UNIT I
The Concept of Business Environment
Question Bank
Q1) What is the concept of Business Environment?
A1) Concept of Business Environment:
You can start a business, but you need financial resources, such as finance, that you have to rely on financial institutions to succeed. Acceptance of social norms that must depend on society. Appropriate market conditions that must depend on the market. Sale of products / services that must be customer dependent. Labor that must depend on society.
Then there are natural resources and raw materials, which must depend on nature. Also, government legal support that must depend on the government. There are many factors and aspects that affect the business environment. These factors are many different components of a single concept called the business environment.
These business-dependent factors aren't stopped, they're very dynamic and constantly changing. For example, the trend, the Fidget Spinner trend, has provided the greatest impetus for the silicone mold industry to date.
The changing needs of customers and new innovations in the market are part of the business environment. The challenge for companies in this tech era is not to enter the market, but to survive in the market. Surviving the market means adapting to change as soon as possible. Adapting to change means being aware of the business environment.
Q2) Define Business Environment and state its importance.
A2) The power to compose a business environment is its suppliers, competitors, consumer groups, media, governments, customers, economic conditions, market conditions, investors, technologies, trends, and several other institutions operating outside the business. Makes up the business environment. These forces affect your business, even when it's outside the boundaries of your business.
For example, government tax changes can reduce customer purchases. Here, businesses need to reestablish prices to survive change. The business was not involved in initiating the change, but had to adapt to the change in order to survive or take advantage of profitable opportunities. Now let's talk about the importance of the business environment.
Importance of business environment:
From the above, it can be said that the business environment is the most important aspect of any business. Recognizing ongoing changes not only helps businesses adapt to these changes, but also helps them use them as opportunities.
The business environment poses threats and opportunities for any business. A good business manager not only identifies and evaluates the environment, but also responds to these external forces. Considering the following facts, you can understand the importance of the business environment.
1. You can identify business opportunities:
Not all changes are negative. If you understand and evaluate them, they can be the reason for your business's success. It is very necessary to identify change and use it as a tool to solve business and population problems.
For example, Phanindra Sama was plagued by ticket reservations in India. He used to travel long distances to travel agencies to book tickets, but even after traveling this distance, he wasn't sure if his seat was confirmed. He saw the opportunity to establish an app in the face of problems and co-founded an online ticket booking app called "redBus".
2. Helps to utilize useful resources:
Careful scanning of your business environment can help you leverage the useful resources your business needs. This helps businesses track these resources and convert them into goods and services.
3. Dealing with change:
Businesses need to be aware of the ongoing changes in their business environment, including changing customer requirements, new trends, new government policies, and technological changes. If your business is aware of these regular changes, you can provide a response to address those changes.
For example, when the Android OS market blossomed and customers began to prefer Android devices with simple interfaces and apps, Nokia couldn't keep up with the changes by not implementing Android OS on Nokia devices. They did not adapt and lost tremendous market price .
4. Planning support:
Solve the problem or take the opportunity. After analyzing the changes presented, the business can incorporate plans to counter the changes for a safe future.
5. Helps improve performance:
Companies that scan the environment thoroughly not only address the changes presented, but also thrive with them. Adapting to external forces helps businesses improve performance and survive in the market.
Q3) What are the characteristic features of Busines Environment?
A3)
(A) Overall external force:
The business environment includes everything outside the organization.
When all these forces are applied, a business environment is formed.
Example: When Pepsi and Coca-Cola got permission to start a business in India, it was an opportunity for them and a threat to local manufacturers such as Goldspot and Camp Cola.
(B) Certain general forces:
A specific force is a force that directly influences the operating activities of a company.
Examples: suppliers, customers, investors, competitors, finance personnel, etc.
General power is the power that indirectly influences the functioning of a company.
Examples: economic, social, political, legal and technical conditions.
(C) Mutual relationship:
The various forces of the business environment are interrelated.
One component of the business environment affects the functionality of the other.
Example: Increased people's life expectancy and health consciousness are driving the demand for diet coke, olive oil and many other health products.
(D) Dynamic nature:
The business environment is dynamic in nature and continues to change in the following ways:
(A) Technical improvement,
(B) Changes in consumer preferences,
(C) Entering new competition into the market.
Example: Many established companies in the FMCG (Fast-moving Consumer Goods) sector are focusing on producing products using natural ingredients in their "Patanjali Products" entry.
(E) Uncertainty:
Due to future uncertainties, changes in the business environment cannot be accurately predicted.
It is very difficult to predict changes in the economic and social environment.
Example: The entry of many new companies has caused the price of Android smartphones to drop significantly.
