INDIAN BUSINESS

ENVIRONMENT
 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 EXTERNAL ENVRONMENT
BUSINESS

MACRO

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.