Business Environment

MBAMCOM

CLASS 12

Synopsis1. Definition2. Components Of Business Environment3. Overview Of Business Environment4. Complexity In Business Environment5. Diversity In Business Environment6. Concept Of Business Cycle7. Stages Of Business Cycle8. Importance Of Scanning Environment9. Techniques Of Scanning Environment10. Political Environment11. Political Institutions12. Fundamental Rights13. Directive Principles Of State Policy

DefinitionBusiness environment means all of the internal and external factors that affect how the company functions including employees, customers, management, supply and demand and business regulations.

An example of a part of a business environment is how well customers' expectations are met.

Components of Business Environment

The two components of business environment:

1) Internal Environment - Includes factors which affects business from within. For example, machinery, employees, company policies, etc.

2) External Environment - Includes factors which affects business from outside and it cannot be control as they are external.

Components of Business EnvironmentExternal environment is of two types:

1) Micro Environment - It consists of the factors in the company’s immediate environment that affects company’s performance. It includes elements like suppliers, public, competitors, etc.

2) Macro Environment - It consists of the factors which are uncontrollable and need proper attention. It includes elements like political, economic, social, technological (PEST), etc.

Overview of Business Environment

Changes in business environment are unpredictable. Business environment differs from place to place and country to country.

Political conditions in India differs from those in Pakistan.

Complexity in Business EnvironmentComplexity is an important hallmark of the 21st century. It is evident not only in business, but in every area of the globalized world in which we live.

It arises due to the following reasons:

1) Interconnection of Countries2) Interconnection of Industries3) Interconnection of Companies4) Interconnection of People5) Diversity

Diversity in Business Environment

Diversity in business environment can bevarious types such as:

1) Diversity in Management -It using best practices with proven results to find and create a diverse and inclusive workplace.

Diversity in Business Environment

2) Diversity in Employees - Workplace diversity refers to the variety of differences between people in an organization.

It includes race, gender, age, personality, tenure, organizational function, education, background and more.

Diversity in Business Environment3) Diversity in Suppliers -Supplier diversity is a business strategy that ensures a diverse supplier base in the procurement of goods and services for any business or organization.

Common examples are Small Business Enterprise (SBE), Minority-Owned Business Enterprise (MBE), etc.

Concept of business cycleBusiness cycle is the periodic movement in the economic activity measured by fluctuation in real gross domestic product (GDP) and macro economic variables.

Stages of Business Cycle

Need to Scan Business Environment

Environmental analysis will help the firm to understand what is happening both inside and outside the organization.

Environmental scanning is necessary because there are rapid changes taking place in the environment that has a great impact on the working of the business firm.

Analysis of business environment helps to identify strength, weakness, opportunities and threats. SWOT analysis is necessary for the survival and growth of every business enterprise.

Need to Scan Business Environment

The following are the need to scan business environment:

1) Identification of Strength - Strength of the business firm means capacity of the firm to gain advantage over its competitors. Analysis of internal business environment helps to identify strength of the firm.

2) Identification of weaknesses - Weakness of the firm means limitations of the firm. A firm may be strong in certain areas but may be weak in some other areas.

Need to Scan Business Environment

3) Identification of Opportunities - Environmental analyses helps to identify the opportunities in the market. The firm should make every possible effort to grab the opportunities as and when they come.

4) Identification of threat - Business is subject to threat from competitors and various factors. Environmental analyses help them to identify threat from the external environment.

Techniques Of Scanning The Environment

1) Executive Opinion Method - Under this environment is forecasted on the basis of opinion and views of top executives. A panel is formed consisting of these executives.

2) Expert Opinion Method - Under this environment forecasting is based an opinion of outside experts or specialist. The experts have better knowledge about market conditions and customer taste and preferences.

Techniques Of Scanning The Environment

3) Delphi Method - It involves forming a panel of experts and questioning each member of the panel about the future environmental trend.

Techniques Of Scanning The Environment

4) Intuitive Reasoning - Under this, rational and unbiased intuition is used for environmental scanning. Environmental dynamics are guessed individual judgement. Reliability of this method is questionable.

5) Historical Method - Under this, the environmental trends are analyzed with the help of other trends which are parallel to historical trend.

Political Environment

Government actions which affects the operations of a company or business.

These actions may be on local, regional, national or international level.

Business owners and managers pay close attention to the political environment to gauge how government actions will affect their company.

Political Institution

Political Institutions includes:

1) Legislature – To create new laws.

2) Executive – To implement laws.

3) Judiciary – To interpret laws and judge whodo not respect them.

Fundamental RightsThe Constitution guarantees six fundamental rights to Indian citizens as follows:

1) Right to equality - All citizens of the country are equal in the eyes of law.

2) Right to freedom - According to this every citizen enjoys freedom of speech and expression, movement, profession, etc.

3) Right against exploitation - According to this no one can take work from others without paying the money for his labour.

Fundamental Rights

4) Right to freedom of religion - India has been declared a secular State. The State itself has no religion.

5) Cultural and educational rights - According to this right the people of any part of India, whose language or culture is separate have the right to protect and develop it.

6) Right to constitutional remedies - All the citizens have the right to move to the Supreme Court or to any of the High Court in India.

Directive Principles of State Policy

The concept of Directive Principles of state Policy was borrowed from Irish Constitution. These principles relate to social justice, economic welfare, foreign policy and legal matters.

It aims to create social and economic conditions under which the citizens can lead a good life.The directive principles are non – justifiable rights to people and are fundamental in the governance of the country

Thank You!

Lesson by

Anjali Kaur SuriTGT Maths, PGT Economics

M.A. Economics, M.Com (Finance), PGD Banking & Finance, B.A. Hons (Economics), B.Ed (Maths & SST), NISM, NSDL and IELTS certified.

For enquiries or topic suggestions, email: contact@geniusedu.co.inConnect on Linkedin: www.linkedin.com/in/anjali-kaur