(F) Complexity:
All the forces of a business environment are interrelated and dynamic and difficult to understand.
The complex nature of the business environment can be understood with partial research.
Example: Raising the Goods and Services Tax to 15% increases government revenue (economic), improves people's social existence (social), reduces rich personal disposable income, and thereby inflation Helps to control.
(G) Theory of relativity:
The business environment varies by location, region, and country.
Example: In China, as electricity consumption increases, electricity to the industry is provided at a lower price, which leads to mass production, but in India, high electricity consumption results in expensive electricity and production decreases. To do. The production cost will be high.
Planning purely means what to do in the future. When the business environment presents problems and opportunities, it is up to the business to decide what plans need to be devised to address the future.
Q4) What are the components of the business environment?
Andrews also correctly defines the company's environment as a pattern of all external influences that affect the life and development of the company. Keith Davis also states that the business environment is a collection of all the conditions, events and impacts that surround and influence it.
The business environment is constantly changing and uncertain. For this reason, the business environment is said to be the sum of all factors outside the control of the company's management. These factors are constantly changing and involve both opportunities and risks, or uncertainties. Undermine the future of business.
Some of the components of the business environment are: -
A. Internal environment – 1. Financial ability 2. Marketing ability 3. Operational ability 4. Human resources ability 5. General management ability
B. External environment – 1. Micro environment 2. Macro environment.
In addition, you will learn about other components of the business environment:
1. Economic environment 2. Technical environment 3. Social environment 4. Demographic environment 5. Political and legal environment 6. Global environment.
Business environment components: Internal and External environment.
Business Environment Components – Two Key Components: Internal and External
Component # 1. Internal environment:
This refers to all factors within an organization that affect the functioning of the organization. These factors are generally considered controllable. That is, the organization can change or change such factors.
Component # 2. External environment:
The external environment consists of all the factors that provide an opportunity or pose a threat to an organization. In a broad sense, the external environment includes various factors such as the international economy, the domestic economy, and the regional economy. Social change, demographic variables, political systems, technology, business attitudes, energy sources, raw materials, other resources, and many other macro-level factors make up the external environment.
Such a wide range of environmental awareness can be called a general environment. All organizations are somehow interested in the general environment, but their immediate concerns are limited to some of the common environments that may be referred to as relevant environments. , Organizations can focus their attention. About those factors that are closely related to their mission, purpose, purpose and strategy.
Q5) Explain the important micro elements of the business environment.
A5) Important micro elements of the business environment are:
a) Customers:
The main task of any business is to attract and retain customers. This is to ensure unique long-term profitability and market presence. Therefore, it is necessary to closely monitor the needs and desires of customers to ensure their joy. This will increase the number of loyal customers in the company.
Customer preferences and changes in preferences need to be predicted in advance, not just observed when they occur. The company also needs to make the necessary modifications to the product / service profile. Customers are the backbone of the company and that's exactly why the company exists.
b) Product:
Product elements such as demand, image, function, utility, function, design, life cycle, price, promotion, distribution, differentiation, and availability of alternatives to products and services also form a close part of the business environment. I will. Product / service functionality is the key to attracting / retaining customers.
c) Marketing broker:
This includes all people who promote the distribution of goods from production bases to various consumption bases. These are the intermediaries that form part of the distribution channel and those who help deliver the product / service to the ultimate consumer. The number can be small or large, depending on the length of the distribution chain and the type of distribution system your company employs. If this chain is hassle-free and works without many hurdles, it ultimately helps the organization.
d) Competitors:
The world has become a global market. There is fierce competition in every field. There are other entities that manufacture similar products and compete with the company for market share and sales. These need to be managed properly and market intelligence is needed to find future plans. These can play a major role in building or damaging the property of any company.
e) Supplier:
A key element in the microenvironment is the supplier, the supplier that supplies the company with raw materials, components, and machinery. Supplier must be reliable, act as a business partner, and work together to meet the ultimate consumer expectations. If the supplier is reliable, there is no need to hold large inventories that increase the risk of obsolescence or damage and block the company's working capital.
Q6) What are the components of Macro Environment?
A6) It consists of the following components:
a) Sociocultural environment:
It consists of the society and culture of the place where the organization operates. This is a common entity and affects almost every enterprise in a similar way. Some of the key factors and impacts of working in the social environment are all factors that influence people's buying and consuming habits, their language, beliefs and values, habits and traditions, tastes and preferences, education and business.
b) Political environment:
The political environment consists of factors related to the management of public relations and the impact of the organization on its business. The political environment is closely related to the economic system and economic policy. For example, communist countries have a centrally planned economic system. Apart from the laws governing investment and related matters, most countries have many laws that regulate the conduct of their businesses. These laws cover matters such as product standards, packaging and promotions.
