Group members:

1) Nishat Shaikh 116

2) Ajit Ishi 99

3) Maya Sapakal 82

4) Komal Singh 71

5) Santosh jaiswar 119

 INTRODUCTION
An environment can be defined as anything which surrounds a
system. Therefore, the business environment is anything which
surrounds the business organization. It affects the decisions, strategies,
processes and performance of the business. The micro environment
consists of different types of stakeholders - customers, employees,
suppliers, board of directors and creditors. The macro environment
consists of factors which are beyond the control of the business (STEP) -
Social, Technological, Economical and Political.

Changes in the micro environment will directly affect and impinge

on the firm's activities. Changes in the macro environment will indirectly
affect the business but will nonetheless affect it. For example, a change
in legislation such as the smoking ban indirectly affects pubs and
restaurants.

Business is defined as buying and selling activity to generate

income. It consists of several inter-related and interacted elements. It is a
economic and social of the society and must achieve its economic goal.
Society being an integral part of the business, its interest cannot be
ignored.

Business environment means the surrounding situation within

which Business organization has to function. Political, economic, social
legal forces revolve around the Business organizations. It is multi
dimensional with different frequency and intensity. Environment is
complicated in nature and business environment should understand it.
 Definitions
1) According to B. O. Wheeler
“Business Environment is the total of all the things
external to firms and individuals which affect the organizations and
operations.”
2) According to Keith Davis
“Environment of the business means the aggregate
of all conditions, events and influences that surround and affect it.”
3) According to J. Kriz & C. Duggan
“Business Environment consists of all external and
internal factors that influence the complex interaction of the market,
production and finance, the three basic components of our business
world.”
4) According to Oxford English Dictionary
“Business Environment refers to those aspects of
the surroundings of a business enterprise which influence or effect its
operations and determine its effectiveness.”
5) According to Arthur W. Weimer
“The Business Environment is the climate or set of
conditions, economic, social, political or institutional in which business
activities are conducted.”
Components of Business Environment
A manager must follow a change in his or her structure, strategy
and policies in response to the changing environmental forces. Thus, a
business firm exists in two level of business environment.

1) Internal Environment
2) External Environment

Internal Environment
The internal environment or business components are surrounded
by industry level environment and the industry level business
environment is surrounded by general level business environment.

Internal business environment comprises internal structure, system,

culture, staff, and resources of the organization. This is sometimes
identified into the internal functional areas such as marketing-
distribution, finance accounting, human resources, production-operation,
and research-development. All these business environment components
are controllable.

The management system can be conceptualized on two levels. The

first level involves the organization's internal environment. Internally, an
organization can be viewed as a resource conversion machine that takes
inputs (labor, money, materials and equipment) from the external
environment (i.e., the outside world), converts them into useful products,
goods, and services, and makes them available to customers as outputs.
External Environment
There are two types of External Environment

1) Micro Environment
2) Macro Environment

 Micro Environmental Factors

This is the environment that an organization can influence. It may
not be able to correct all flaws in the microenvironment, but it has a
much better control over it than the macro environment. The micro
environment consists of eight larger parts.

• Customers

Organizations survive on the basis of meeting the needs, wants and

providing benefits for their customers. Failure to do so will result in a
failed business strategy. Another important goal of the company is to
keep the consumers happy. Today, competition is so large that for every
product, there are ten of the same, but different brands. Organizations
recognize that it is in their own interest to keep consumers happy.

• Employees

Employing the correct staff and keeping these staff motivated is an

essential part of the strategic planning process of an organization.
Training and development plays an essential role particular in service
sector marketing in-order to gain a competitive edge. This is clearly
apparent in the airline industry. Organizations have to find the right
people for each job. This means finding some highly specialized people
and generally trained workers. Organizations are limited by their money
supply and the constraints of the general workforce.
 • Suppliers

Increase in raw material prices will have a knock on affect on the

marketing mix strategy of an organization. Prices may be forced up as a
result. Closer supplier relationships are one way of ensuring competitive
and quality products for an organization.

• Shareholders

As organization requires greater inward investment for growth they

face increasing pressure to move from private ownership to public.
However this movement unleashes the forces of shareholder pressure on
the strategy of organizations. Satisfying shareholder needs may result in
a change in tactics employed by an organization. Many internet
companies who share prices rocketed in 1999 and early 2000 have seen
the share price tumble as they face pressures from shareholders to turn in
a profit.

