MBA - IInd Semester

Subject Teacher- Ms. Asha Dass

(Asst. Prof., UCCM, GKU)

What do you mean by

business environment ?

The environment of any organization is the

aggregate of all conditions, events and influences

that surround and affect it.

Understanding the environment within which the

business has to operate is very important for

running a business unit successfully at any place.

Schoell, “ The environment of business consists of all

those things to which business is exposed and by which it

may be influenced directly or indirectly”.

Arthur, “ Business Environment encompasses the

climate or set of conditions in which business operates or

conducted.

1. Complex

2. Inter- dependence

3. Dynamic

4. Inter – relatedness

5. Impact

6. Uncertainty

7. Relativity

Explanation:

1. Complex: Business environment is compound in

nature. Environment consists of number of factors,

events, conditions and influences arising from

different sources which impact business, thus makes

business complex.

2. Inter – dependence: The environment of the

business is made of social, legal, cultural, political

and technological factors, these factors are inter –

dependable.

For example: The economic status of a country

affects the development of technology.

3. Dynamic: Business environment is constantly

changing. The various forces in the environment

keeps on changing from time to time.

4. Inter – relatedness: Different factors of business

environment are inter- related.

For example: Change in import- export policy are

political and economic changes respectively.

5. Impact: Business environment has both long term

and short term impact.

6. Uncertainty: It is difficult to predict future

happenings , especially when environment changes

are taking place too frequently.

7. Relativity: It is relative concept since it differs

from country to country and region to region.

Example: Demand for sarees may be fairly high in

India where as it may be almost non – existent in

France.

Customer focus

Strategy formulation

Public image

Continuous learning

Giving direction for

growth

Change Agent

Determining opportunities and threats

Identifying firms strength

and weakness

Business Environment

Internal environment

External environment

1.Internal environment: It lies within the origin. These are generally

regarded as controllable.

2.External Environment : forces, organization, institution operating

outside the company.

1. Value System:The value system of an organization means the ethical beliefs that

guide the organization in achieving its mission and objective. The

value system of a business organization also determines its

behaviour towards its employees, customers and society at large.

2. Mission and Objectives:The objective of all firms is assumed to be maximization of long-

run profits. But mission is different from this narrow objective of

profit maximization. Mission is defined as the overall purpose or

reason for its existence which guides and influences its business

decision and economic activities.

3. Organization Structure:

Organization structure means such things as composition of board of

directors, the number of independent directors, the extent of

professional management and share -holding pattern.

4. Corporate Culture an of Top Management:

Corporate culture is generally considered as either closed and

threatening or open and participatory.

In a closed and threatening type of corporate culture the business

decisions are taken by top-level managers, while middle level and

work-level managers have no say in business decision making.

5. Quality of Human Resources:

Quality of employees (i.e. human resources) of a firm is an important

factor of internal environment of a firm. The success of a business

organization depends to a great extent on the skills, capabilities,

attitudes and commitment of its employees. Employees differ with

regard to these characteristics.

6. Labour Unions:Labour unions are other factor determining internal environment of a

firm. Unions collectively bargain with top managers regarding wages,

working conditions of different categories of employees. Smooth

working of a business organization requires that there should be good

relations between management and labour union.

7. Physical Resources and Technological Capabilities:Physical resources such as plant and equipment, and technological

capabilities of a firm determine its competitive strength which is an

important factor determining its efficiency and unit cost of

production. R and D capabilities of a company determine its ability to

introduce innovations which enhance productivity of workers.

Environmental Threat and Opportunity Profile

Analysis (ETOP)

ETOP is considered as a useful device that facilitates

an assessment of information related to the

environment and also in determining the relative

significance of external environment threats and

opportunities to systematically evaluate environmental

scanning. By dividing the environment into different

sections, the ETOP analysis helps in analyzing its

impact on the organization. The analysis is based on

threats and opportunities in the environment.

Quick Environmental Scanning Technique

Analysis (QUEST)

QUEST is an environmental scanning technique that is designed

to assist with organizational strategies by keeping adheres to

change and its implications. Different steps involved in this

technique are as follows:

The process of environmental scanning starts with the

observation of the organization’s events and trends by

strategists.

After observation, important issues that may impact the

organization are considered using environment appraisal.

A report is created by making a summary of these issues and

their impact.

In the final step, planners who are responsible for deciding the

feasibility of the proposed strategy, review reports.

SWOT Analysis

SWOT analysis stands for strengths, weaknesses,

opportunities and threats analysis of a business

environment. Strengths and weaknesses are an

organization’s internal factor while threats and

opportunities are considered as external factors.

So, the process of SWOT analysis includes the

systematic analysis of these factors to determine an

effective marketing strategy. It is a tool that is used

by the organization for auditing purposes to find its

different key problems and issues.

PEST Analysis

PEST technique for a firm’s environmental scanning

includes analysis of political, economic, social, and

technical factors of the environment.

Thank You