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LEARNING
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Bangalore QUICK REVISION GUIDE 1
Chapter 1 - Introduction
CHAPTER 1 : Business Environment – An Introduction
BUSINESS
- Organized effort to
- Supply consumers with
- Goods & services for a
- Profit.

BUS. PURPOSE more than profit

- Important for society
- Creates job opportunities
- Improve quality of life
- Economic growth for nation

CHARACTERSTICKS OF BUSINESS (TCO GTI)

1. Transition
2. Competition
3. Opportunities
4. Globalization
5. Technology
6. Information

1.TRANSITION (Decades old Business to Today's Business )

From To
Rigid Flexible
Hierarchy Flat
Family Centric Distributed
Close minded Open minded
Secretive Transparent
Superstious Rational
Sluggish Vibrant

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2.COMPETITION (advantages)
- Makes Customer A King
- Improve quality & value for goods / services
- Brings Innovation in Business
- Generates new Capabilities
- Customer satisfaction levels enhanced
- Develops Positive Leaders

3.OPPORTUNITIES (for India)

- IT, ITES, BPO, Call centers, Private Banking / Insurance
- Globally competitive manufacturing (Low price / high value)
- Large exports
- India nr. 2 in Global manufacturing (next to China)
- Worlds largest producer in Bicycles, Motor cycles
- Multinational mergers & acquisitions
- World’s nr.1s are sourcing from India.
- Indians emerging as the Top 10 Richest persons / companies.

4.GLOBALIZATION
Removing the barriers of trade among all the global nations.
Triggers of globalization
- Technological innovation
- Crumbling trade barriers
- Flow of Capital and technology
- Information explosion
- Changing lifestyles
- Intensified Competition
More on subsequent chapters

Prof. Dr. Madhavan Ph.D., Bangalore 0 98860 67232 Email: profmadhavan@yahoo.com

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5.TECHNOLOGY
- All pervasive in Business.
- Affects manufacturing, marketing, distribution, transport and management.
- Brings WOW effect with customers.
- Adds quality and user-friendly.
- Brings in Real time actions.
- Makes Global a small village
More on subsequent chapters

6.INFORMATION
- Business has become more complex
- Require quick decisions based on the piles of Information
- Computers and IT enable Information processing.
- Drudgery of paper work avoided.
- Instant communication
- Accelerates human capability
- Information is another wealth.

OBJECTIVES OF BUSINESS
Related Concepts
VISION, MISSION, OBJECTIVES

VISION
Vision is a broader statement of
- Wider fluidic general purpose, touching the distant horizon
- Inspiration for achieving greater values for the society at large
- Example: Infosys Vision
“ To be globally respected corporation that provides best- of- breed business
solutions, leveraging technology, vendors and society at large”

Prof. Dr. Madhavan Ph.D., Bangalore 0 98860 67232 Email: profmadhavan@yahoo.com

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Chapter 1 - Introduction

MISSION
Mission is a statement outlining
- Fundamental and specific purpose
- Covering 4 points: Customer needs, Customer groups, Activities and
Philosophy (of
survival & growth.)
- Example of Mission Statement from Ford Company:
“Our Mission is to improve continually, our products and services to meet our
customers’ needs, allowing us to prosper as a business and to provide a
reasonable return for our stock holders, the owners of our business”

OBJECTIVES
While Vision is the distant star and Mission is the guiding path; the objectives
are the real measurable concrete achievable units of performance. All of them
are compatible to each other (and not contra)

Objectives may change from company to company and even change in times
to come. Some of the most common objectives are:

• Profit
• Growth
• Power
• Employee satisfaction & development
• Quality Products & Services.
• Market leadership
• Challenging
• Joy of Creation
• Service to Society
• Good Corporate Citizenship.

Prof. Dr. Madhavan Ph.D., Bangalore 0 98860 67232 Email: profmadhavan@yahoo.com

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Bangalore
Chapter 1 - Introduction
1. PROFIT
Main purpose of every Business is to earn profit. Profit is the excess of Income over
expenses. Profit enable Business to achieve their objectives. Non profit organizations
also have to generate funds for their social activities from public donations.

The profits have to be reasonable and not greedy. Promoting sales with out
investment in R&D, Technological up gradation, satisfactory working conditions for
employees, incentives to dealers and customers will lead a business to disaster in
the long run.

2. GROWTH
Growth is an indication that the business is alive and poised for staying in
future. Without growth, the business is considered to be heading for closure.

Strategies for growth are:

Add more products / services

Enlarge the existing market and create new markets

Diversify into new areas of Business

Integration (both forward & backward)

Cut costs

Improve productivity

3. POWER
Business enjoy vast amount of resources in terms of Money, Materials,
Manpower, Machinery etc., Naturally certain Powers go along with it. We see
the powers of Tatas, Birlas, Ambanis, Mahindras, TVS family etc., have a say in
the formation of Government regulations.

Some business leaders (UB Mallya) even have become MPs, MLAs to play a
key role in the governance of country

4. EMPLOYEE SATISFACTION & DEVELOPMENT

Without people, there is no need for any business. Charity begins at home, so
also the employees are business stake holders. ESOP – Employee Stock
options are given to almost all the IT companies making the Employee as the
Investors in the company eligible to earn profits from the business. Making
people is more important than making steel says Tata, is a good example for
employee satisfaction & development.

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5. QUALITY PRODUCTS & SERVICES

Continuous improvement in quality of the products and services is a sure way of
staying in business. Only such people survive the competition and stay in the
market. Persisitence quality earn Brand Loyalty and customers heart. For eg;
Colgate, Lux, Pears, Rin, Surf etc., This is made possible by their R&D activities and
high degree of professional commitment & efficient management.

