INDIAN BUSINESS

ENVIRONMENT

Module 1

Bhavani B S
Asst. Professor
MBA Dept
RIT, Hassan
 BUSINESS
“Business is the organised efforts of enterprises
to supply consumer with goods and services
for 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 is
completely different.
According to the Davis and Blomstorm

“A business is a social institution, performing a

social mission and having broad influence on
the way people live and work together”
 Characteristics of Modern
Business
GOVT. INTERFERENCE CHANGE BIGNESS

BUSINESS
COMPETITION DIVERSIFICATION

INFORMATION SCIENCE GLOBALISATION

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 the
market.
2. Diversification
• Diversification is the process of
introducing new product line in the
market to satisfy the new customers
needs.
• Diversification may be in the form of-
(i) Concentric Diversification
(ii) Horizontal Diversification
(iii) Conglomerate Diversification
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 are
being sold through a global network.
• Globalisation is becoming imperative for modern
business due to technological innovations, information
explosion, changing life styles, global flow of capital
and technology.
4. Science
• Science is the integral part of the business.
• The development of atomic power, space
age programmes application of
mathematics in managerial decision
making are contributions being made to
business by science.
• Scientific developments will offer
attractive opportunities to alert
businessmen.
5. Information
• Today business are operating in different
places.
• Quick distribution and gathering
information is necessary to run the
business.
6. Govt. Interference
• In order to reduce inequalities of income
concentration of economic power, to
protect SSI units Govt. imposes
restrictions on business.
7. Competition
• Today market place become battle field for
all companies.
• Businessmen have to workout strategies to
compete with rivalaries to survive in the
market.
8. Bigness
• Mass production and Mass marketing are
the norms followed by business
enterprises.
• Today most companies speak about huge
investment projects.
 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 firm
are
* Survival
* Growth
* Prestige or Reputation
2. Economic Objectives
• Profit making
• Creation of customers
• Innovation
3. Human Objectives
• The success of any business is depends on its
human resources.
• It is necessary for business to look after the
interest 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
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 obligation
towards – 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
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 the
country.
* Development of small scale and cottage
industries.
* Export promotion.
* Ensuring social justice.
* Production according to national priorities.
 Business Environment
“ Business environment refers to all external forces
which have a bearing on the functioning of
business.”
“Business environment consists of all those factors
that have a bearing on the business”

INTERNAL MICRO
ENVIRONMENT BUSINESS EXTERNAL ENVRONMENT
MACRO

BUSINESS ENVIRONMENT
Business Environment
 Internal Environment
• These are controllable factors.
• Lies inside the organisation
• Under the control of the organisation.
• Internal environment factors can divided as
follows-
1. Value System
• The value system of the founders, Board of
directors, managers, workers of the organisation
has important bearing on the strategies of the
organisation.
2. Mission and Objectives
• Firms philosophies, priorities, development, polies are
guided by the mission and objectives of the
organisation
• Mission and objectives are the first steps in the
development of the organisation.
Mission Statement of the HLL
“Unilever's mission is to add Vitality to life. We meet
everyday needs for nutrition, hygiene, and personal
care with brands that help people feel good, look good
and get more out of life.”
Mission Statement of the HLL
• To become a provider of World - Class Financial
Services
• To meet Customer expectations through Innovation
and Technological Initiatives
• To emerge as a Role Model with distinct culture
identity, ethical values and Good Corporate
Governance
• To enhance Shareholder's Wealth by sustained,
profitable and financially sound growth with prudent
risk management systems
• To fulfill national and social obligations as a
responsible Corporate citizen
• To create an environment, intellectually satisfying and
professionally rewarding to the employees
3. Organisational Structure
• Organisational hierarchy where authority flows from
top to bottom.
• Some management structures and styles delay
decision making and while others facilitate quick
decision making
4. Human Resources
• The characteristics of the human resources like skill,
quality, morale, commitment, attitude, knowledge etc
could contribute to the strength and weakness of an
organisation.
• Some organisations find difficult to carryout
restructuring or modernisation because of resistance
by employees.
5.Company Reputation
• The goodwill of the company matters while raising
finance, formatting joint ventures or other alliances,
selecting marketing intermediaries, launching new
products etc.

6. Financial Factors
• Financial factors like financial policies, financial
position and capital structure etc. are affecting
corporate strategies and decisions.
 External Environment
Classified into two categories viz.