• Media

Positive or adverse media attention on an organizations product or

service can in some cases make or break an organization. Consumer
programmers with a wider and more direct audience can also have a
very powerful and positive impact, forcing organizations to change their
tactics.

• Competitors

The name of the game in marketing is differentiation. What benefit

can the organization offer which is better than their competitors. Can
they sustain this differentiation over a period of time from their
competitors? Competitor analysis and monitoring is crucial if an
organization is to maintain its position within the market.
 • Financial organizations

Their effect is possibly the most visible. For example, the

exchange rate difference between two banks could mean millions of
extra loss or profit. Their guarantee may be needed for large projects,
but aside all that, the most important thing is that they insure
functionality day to day.

• The Government

Governments may have a direct or indirect effect. They may

subsidize, giving money directly to the organizations. They can also give
extra tax-refunds or they may punish unlawful behavior.
  Macro Environment
Changes in the wider macro-environment may not be as close to
the marketing firm’s day-to-day operations, but they are just as
important. The main factors making up these wider macro-
environmental forces fall into seven groups.

Political, Economic, Social, Technological, Natural, International

and Legal Environments

1) The Political Environment includes all laws, government

agencies, and lobbying groups that influence or restrict individuals
or organizations in the society.

Business decisions are greatly influenced by the developments in

the political environment. This environment consists of government
agencies, political parties and pressure groups the influence and controls
various individuals and organizations in a society. A change in the
government brings about a change in attitude preferences, objectives and
priorities. Business firms need to keep a track of all political events,
anticipate changes in government policies and frame production and
marketing strategies accordingly.

The political environment in which the firm operates (or plan to

operate) will have a significant impact on a company's international
marketing activities. The greater the level of involvement in a foreign
markets, the greater the need to monitor the political climate of the
countries business is conducted. Changes in government often result in
changes in policy and attitudes towards foreign business.
 Bearing in mind that a foreign company operates in a host country
at the discretion of the government concerned, the government can either
encourage foreign activities by offering attractive opportunities for
investment and trade, or discourage its activities by imposing restrictions
such as import quotas, etc. An exporter that is continuously aware of
shifts in government attitude will be able to adapt export marketing
strategies accordingly.

Nearly all governments today play active roles in their countries'

economies. Although evident to a greater or lesser extent in most
countries, government ownership of economic activities is still prevalent
in the former centrally planned economies, as well as in certain
developing countries which lack a sufficiently well developed private
sector to support a free market system. Of primary concern to an
exporter should be the stability of the target country's political
environment. A loss of confidence in this respect could lead to a
company having to reduce its operations in the market or to withdraw
from the market altogether. One of the surest indicators of political
instability is a frequent change in regime. Although a change in
government need not be accompanied by violence, it often heralds a
change in policy towards business, particularly international business.
Such a development could impact harshly on a firm’s long-term
international marketing programme.
 2) The Economic Environment consists of all factors-such as salary
levels, credit trends, and pricing patterns- that affect consumer
spending habits and purchasing power.
Economic environment is a sum total of the overall economic
conditions, the economic policies of the government and the economic
system operating in the country. The policies of the government and the
economic system are operating in the country. The government through
its economic policies relating to fiscal, monetary, import-export, taxation
industrial licensing, etc. provides a framework of economic environment
to all business enterprises. Any change in the economic policies and
situation is bound to have a positive or negative effect on the working of
business firm. That is why a businessman is expected to keep a constant
watch on the changes in economic environment, so as to adjust its
resources accordingly.
Economic factors are of concern to marketing firms because they
are likely to influence, among other things, demand, costs, prices and
profits. These economic factors are largely outside the control of the
individual firm, but their effects on individual enterprises can be
profound. Political and economic forces are often strongly related. A
much quoted example in this context is the ‘oil crisis’ caused by the
Middle East War in 1973 which produced economic shock waves
throughout the Western world, resulting in dramatically increased crude
oil prices. This, in turn increased energy costs as well as the cost of
many oil-based raw materials such as plastics and synthetic fibers. This
contributed significantly to a world economic recession, and it all serves
to demonstrate how dramatic economic change can upset the traditional
structures and balances in the world business environment.

