentrating on and rethinking end-to-end activities that create value for customers, while
removing unnecessary, non-value added work
Enterprise analysis focuses on understanding the needs of the business as a whole, its
strategic direction, and identifying initiatives that will allow a business to meet those strategic
goals.
The process of starting up and developing a business is not just an adventure, but also a real
challenge in the present dynamic environment. Ensuring easier access to funding, making
legislation clearer and more effective and developing an entrepreneurial culture and support
networks for businesses are all instrumental as far as the setting up and growth of businesses
are concerned. However, creating a favourable business environment does not mean simply
improving the growth potential of businesses. It also means turning nation into a place in
which it is advantageous to invest and work.
Developments across a range of factors will have an impact on business or industry. The
environmental analysis/scanning identify major of external and internal factors that affect the
ability of your organization to survive and prosper.
Environmental scanning is carried out with a view to (a) understand the working of the
economic system and its relationship with the business sector, (b) analyze the impact of the
changing policy regimes on business and (c) anticipate the policy changes that are likely to
occur or should occur in view of the national and international developments.
Environmental analysis/scanning is a process of gathering, analyzing, and dispensing
information for tactical or strategic purposes. The environmental scanning process entails
obtaining both factual and subjective information on the business environments in which a
company is operating or considering entering.
Most commentators feel that in today's turbulent business environment the best scanning
method available is continuous scanning because this allows the firm to act quickly, take
advantage of opportunities before competitors do and respond to environmental threats before
significant damage is done.
Environmental scanning usually refers just to the macro environment, but it can also include
industry, competitor analysis, marketing research (consumer analysis), new product
development (product innovations) or the company's internal environment.
Economy
Government
Legal
Technology
Ecology
Socio-cultural
Attitudes towards:
Potential suppliers
Labour supply
quantity of labour available
quality of labour available
stability of labour supply
wage expectations
employee turn-over rate
strikes and labour relations
educational facilities
Material suppliers
Service providers
Stakeholders
Lobbyists
Shareholders
Employees
Partners
Costumers
Creditors
Scanning these macro environmental variables for threats and opportunities requires that each
issue be rated on two dimensions. It must be rated on its potential impact on the company,
and rated on its likeliness of occurrence. Multiplying the potential impact parameter by the
likeliness of occurrence parameter gives a good indication of its importance to the firm.
Environmental analysis is a challenging, time consuming and expensive affair. The analysis
consists of four sequential steps: (i) scanning, (ii) monitoring, (iii) forecasting, and (iv)
assessment.
Scanning – Being the first step in the process of environmental analysis, scanning involves
general surveillance of all environmental factors and their interactions in order to (a)
identify early signals of possible environmental change, and (b) detect environmental
change already under way. The potentially relevant data for scanning are unlimited but are
scattered, vague, and imprecise. The fundamental challenge for analysis in scanning is,
therefore, to make sense out of vague, and imprecise. The fundamental challenge for
analysis in scanning is, to make sense out of vague, ambiguous, and unconnected data.
Monitoring – Monitoring involves tracking the environmental trends, sequences of events,
or streams of activities. It frequently involves following signals or indicators unearthed
during environmental scanning. The purpose of monitoring is to assemble sufficient data to
discern whether certain trends and patterns are emerging. Thus, as monitoring progresses,
the data turn frequently from imprecise to precise.
Forecasting – Scanning and monitoring provide a picture of what has already taken place
and what is happening strategic decision-making, however, requires a future orientation.
Naturally, forecasting is an essential element in environmental analysis.
Unlike scanning and monitoring, forecasting is well focussed is well focussed and is
much more deductive and complex activity. This is so because the focus, scope and goals
of forecasting are more specific than the earlier two of environmental analysis.
Assessment – Scanning, monitoring and forecasting are not ends in themselves. Unless
their outputs are assessed to determine implications for the organisation’s current and
potential strategies, scanning, monitoring and forecasting simply provide ‘nice-to-know’
information. Assessment involves identifying and evaluating how and why current and
projected environmental changes affect or will affect strategic management of the
organisation.
In assessment, the frame of reference moves from understanding the environment –
the focus of scanning, monitoring and forecasting – to identifying what the understanding
means for the organisation. Assessment, therefore, tries to answer questions such as what
are the key issues presented by the environment, and what are the implications of such
issues for the organisation?
Environmental analysis plays vital role in the decisions making process of an organisation.
Some of the benefits of environmental analysis are described below.
1. The very idea of the analysis makes one aware of the environment – organisation
linkage.
2. Development of broad strategies and long – term policies of the firm.
3. To foresee the impact of socio-economic changes at the national and international
levels on the firm’s stability.
4. Analysis of competitors’ strategies and formulation of effective counter-measures.
5. Environmental analysis helps an organisation to identify the present and future
opportunities and threats.
6. Environmental analysis will provide a necessary and very useful picture of the
important factors which influence the business.
7. Environmental analysis helps to understand the transformation of the industry
environment.
8. Technological forecasting will indicate some of the future opportunities and
challenges.
9. A very important benefit of environmental analysis is its contributions to
identifications of risks.
10. Environmental analysis is a prerequisite for formulation of right strategies - corporate,
business and functional.
11. Environmental monitoring helps suitable modifications of the strategies as and when
required.
12. Environmental analysis keeps the managers informed, alert, and often dynamics.
Environmental forecasting has several limitations. Some of the limitations arise from the
forecasting techniques used. Further there are also changes of certain errors affecting the
reliability of the forecasts. They are