1. Micro Environment
2. Macro Environment
 Micro Environment
• The micro environment is a company’s
immediate environment and that affect the
company’s 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.
1. Suppliers
• Suppliers are those who supply the raw material and
components to the company.
• Reliable sources of supply are necessary for smooth
functioning of business.
• It is very risk to depend on a single supplier because
a 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 of
customer like individuals, households. Industries
and other institutions.
• Depending on a single customer is risky because it
may place company in poor bargaining position.
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 those
who 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, selling
and distributing the goods and services to ultimate
customers.
• Marketing intermediaries help the firm in overcoming
the discrepancies in quality , place, assortment.
5. Publics
• A public is any group that has actual or potential
interest in or impact on company’s ability to
achieve its objectives.
• It is the duty of the company to satisfy the people
at large, which is necessary for future stay and
growth.
• In order to build goodwill and seek favorable
response from the public, it is necessary for the
firm to satisfy the needs of the public as well .
 Macro Environment
• Refer to those factors which are not
concerned to the firm’s immediate
environment.
• These factors are external to the firm and
are quite uncontrollable
• The macro environment generally
consists of two factors viz..
1. Economic environment
2. Non-economic environment
 1. Economic Environment
• This comprises all those factors relating to the
economic conditions, systems, economic policies of a
country and includes structure of economy,
agriculture, industrial sectors, transportation etc
• The economic policy of the govt. has a greater impact
on business. Some business are favorably affected by
govt. policy and some are adversely affected by the
govt. policy .
• Favorable monetary policies like credit sanction,
interest rate influence the business unit.
• The fiscal policy of the govt. like tax policy has its
influence ion the pattern of business
 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 the
business environment.
• The business activities flourish when there is a stable
govt. in the economy on the other hand if the Govt. is
unstable and doubtful, it will demoralise the business
and may adversely effect on its performance.
• Certain changes in the Govt. policies like industrial
policy, fiscal policy may have profound impact on
business
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 consumption
habit of the people, customs and traditions, tastes and
preferences, languages etc. are the factors that affect
the 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 should
be happen to the earnings? Can be decided by legal
rules and regulations.
• 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 the
business activities.
• It is stated that difference in geographical conditions
may call for changes in production, marketing
activities in the economy.
• The ecological factors like depletion of natural
resources, environmental pollution have cost grater
concern to the business field, so that preservation of
physical environment is becoming important factor of
management of modern business.
e) Demography

• Study of the population in terms of age, sex, size of the

population, family size, and occupation is known as
demography.
• Rapidly increasing population indicates a growing
demand for many products.
• Increasing population also indicates that availability
of surplus labour which affects the wage rates.
f) Technological Environment.
• Technology is a systematic application of
scientific knowledge to practical task.
• The business prospects largely depend upon the
technological aspects in connection with production and
marketing of products.
• The changes in technology also create problem for business
enterprises as they are subject to obsolescence quickly

G) 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
 Environmental Analysis
“Process of collecting information about the
forces in the business environment and
assessing, interpreting the information to take
effective managerial decision”
• It Includes SWOT analysis
S - Strengths
W - Weaknesses
O - Opportunities
T - Threats
S+W= Internal environment analysis
O+T+ External environment analysis
 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 the
national and international levels.
• Analysis of competitors strategies and formulation of
effective counter measures.
• So it is said that
“ firms which systematically analyse and diagnose the
environment are more effective than those which
don’t”
 Process of Environmental Analysis
1. Identification of relevant environmental variables
• All environmental variables do not have the same
relevance 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 environmental
variables and to predict their future trends.
2. Collection of Information
• Involves identification of sources of information,
determination of the types of information to be
collected, selection of methods of data collection etc.
3. Forecasting
• Decision making requires a future orientation.
• Forecasting is concerned with developing projections
of the direction, scope and intensity of environmental
change.
4. Monitoring
• The characteristics of the variables or their trends may
undergo changes.
• New variables may emerge as critical or the relevance
of certain variables may decline.
• It is necessary to monitor such changes.
• Some time it is necessary to re-collection of
information and re-forecasting
 Business Planning
Formulation of Evaluation
Mission and and
Objectives Control

SWOT Implementation
Analysis

Identifying
strategic
alternatives
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 company’s business be?
 What will the company's business be?
• Objectives help define the organization in its
environment
2. SWOT Analysis
• Analysis of company’s Strengths, weaknesses,
opportunities, and threats is known as SWOT
analysis.
• It is a cornerstone of business planning
• It is determining the course of action to ensure the
survival and growth of the firm.
• The environmental opportunities and threats should
be evaluated in the light of the strengths and
weaknesses of the internal factors.
3. Strategic alternatives and choice of strategy
• After the SWOT analysis the next task in the business
planning process is consideration of strategic and the
choice 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.
4. Implementation
• Many good strategies fail to achieve the results
because of poor implementation.
• It is necessary to formulate a detailed plan to achieve
the objectives by means of chosen strategy
5. Control
• After implementation company has to measure the
performance of the strategies and it should compare
actual performance of the strategies with standard
performance.
• If there is any deviation, it should take corrective
actions to correct it.
 How company logos will look like
when the crisis is finally over
•