As can be seen, changes in world economic forces are potentially

highly significant to marketing firms, particularly those engaged in
international marketing. However, an understanding of economic
changes and forces in the domestic economy is also of vital importance
as such forces have the most immediate impact.
One such factor is a high level of unemployment, which decreases
the effective demand for many luxury consumer goods, adversely
affecting the demand for the industrial machinery required to produce
such goods. Other domestic economic variables are the rate of inflation
and the level of domestic interest rates, which affect the potential return
from new investments and can inhibit the adoption and diffusion of new
technologies. In addition to these more indirect factors, competitive
firms can also pose a threat to the marketing company so their activities
should be closely monitored.
It is therefore vital that marketing firms continually monitor the
economic environment at both domestic and world levels. Economic
changes pose a set of opportunities and threats, and by understanding
and carefully monitoring the economic environment, firms should be in
a position to guard against potential threats and to capitalize on
opportunities.
 3) The Social Environment includes institutions and other forces
that affect the basic values, behaviors, and preferences of the
society-all of which have an effect on consumer marketing
decisions.
Social environment includes customs traditions, tastes and
preferences buying and consumption habits of various social groups of
the society. The social environment reflects the expectation of different
groups operating in the society. Each group has some expectation from
business firms. Consumers want quality goods at reasonable price,
investors expect a higher rate of dividend and employees expect a better
deal from employers. The social environment changes gradually but
continuously. These changes are due to spread of general awareness,
growth of science and technology. Then changes in social environment
could be seen in the form of change in life style, social, values, increased
income, spending habits, social awareness, etc.
Culture may be defined as a sum total of knowledge, belief, art,
morals, laws, customs and other capabilities and habits acquired by
individuals and groups as elements of society. Culture frames the
attitude of individuals towards life and society. In short, both social and
culture environment has short and long term effect on the working of a
business enterprise.
This is perhaps the most difficult element of the macro-
environment to evaluate, manifesting itself in changing tastes,
purchasing behavior and changing priorities. The type of goods and
services demanded by consumers is a function of their social
conditioning and their consequent attitudes and beliefs.
 Core cultural values are those firmly established within a society
and are therefore difficult to change. They are perpetuated through
family, the church, education and the institutions of society and act as
relatively fixed parameters within which marketing firms are forced to
operate. Secondary cultural values, however, tend to be less strong and
therefore more likely to undergo change. Generally, social change is
preceded by changes over time in a society’s secondary cultural values,
for example the change in social attitude towards credit. As recently as
the 1960s, personal credit, or hire purchase as is sometimes known, was
generally frowned upon and people having such arrangements tended
not to discuss it in public. Today, offering instant credit has become an
integral part of marketing, with many of us regularly using credit cards
and store accounts. Indeed, for many people it is often the availability
and terms of credit offered that are major factors in deciding to purchase
a particular product.
Marketing firms have also had to respond to changes in attitude
towards health, for example, in the food industry people are now
questioning the desirability of including artificial preservatives,
colourings and other chemicals in the food they eat. The decline in the
popularity of smoking is a classic example of how changes in social
attitudes have posed a significant threat to an industry, forcing tobacco
manufacturers to diversify out of tobacco products and into new areas of
growth.
 4) The Technological Environment consists of those forces that
affect the technology and which can create new products, new
markets, and new marketing opportunities.

Technology is a major macro-environmental variable which has

influenced the development of many of the products we take for granted
today, for example, television, calculators, video recorders and desk-top
computers. Marketing firms themselves play a part in technological
progress, many having their own research department or sponsoring
research through universities and other institutions, thus playing a part in
innovating new developments and new applications.

One example of how technological change has affected marketing

activities is in the development of electronic point of sale (EPOS) data
capture at the retail level. The ‘laser checkout’ reads a bar code on the
product being purchased and stores information that is used to analyze
sales and re-order stock, as well as giving customers a printed readout of
what they have purchased and the price charged. Manufacturers of fast-
moving consumer goods, particularly packaged grocery products, have
been forced to respond to these technological innovations by
incorporating bar codes on their product labels or packaging. In this
way, a change in the technological environment has affected the
products and services that firms produce and the way in which firms
carry out their business operations.
 5) The Natural Environment involves all the natural resources, such
as raw materials or energy sources, needed by or affected by
marketers and marketing activities.

Natural or physical environment consists of natural resources like

land, water, minerals, climatic conditions, rainfall and all other natural
resources found on the surface of the earth. The natural resources are
available in limited quantities at selected places. For example, oil
deposits are found in selected countries like Saudi Arabia, Iran, Iraq, etc.
So, a study of natural environment is useful in deciding the locations of
business. The availability of raw materials and the nature of area like
climate, plain, hilly, earthquake factors has many socio-economic
problems i.e. overcrowding in cities, increase in pollution, growth of
slums, etc. several legal and other measures like minimum use of natural
resources, reuse of waste products, use of pollution control devices, etc.
have been prescribed to maintain ecological balance. It means, business
enterprise should consider all aspect of ecological environment and
adjust their business activities accordingly.
 6) The International Environment have been established over the
years to address these negative trade patterns and in many respects
they have influenced much of the thinking on and practice of world
trade.