6. MARKET LEADERSHIP
This is another objective of business. Market research, Innovation and improvement
keeps one as the market leader. For example SONY for their Walkman products.
Almost every year a new model with added features, wider scope of application,
better sound clarity etc is launched in the market thus SONY remain as unbeatable
market leader.

In India Raymonds, Unilever, Maruti are a few examples of Market leaders, who
enjoy an exclusive choice of millions of customers.

7. CHALLENGING
Business poses a variety of challenges from many direction that has a telling effect in
the making of profit. As the future is full of uncertainties and therefore the
challenges are equally great. A prudent ever watchful manager is ready to meet the
challenges in the eyes of it than running away with excuses. Meeting challenges is
another objective in business.

8. JOY OF CREATION
Imagine the joy of bringing a Maruti small car in India few decades ago. Recently
when Nano car entered the market – the joy it gave to Tatas is not less than the joy it
gave to many fellow Indians.

We take pride in the joy of creation, by virtue of Innovation, demands of the market
and the emerging new technologies. Every mobile phone is becoming an PC, TV,
Internet Browser, emailer, Banking tool, sharing videos etc., is also giving us the joy
of ownership, user besides the creator of that product. paying

9. SERVICE TO SOCIETY
Society is the very cause for existence of Business. Therefore some of the Business
obligations are:

Quality goods at reasonable prices

Providing employment

Protecting Environment etc.,

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10. GOOD CORPORATE CITIZENSHIP
It implies that Business Units follow

rules of the land,

pay taxes regularly,

care for its employees, customers and society.

CRITICS OF BUSINESS

Critics of Business are the negative points of Business. They all come, because of
one reason, that Business puts profits before People (or anything else). As the
Money values are kept high in Business, the Human values takes the heavy toll.
Some of the criticisms are:
1. Business corrodes cultural values. (saris are replaced by low hip jeans)
2. It exploits workers. (IT guys work for > 12 hours a day spoiling their health)
3. Consumerism addiction (Unnecessary compulsive buying)
4. Deplete natural resources faster and spoil the environment (carbon emissions)
5. Machine made things made replace Man made things, creating unemployment.
6. It causes scams and scandals. ( stamp paper scam, T20 cricket scandals)
7. Makes people greedy and avaricious.
8. Makes Rich people richer and Poor people more poorer. .
9. Business leaders cut corners, bribe officials, bend rules and challenge Govt.,

There are major 5 groups of critics:

1. Activist Reformers: Redressing imbalance between Business Interests and
Public Interests – Consumer Forum.
2. Liberal Intellectuals: Big organizations become big power of control over
individual to obey them like slaves.
3. Marxists: Communism against Capitalism.
4. Radical Non Marxists: Restructure economy by limiting the growth.
5. Reactionaries: Going too far in non market - social / political / moral standings.
Looking at the gains made by Business to the Society would outweigh these critics.

Prof. Dr. Madhavan Ph.D., Bangalore 0 98860 67232 Email: profmadhavan@yahoo.com

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ENVIRONMENT
It refers to all external forces that have a bearing on the functioning of Business.

INTERNAL ENVIRONMENT – Strengths and Weaknesses

EXTERNAL ENVIRONMENT – Opportunities and Threats

INTERNAL ENVIRONMENT: (Needs Management Control)

Suppliers

Substitute products

Buyers

New Entrants

Rival Firms

EXTERNAL ENVIRONMENT: (Needs Strategic Control)

Political – Legal

Economic

Technological

Global

Cultural

Physical (nature)

POLITICAL – LEGAL

Legislature (Pass Acts / Laws / Controls by MLAs, MPs, Ministers, Govt.,)

Judiciary (Pass Judgments to obey)

Executive ( IAS, IPS etc)

Law of the land

ECONOMIC

Eco. Policies, System & strategy

Infra structure

Industry / Agriculture

Money & Capital

Population

TECHNOLOGICAL

Mass production

Huge R&D Expenses

Fast Changing Technology

Social change & Expectations

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GLOBAL

World becoming One market

World Class Quality

Competing with MNCs

India and WTO

SOCIO CULTURAL

Culture determine People Attitude / Market

Caste system

Education

Growing Environment

Family Marriage systems

PHYSICAL / NATURAL

Natural resources

Major activity of people

Geographical conditions

Transport & Communication

ENVIRONMENTAL ANALYSIS

Sequence of Analysis:
1. Scanning (Get signals of changes)
2. Monitoring (Track the trends)
3. Forecasting (Develop possible projections)
4. Assessment (What it means to business)

Three basic Objectives of Analysis

1. Understand current situation and Potential Changes
2. Information should provide inputs for Strategic decision making.
3. Facilitate and foster Strategic Thinking

Five benefits of Analysis:

1. Long term strategies and policies
2. Develop Action Plans
3. Foresee changes at domestic and International level
4. Formulation of counter measures
5. Keep oneself on toes.

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LIMITATIONS OF ENVIRONMENTAL ANALYSIS

1. Does not foretell the future

2. Does not eliminate uncertainties
3. Not a guarantee for an effective organization
4. Difference between Analysis and Actual Practice
5. Suffer from ‘Paralysis of Analysis’ syndrome.

DIVERSIFICATION
Changing from the existing Business to some other business may related or not.

ENVIRONMENTAL SCANNING
Taking the signals from the present environment with their strength and giving
meaning to it for possible future forecasts.

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