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INDIAN BUSINESS
ENVIRONMENT
Module 1
Bhavani B S
Asst. Professor
MBA Dept
RIT, Hassan
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BUSINESS
Business is the organised efforts of enterprisesto supply consumer with goods and servicesfor a profit
Business refer to any commercial activity which
is aimed at making profit These two definitions make a fundamental
assumption that profit maximization is the
basic objective of every firm This concept was very old
The modern outlook of the business iscompletely different.
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According to the Davis and Blomstorm
A business is a social institution, performing asocial mission and having broad influence onthe way people live and work together
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Characteristics of Modern
BusinessGOVT. INTERFERENCE
COMPETITION
INFORMATION
BIGNESSCHANGE
SCIENCE
DIVERSIFICATION
GLOBALISATION
BUSINESS
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1. CHANGE
Modern Business is Dynamic.
Business has to change according to the
environmental changes. This change makes the companies spend
substantially on R&D to survive in themarket.
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2. Diversification
Diversification is the process ofintroducing new product line in the
market to satisfy the new customersneeds.
Diversification may be in the form of-
(i) Concentric Diversification
(ii) Horizontal Diversification
(iii) Conglomerate Diversification
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3. Globalisation
Moving beyond the political boundaries of the
country is known as Globalisation
Globalisation is a borderless world where there is free
exchange of money, business , labour etc. In the modern business world production facilities are
being set-up in different countries and products arebeing sold through a global network.
Globalisation is becoming imperative for modernbusiness due to technological innovations, informationexplosion, changing life styles, global flow of capitaland technology.
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4. Science
Science is the integral part of the business.
The development of atomic power, space
age programmes application ofmathematics in managerial decisionmaking are contributions being made tobusiness by science.
Scientific developments will offerattractive opportunities to alertbusinessmen.
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5. Information
Today business are operating in differentplaces.
Quick distribution and gatheringinformation is necessary to run thebusiness.
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6. Govt. Interference
In order to reduce inequalities of incomeconcentration of economic power, to
protect SSI units Govt. imposesrestrictions on business.
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7. Competition
Today market place become battle field forall companies.
B
usinessmen have to workout strategies tocompete with rivalaries to survive in themarket.
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8. Bigness
Mass production and Mass marketing arethe norms followed by business
enterprises. Today most companies speak about hugeinvestment projects.
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Objectives of Business
1. Organic Objectives Just like human being business is an organic
entity. It has its own introduction, growth,maturity and declining stages.
The organic objectives of a business firmare
* Survival
* Growth* Prestige or Reputation
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2. Economic Objectives Profit making Creation of customers Innovation3. Human Objectives The success of any business is depends on its
human resources.
It is necessary for business to look after theinterest of those who make business successful.
Human objectives include-
* Providing job satisfaction* Providing opportunity for workers
participation in management.* Providing good working condition
* Providing fair wages
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4. Social Objectives
Business is a social institution and it is a part
of the society. The economic objectives of business can be
realised only by social objectives.
Each and every business has its obligationtowards customers, investors, supplies,govt. and general public.
The social objectives of business are* Quality goods at fair prices
* Providing employment opportunities
*avoiding anti-social practices
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5. National Objectives
These are the specific business obligations
towards national needs and aspirations. In India business organisations have to fulfill
the following obligation-
* Contributing to economic growth of thecountry.
* Development of small scale and cottage
industries.
* Export promotion.
* Ensuring social justice.
* Production according to national priorities.
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Business Environment Business environment refers to all external forces
which have a bearing on the functioning ofbusiness.
Business environment consists of all those factorsthat have a bearing on the business
MICRO
EXTERNAL ENVRONMENT
MACRO
INTERNAL
ENVIRONMENTBUSINESS
BUSINESS ENVIRONMENT
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Business Environment
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Internal Environment
These are controllable factors.
Lies inside the organisation
Under the control of the organisation.
