BUSINESS ENVIRONMENT 
         
                                                  UNIT 1 
         
        Environment Economic and non-economic environments – Inter relation between economic 
        environments – Business and society; Professionals - Business ethics – Business culture – 
        Social responsibility of business – Social Audit. 
         
         
               There are to factors which affects the operation of the business. These can also be 
        classified into two categories.  Internal factors and external factors. 
         
        INTERNAL FACTORS 
         
           The internal factors are generally regarded as controllable factors because the company has 
        control  over  these  factors.    It  can  alter  or  modify  such  factors  as  its  personnel,  physical 
        facilities, organisation and functional means, such as marketing mix, to suit the environment. 
         
        EXTERNAL FACTORS 
         
           The external factors, as on the other hand beyond the control of a company.  The external or 
        environmental factors such as the economic factors, socio- cultural factors, government and 
        legal factors, demographic factors, geo-physical- factors etc.., are therefore generally regarded 
        as uncontrollable factors.  
         
            Some of the factors external factors have a direct and intimate impact on the firm (like the 
        suppliers and distributors of the firm).  These factors are classified as micro environment also 
        known as task environment and operating environment.  There are other external factors which 
        affect an industry very generally such as industrial policy, demographic factors etc.   
        
       They  constitute  what  is  called  Macro  Environment/  General  Environment  or  Remote 
       Environment. 
            We can consider the business environment at three levels. 
            Internal Environment. 
            External Environment. 
            Micro Environment/ Task Environment /Operating Environment. 
            Macro environment/ General Environment /Remote Environment. 
             Business  environment  is  studying  of  external  environment  which  affects  the  business 
       operation and adaptability of those factors. 
        
       INTERNAL ENVIRONMENT 
            The important internals factors which have a bearing on the strategy and other decision are; 
        
        1.  VALUE SYSTEM 
           
             The value system of the founders has important bearing on the choice of business.  The 
       mission and objectives of the organisation, business policies and practices. 
             Ex. Infosys views its employees as its resources “Wealth creation for employees as one of 
       its stated objectives.  It provides innovative compensation and benefit packages. 
             
        2.  MISSION AND OBJECTIVES 
              The  business  domain  of  the  company,  priorities,  direction  of  development,  business 
       philosophy business policy etc are guided by the mission and objectives of the company. 
              Ex : Ranbaxy thrust in to the foreign markets and development have been driven by its 
       mission “to become a research based international pharma ceutical coy. 
        
        3.  MANAGEMENT STRUCTURE AND NATURE 
             The organisational structure the composition of 
                 Board  of  directors,  extent  of professionals of management etc are important factors 
       influencing business decision.  Some management structures and styles delay decision making 
       while some others facilitate quick decision making. 
        
        
        
       4. INTERNAL POWER RELATIONSHIP 
                Factors like the amount of support the top management enjoys from different levels of 
       employees, Shareholders and Board of directors have important influence on the decision and 
       their implementation. 
        
        5.  HUMAN RESOURCES 
               The characteristics of the human resources like skill quality, morale, commitment, attitude 
       etc., could contribute to the strength and weakness of the organisation, Some organisation find 
       it  difficult to carry out restructuring or modernisation because of resistance by employees 
       whereas they are smoothly done in some others. 
        
       6.COMPANY IMAGE AND BRAND EQUITY: 
                The image of the company maters while raising finance, forming joint venture or other 
       alliance, soliciting marketing, intermediaries, entering purchases, sales contracts, launching 
       new products etc, Brand equity is also relevant in several of these cases. 
        
       7.MISCELLANOUS FACTORS 
                I Physical assets and facilities 
                II R& D technological Capabilities. 
                III Marketing resources and 
                IV Financial factors. 
        
       EXTERNAL ENVIRONMENT 
        
       (I) Micro environment 
         
            The micro environment consists of actors in the company immediate environment that effect 
       the  performance  of  the  company.    These  include  the  supplier  marketing  intermediate 
       competitor customer and the public. 
        
        
        
        
        
        
        1.  SUPPLIERS 
           
              An important force in the micro environment of a company is the suppliers (i.e) those 
          who  supply  the  inputs  like  raw  materials  and  components  to  the  company  (the 
          importance of reliable source / source of supply to the smooth functioning of business 
          is obvious) 
        
                                                              AVERAGE STOCK 
        
       IN INDIA                                  intergenious 3-4 month                             Imported 9 month 
       IN JAPAN                                 Few hours                                             two week 
        
        2.  CUSTOMERS 
           
               The major task of the business creates and sustain customers (a company may have 
          different categories of the customers like individuals, households, industries and other 
          institutions.  For an example the customer of a tyre company may include individuals 
          auto mobile owners, automobile manufactures, public sector transport in undertakings 
          and other operators. Depending on a single customer is often to risky because it may 
          place the company in a poor bargaining position, apart from the risk if losing business 
          consequent to the winding up of business by the customers. 
           
           
           
        3.  Competitors: 
           
                  A firm competitor includes not only the other firms which market the same or 
          similar  products  but  also  those  who  compete  for  the  discretionary  income  of  the 
          consumers. For the ex. The competition for a company’s televisions may come not only 
          from  other  tyre  manufacturers  but  also  from  two-wheelers,  refrigerators,  cooking 
          ranges stereo sets and so on from firms offering saving and investment schemes like 
          banks, UTI. 
           
           
        4.  Marketing intermediaries: 
           
                These are vital links between the company and the final consumers. A dislocation 
          or disturbance of the link, or wrong choice of the link may cost the company very 
          heavily. Retail chemist and druggists and India once decide to boycott the products of 
          a leading company and company have been in trouble.