Business Environment

Topics: Strategic management, Management, Environment Pages: 5 (1075 words) Published: February 1, 2013
Unit 1 : Introduction to Business Environment
* The concept of Business Environment
* Significance of Business Environment
* Impact of Environment on Business and Strategic Decisions. Business : Meaning, Characteristics & objectives
* Business refers to the buying or selling of goods or services or the activity of making money by producing and selling goods, or providing services. * Modern business ,spans a vast and complex field of activity involving industry, trade and commerce as they relate to production, distribution and exchange of goods and services. * According to F.C Hooper “ Business means the whole complex field of commerce and industry, the basic industries, processing and manufacturing industries and the network of services which service and inter – penetrate the world of business as a whole”. * Business has certain characteristic :

1. Elements of Enterprise
2. Dealing in exchange of Goods and services
3. Profit Motive
4. Element of risk and Uncertainty
5. Economic Activities related to production and Distribution
6. Element of creation of utilities
7. Element of continuity of Transaction
Characteristics of Modern Business

Environment * Environment refers to all external forces which have a bearing on the functioning of business. ”Environment are largely if not totally external, and beyond the control of individual industrial enterprises and their management. These are essentially the givers within which firms and their managements must operate in a specific country and they vary, from country to country”. * However, the term business environment refers to the External Factors. The external environment has two components ie business opportunities and threats to business. * Simmilarly, the organisational environment has two components ie. strengths and weaknesses of the organisation. A SWOT analysis is thus the first step in strategy formulation

Factors influencing Business Decision

Business Decision
Internal Environment
External Environment

Internal Environment
Mission / Objectives
Management Structure
Internal Power Relationship
Physical Assets & facilities

Company image
Human resources
Financial Capabilities
Technological Capabilities
Marketing Capabilities

Mktg Intermediaries
Micro Environment

Macro Environment


* Internal Environment: Any business has certain vision, mission and objectives and a strategy to achieve them. Formulation of strategy is defined as establishing a proper firm-environment fit. Indeed the objectives should be based on an assessment of the external environment and the organizational factors (internal environment). * The Micro environment consists of different types of stakeholders - customers, employees, suppliers, marketing intermediaries, competitors. It is also known as the Task Environment and Operating Environment and has a direct bearing on the operations of the firm. Changes in the micro environment will directly affect and impinge on the firm's activities. * The Macro Economics : it consist of the factors which are beyond the control of the business.

Process of Environmental Analysis
The analysis consists of four steps:

* Scanning : Detect early signals of possible environmental change and detect environmental change already underway. * Monitoring : Purpose of monitoring is to assemble sufficient data to discern whether certain trends are emerging, identification of the trends and identification of areas for further scanning. * Forecasting : It is concerned with developing projections of the direction, scope and intensity of environmental change. * Assessment : To determine...
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