Internal environment factors can divided asfollows-
1. Value System The value system of the founders, Board of
directors, managers, workers of the organisationhas important bearing on the strategies of theorganisation.
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2. Mission and Objectives Firms philosophies, priorities, development, polies are
guided by the mission and objectives of theorganisation
Mission and objectives are the first steps in thedevelopment of the organisation.
Mission Statement of the HLL
Unilever's mission is to add Vitality to life. We meeteveryday needs for nutrition, hygiene, and personalcare with brands that help people feel good, look goodand get more out of life.
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Mission Statement of the HLL
To become a provider of World - Class FinancialServices
To meet Customer expectations through Innovationand Technological Initiatives
To emerge as a Role Model with distinct cultureidentity, ethical values and Good Corporate
Governance To enhance Shareholder's Wealth by sustained,
profitable and financially sound growth with prudentrisk management systems
To fulfill national and social obligations as aresponsible Corporate citizen
To create an environment, intellectually satisfying andprofessionally rewarding to the employees
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3. Organisational Structure Organisational hierarchy where authority flows from
top to bottom. Some management structures and styles delaydecision making and while others facilitate quickdecision making
4. Human Resources The characteristics of the human resources like skill,
quality, morale, commitment, attitude, knowledge etccould contribute to the strength and weakness of anorganisation.
Some organisations find difficult to carryoutrestructuring or modernisation because of resistance
by employees.
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5.Company Reputation
The goodwill of the company matters while raisingfinance, formatting joint ventures or other alliances,selecting marketing intermediaries, launching newproducts etc.
6. Financial Factors Financial factors like financial policies, financial
position and capital structure etc. are affectingcorporate strategies and decisions.
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External Environment
Classified into two categories viz.
1. Micro Environment2. Macro Environment
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Micro Environment
The micro environment is a companysimmediate environment and that affect thecompanys ability to produce goods and
services and serve consumers. Known as task environment or operating
environment
Include suppliers, marketing intermediaries,
competitors, customers and the publics.
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1. Suppliers Suppliers are those who supply the raw material and
components to the company.
Reliable sources of supply are necessary for smoothfunctioning of business.
It is very risk to depend on a single supplier becausea strike, lockout or any other production problem
with supplies may seriously affect the company.
2. Customers A business exits only because of its customers.
A
company may have different categories ofcustomer like individuals, households. Industriesand other institutions.
Depending on a single customer is risky because it
may place company in poor bargaining position.
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3. Competitors In general competitors are those who sell the goods
and services of the same and similar products in the
same market. A firms competitors include not only the other firms
which are marketing same products but also thosewho compete for the discretionary income of the
consumer.4. Marketing Intermediaries Every producer has to appoint a number of
intermediaries in assisting him in promoting, sellingand distributing the goods and services to ultimatecustomers.
Marketing intermediaries help the firm in overcomingthe discrepancies in quality , place, assortment.
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5. Publics
A public is any group that has actual or potentialinterest in or impact on companys ability toachieve its objectives.
It is the duty of the company to satisfy the peopleat large, which is necessary for future stay andgrowth.
In order to build goodwill and seek favorable
response from the public, it is necessary for thefirm to satisfy the needs of the public as well.
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Macro Environment
Refer to those factors which are notconcerned to the firms immediateenvironment.
These factors are external to the firm andare quite uncontrollable
The macro environment generally
consists of two factors viz..1. Economic environment2. Non-economic environment
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1. Economic Environment
This comprises all those factors relating to the
economic conditions, systems, economic policies of acountry and includes structure of economy,agriculture, industrial sectors, transportation etc
The economic policy of the govt. has a greater impacton business. Some business are favorably affected bygovt. policy and some are adversely affected by thegovt. policy .
Favorable monetary policies like credit sanction,interest rate influence the business unit.