The International Environment of business comprises of a

country’s foreign policy, international agreements, import-export policy,
monetary policies, etc. other factors like war, civil disturbances, political
instability, etc. Business units engaged in import or export trade or
domestic units using imported raw materials, technology or machinery
are affected more by a minor change in international environment.
Further, business units engaged in export marketing are influenced by
depression or boom in international market. Business units particularly
connected with import-export should continuously monitor the
international environment.
 7) The Legal Environment is derived partly from the political
climate in a country and has three distinct dimensions to it:

1) The domestic laws of your home country

2) The domestic laws of each of your foreign markets

3) International law in general

The Legal environment means those laws, rules, regulations and
procedural formalities prescribed by the government to control the
planning and functioning of business activities. The objectives of
regulatory environment is to prevent exploitation of consumers,
employees and investors, to ensure better utilization of natural resources,
to control environment pollution and finally preserve the ecological
balance. Legal environment is also useful to protect firms by preventing
unfair competition.
To many companies, domestic political considerations are likely to
be of prime concern. However, firms involved in international
operations are faced with the additional dimension of international
political developments. Many firms export and may have joint ventures
or subsidiary companies abroad. In many countries, particularly those in
the so-called ‘Third World’ or more latterly termed ‘Developing
Nations’, the domestic political and economic situation is usually less
stable than in the UK. Marketing firms operating in such volatile
conditions clearly have to monitor the local political situation very
carefully.
Many of the legal, economic and social developments, in our own
society and in others, are the direct result of political decisions put into
practice, for example the privatization of state industries or the control
of inflation.

METHODOLOGY
Indicative Content and Weighting

 The Organization (15%)

 The Micro Environment (30%)
 The Macro Environment (45%)
 The Global Environment (10%)

The Organization (15%)

 Recognition of various private, voluntary and public
sector organizations their legal status and characteristics.

Appreciation of different organizational objectives

and understanding of how the goals and nature of
organizations can do change

Stakeholders and the concept of social responsibility

Factors influencing the size of organizations and the

structure they adopt and their responsiveness to
environmental change.

How organizations operate and develop different

internal structures and the role of marketing within these
structures.

The Micro Environment (30%)

A broad appreciation of the micro environment within

which the firm operates

The role and functions of intermediaries and

suppliers the growing importance of relationship
marketing.
 How the size of organizations and industrial structure
of the sector influences the nature of competitive activity
and the need for models to predict competitive behavior.

Structural analysis and market power within the

microenvironment and how it affects the organization.

Recognition of the variety of 'publics' interested in

the organization and their potential impact, particularly
groups like consumerists and environmentalists.

Appreciation of the role of marketing and internal

marketing in communicating with these publics

An understanding of the legal relationships and

obligations between members of the microenvironment
including contracts, sale of goods, agency, fair-trading
and consumer/employee protection

The Macro Environment (45%)

The critical importance of an organization’s

understanding and monitoring its changing macro (and
micro) environment
 The nature of the environment, environmental
influences, the environmental set, scenarios, threats and
opportunities

An appreciation of the key social, legal,

demographic, economic, political, natural and technical
environment changes within them and how these have
affected and can affect different organizations

Awareness of the main sources of data on macro

environment and an understanding of how they should be
interpreted and monitored by an organization

The Global Environment (10%)

The basis for international trade, multinational

investment and sources of turbulence, the particular
differences and challenges involved when an
Organization operates in more than one national market.

Differences in both micro and macro environments

and how business organizes itself to bridge the
international gap

International institutions and trade blocks

Legal and political limitations influencing the

development of global operation

Sources of information on international markets

 Pepsi’s plan to control local
bottling unit gets govt nod
New Delhi, January 2, 08.

CASE

THE GOVERNMENT on Friday cleared the way for $50-million foreign direct
investment (FDI) from PepsiCo, by exempting the beverages major from
fulfilling the requirement to divest 49 % stake in bottling firms to Indian
companies.

The decision was taken by the cabinet committee on Economic Affairs

(CCEA).

Since a guideline for food processing sector now allows 100 % (FDI), said
KAPIL SIBAL,(science and technology minister). “When PepsiCo India Holding
private Ltd first invested in India, guidelines for invested were different. The
guidelines have changed now.”

