Introduction to

Business Environment
Ranjana Agarwal
 Agenda of Lesson 1

• Meaning and Concepts of Business

Environment
• Why do you need to study it ?
• Constituents of Business Environment –
Economic and Non Economic
• Environmental Scanning – SWOT
Analysis, STEEPEL
• Exercise
 Meaning of Business
Environment
Environment The aggregate of all external and internal
conditions affecting the existence, growth and welfare of
organisaton.

Environment The surroundings or external objects,

influences or circumstances, taken collectively, under
which someone or something exists.

Bus.Env. The aggregate of all conditions, events, and

influences that surround and affect business .

 Meaning of Business
Environment
There are two sets of factors- internal and external – which
influence business:

Important internal factors- Organisational resources, R & D,

technological capability, Finance, Operations etc. Internal factors
lead to Strengths or Weaknesses.

By Business Environment, we generally refer to the external

environment, only. This includes- economic, govt., legal,
technological, and socio-cultural factors. The external environment
represents the opportunities and threats for the firm
 Why BE?
By understanding potential conditions in the external
environment, we can expect to make better strategic
decisions.

• Knowledge about changing environment keeps the

organisation dynamic in its approach.

• Helps foresee the impact socio-economic changes,

national and international.

• Firms with good adaptability or flexibility can

capitalise on a given change in business env. and
enhance their competitive position
 BE and Strategic
Management
• Corporate Strategy
• Business Strategy
• Functional strategy
BUSINESS ENVIRONMENT LAYERS
Internati-
onal Env

Macro Political

Conventional Economic Micro

Competitors

Environ-
mental Internal Buyers
Suppliers
Social

New New
Substitutes Entrants
Legal

Technological
 Scope of BE

• Micro Environment - Customers, Suppliers,

Competitors, Government, Marketing
Intermediaries, Special Interest groups,
Labour Unions, Media

• Macro environment – Political, Legal,

Economic, Environmental, Ethical,
Technological, Social (STEEPEL)
• International
 BE = Eco + Non Eco
Envmt
Economic Non Economic
Environment Environ
• Economic •
•
Sociocultural
Demographic
Systems • Political

• Economic •
•
Legal
Technological
Conditions • Government

• Economic Policies • International

• Environmental
• Ethical
 Sociocultural
environment
• Cultural and civilization values and attitudes –
family system, caste system
• Rapidly changing culture
• Social problems
• Role of civil society – moving beyond compliance
• Indian diaspora
• Labour supply and mobility
• Consumer’ opinion
 Demographic
environment
• Structure and dynamics of population
• Size, density, rural-urban distribution,
growth and aging patterns of population
 Political environment

• Form of government- republic,

democratic, socialist
• Strength and ideology of ruling party as
well strength and ideology of opposition
• Bureaucracy involvement – red- tapism (
related to business friendly practice)
• Political stability
• Regulation of entrepreneurial behavior
 Legal environments

• Company’s Act 2013

 Technological
environment
• Technology leads to
• Better utilisation of productive resources,
improvement in competitive strength, Risk efficiency,
improvement in productivity and profatbility

• Technological assimilation – digital India

• Technological divide

• E,g. Start up India, Stand up India

 International
Environment
• Globalisation process
• Access to reliable and cheaper resources
• Possibility of profitable investment
• Role of multinational corporation
• Trade restriction
• Joint venture
• Global strategic partnership
 Cases

• Social Environment - Video case – Unilever

• Political environment - Case of Syria and Iran

pg 20

• Technological - Startup India , Digital India pg 7

• International Environment – PBD, pg 3, 4

Environmental Scanning

• How to scan BE ?
• SWOT

• PEST
 SWOT

Internal External
1 Strengths: are 3 Opportunities: open
capabilities that up possibilities
provide a definite
benefit in a given
4 Threats: undermine
situation performance and/or
2 Weaknesses: are
close off future
absent resources or possibilities
things you do badly
king Bus. Environment to SWOT Analysis
Market Company
Researc Research
h

Opportunities Strengths &

& Threats Weaknesses

Key Success Competitive Distinctive

Factors Advantage Competencies

Superior
Performance
 STEEPEL

• PEST
 Activity

SWOT Analysis STEEPEL

Of your company • W Bengal
• Syria
• Jharkhand