The fiscal policy of the govt. like tax policy has itsinfluence ion the pattern of business
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2. Non-Economic Environment
Non-economic factors consists of following factors
a) Political Environment The nature of policies and the type of the govt. in
economy have considerable influence over thebusiness environment.
The business activities flourish when there is a stablegovt. in the economy on the other hand if the Govt. is
unstable and doubtful, it will demoralise the businessand may adversely effect on its performance.
Certain changes in the Govt. policies like industrialpolicy, fiscal policy may have profound impact on
business
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b) Education and Cultural Environment The attitude towards education and training helps
business and industry to avail services of efficient,trained and labour.
The cultural factors like buying and consumptionhabit of the people, customs and traditions, tastes and
preferences, languages etc. are the factors that affectthe strategy of the business.
c) Legal Environment The vital aspect like of business like who should own?
What should be the size of business? And what shouldbe happen to the earnings? Can be decided by legalrules and regulations.
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Threre are number of legislations formed by the Govt.to regulate the business.
It is said that the stable Govt will protect the business
by formulating effective legislation .d) Natural Environment The natural factors like weather climate, availability of
land, forest resources etc. have influence on thebusiness activities.
It is stated that difference in geographical conditionsmay call for changes in production, marketingactivities in the economy.
The ecological factors like depletion of naturalresources, environmental pollution have cost graterconcern to the business field, so that preservation ofphysical environment is becoming important factor of
management of modern business.
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e) Demography
Study of the population in terms of age, sex, size of thepopulation, family size, and occupation is known asdemography.
Rapidly increasing population indicates a growing
demand for many products. Increasing population also indicates that availability of
surplus labour which affects the wage rates.
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f) Technological Environment. Technology is a systematic application of
scientific knowledge to practical task.
The business prospects largely depend upon thetechnological aspects in connection with production andmarketing of products.
The changes in technology also create problem for
business enterprises as they are subject to obsolescencequicklyG) International Environment
It refers to those global factors which have impact on
business and economy. It is important for industries which are directly
depending on imports and exports.
Export market enables a firm to develop more profitable
product mix
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Environmental AnalysisProcess of collecting information about theforces in the business environment andassessing, interpreting the information to takeeffective managerial decision
It Includes SWOT analysisS - Strengths
W - Weaknesses
O - OpportunitiesT - Threats
S+W= Internal environment analysis
O+T+ External environment analysis
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Objectives and uses of E.A Development of broad strategies and long-term
policies of the firm. Development of action plans to deal with
technological advancements.
To forsee the impact of socio-economic changes at thenational and international levels.
Analysis of competitors strategies and formulation ofeffective counter measures.
So it is said that firms which systematically analyse and diagnose the
environment are more effective than those whichdont
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Process of Environmental Analysis
1. Identification of relevant environmental variables
All environmental variables do not have the samerelevance to all the industries.
A variable that is relevant to one industry may not
be relevant for another. It is essential to identify the critical environmentalvariables and to predict their future trends.
2. Collection of Information
Involves identification of sources of information,determination of the types of information to becollected, selection of methods of data collection etc.
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1. Formulation of Mission and Objectives To formulate the clear objectives, it is essential to
get answers to certain questions like
What is the company is in?
What should the companys business be?
What will the company's business be?
Objectives help define the organization in itsenvironment
2. SWOT Analysis
Analysis of companys Strengths, weaknesses,opportunities, and threats is known as SWOTanalysis.
It is a cornerstone of business planning
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It is determining the course of action to ensure thesurvival and growth of the firm.
The environmental opportunities and threats shouldbe evaluated in the light of the strengths andweaknesses of the internal factors.
3. Strategic alternatives and choice of strategy
After the SWOT analysis the next task in the businessplanning process is consideration of strategic and thechoice of the most appropriate strategy
Available alternatives are,
Should the company continue in the same business.
Should the company diversify its business.
Should it integrate with others.
Should it acquire other units in the industry.
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How company logos will look like
when the crisis is finally over
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