The CCEA has decided to delete the previous requirement, a decision

that would result in FDI inflow of $ 50 million into the country.

A PepsiCo in India Holding spokesperson refused to comment on the

decision on the ground, saying he wasn’t aware of the details of the CCEA
decision.

When PepsiCo holding came to India in 1997, it was asked to

mandatorily disinvest 49 % of enquiry in its Indian bottling arms to domestic
companies in 5 years.
 PepsiCo case for waiver from the divestment requirement was heard by
the foreign investment promotion board (FIPB) for the third time in October
last year. It had subsequently referred the case to the CCEA.

PepsiCo India holding has 100 % stake in Aradhana soft Drinks

Company and the deadline for divesting stake expired in 2007.

The decision would enable PepsiCo to bring in much-needed FDI into the
country, as the economy faces a dearth of capital.

THIS CASE IS UNDER ECONOMIC ENVIRONMENT.

` Submitted by Maya Sapakal (82)l

Jindal stainless buys chrome ore
assets in middle east,Europe.

The article mainly concerns with the future plansand

expansion plans of jindal stainless business all over the
globe. The jindal stainless is presently the largest
stainless steel maker in india .

The company is introducing new technologies to control

the input cost.The mines would meet the internal chrome
ore reqirement that will serve the demand of asia,Europe
and America markets. Currenty further process of global
expansion they have decided to delay the 8 lakh ton
stainless steel project in Orissa by a year. Now the plan
would get commissioned in 2011-2012.the company has
also joined hands with Indonesians mining major pt
antantot develop a nickel melting stainless steel plant in
Indonesia .

The main environmental factors that are affecting the jindal stainless business
in the article are mainly International environment along with
Technological environment involved in it.

Submitted by Komal Singh (71)

DARJEELING TEA ESTATES TO GET AEZ STATUS.

The article mainly concern about the Darjeeling tea estate to seek
Govt.incentives for agri. Export zone (AEz) status to enhance export
revenue and improve productivity. This will help them to find a way into
export market during the time of global meltdown.

North America, USA, Japan, generally prefer and demand the

muscatel flavor of 2nd flush Tea whereas European countries go for the
1st flush.

The Tea board of India, Bengal Industries Development

corporation will declare Darjeeling Tea region as an AEz will sign the
MoU (memorandom of understanding) by the end of Jan. a committee
will be formed who will be responsible for implementing the AEZ
scheme. During the time of Financial crises, AEZ will help Darjeeling
Tea Industry.

Agricultural Processed Food Products Export Development

Authority (APEDA) will help AEZ to setup in Darjeeling with
Rs.212.65

EFFECTS: The main environment Factor that affects the Darjeeling

Tea Estate is Economic Environment and International
Environment.
Bajaj slips to 3rd position in 2Wheeler market in
November
The bajaj is one of the best 2 wheeler brand, it lost its top position
in 2001. It has further slip to the 3rd position in terms of monthly
Domestic sales.

It only Managed to sale 82,919 units in nov. the main reason for
the Decrease in its sales is the competition and customers.The various
Competitors like Honda motor cycle, HMSI, TVS etc. have brought
various new models or bikes or scootees and manufacturing them
according to the wants of the customers.

Honda was elected particularly as both its two wheelers companies

is hero Honda and fully owned HMSI rule the market.

EFFECTS: The main factors that are affecting the business is the
External Factors like competitors and customers.

Submitted by Ajit Ishi (99)

Regional UK media roots for JLR bailout:
The Article gives information about the highly talked acquisition of
the Jaguar landrover deal b y the Indian giant “TATA” from the UK
based auto industry .

Due to the current recession period the JLR company is facing financial
crisis. But the tatas have found an unlikely and powerful champion to
make their case for UK government intervention in jaguar deal ie “the
regional and local media in Britain.

The newspapers of the Britain have launched a joint public campaign ,

“save jaguar landrover”.

The campaign hopes to pressure the UK government into acceding to

JLR .

The tata group also announced laying off 450 more jobs including 300
managers .the job losses will also affect 150 salaried agency staff the
company announced.

The UK government is still mulling its response to the demands from the
UK auto industry in general and JLR in particular –if the regions have

Their way ,the TATAS will get what they are asking for .

EFFECTS: The International Environment and Economic Environment

are affecting this business.
 BIBLIOGRAPHY
1. 12TH COMMERCE BOOK
2. WIKIPEDIA
3. REFERENCE BOOK – FRANCIS
CHERUNILUM