India is a democratic country with a stable political system, and the government plays an active role as a planner, promoter and regulator of economic activities. Therefore, businessmen are aware of the political environment facing the organization. Most business-related government decisions are based on political considerations in line with the political philosophy followed by the central and state-level ruling parties.
c) Economic environment:
The economic environment consists of macro-level patterns related to the areas of wealth production and distribution that affect an organization's business.
d) Regulatory environment:
The regulatory environment consists of factors related to the planning, promotion and regulation of government economic activities that affect an organization's business.
e) Technical environment:
The technical environment consists of applied knowledge and elements related to the materials and machines used to produce goods and services that affect an organization's business. For many companies, technology is the most dynamic of all environmental factors. Individual companies are interested in their products and process technologies. This environment is made up of factors that accompany all sorts of technological advances or their lack.
f) Demographic environment:
This environment deals with the composition and characteristics of the place's population. All relevant descriptions of the location's population with respect to its demographic profile have a dramatic impact on business decisions. It is beneficial for any company to consider these aspects in detail before planning a strategy.
Q7) Give some examples that emphasize the role of the economic environment.
A7) Some examples that emphasize the role of the economic environment.
1) Economic liberalization since the last 20 years has had various impacts on Indian industry. While most companies have the advantage of being able to freely change the composition and capacity of their products, they have also had some negative impacts in the areas of capacity overcapacity and intensifying competition.
With the partial deregulation of cement in 1982, production capacity and the resulting supply increased rapidly, and market conditions changed from severe shortage to a comfortable surplus. The liberalization of imports led to intensified competition in the capital goods industry, reducing profits and, as a result, many companies were unable to sustain their businesses.
2) India's public savings have traditionally been invested in fixed assets and precious metals. Shares of savings invested in the government have been carried through post offices and banks. But lately, investors are increasingly looking at other means such as stock markets and company deposits.
Recent changes in economic and fiscal policy have made many important developments. Entry into equity trading by leasing and finance companies, bonds, mutual funds, venture capital businesses, new financial products, banks and financial institutions is part of the development that provides resources for capital markets and project finance.
Q8) Mention the Components of the economic environment.
A8) Components of the economic environment are:
I. General economic situation:
The general economic situation that prevails in the economy is a determinant of economic prosperity and community well-being. These economic conditions are variables in which the amount of national income, per capita income, economic resources, income and wealth distribution, and economic development determine people's economic prosperity.
Revenue and its distribution determine the business outlook and therefore the business strategy. In an economy where it is low and per capita is relatively low, demand will decline. This pessimistic situation does not attract business people who invest in and execute manufacturing and marketing activities.
On the other hand, in an economy where the income of the economy is increasing, it leads to more and more investment and entry into industrial and marketing activities. In India, the backbone of the Indian economy, the Middle, is ready to increase income and invest in business.
Even NRI considers it beneficial to invest surplus income in this way, helping the Indian economy to become stronger and thus benefit from profits.
II. Economic system:
The economy is an arrangement that encourages the use of free resources to generate and distribute income, based on some accepted economic philosophies. Economy around the world is widely linked to Kabbalism, socialism, and communism as a hybrid economy called a pure variety or mixed economy.
India is the best example of a mixed economy, with the benefits of capitalism and socialism in one focus, eliminating the disadvantages of pure socialism or capitalism.
Capitalism gives maximum economic freedom in the management of economic activity, socialism talks about maximum domination by the state, mixed economy is freedom and the role of the state in which both the public and private sectors support each other. I have.
The collapse of the mighty nation formed in the early 20th century had to kick a bucket for a period of 100 years. Today, the Soviet Union is divided into small nations that were one of the greatest forces in the world linked to socialist ideology.
III. Economic policy:
It is the appropriate and timely economic policies adopted and implemented by the government that determine the fate of the state and its citizens. Think about India before 1991 and now. The Indian economy is on the verge of collapse and foreign exchange reserves were enough to pull another eight days.
It was a change in personality as a political leader and the brain behind them, together they freed India from control and opened the Indian economy to the whole world.
Private and public sector businesses that worked under the umbrella of protection were set up and faced the challenge of changing competition. Which foreign companies couldn't replace them as Indian players became global players?
IV. Economic growth:
Economic growth or development is the rise and maintenance of per capita income for all individuals who are members of the economy. It is economic growth, which represents increased consumer spending and lower pressure in the industrial sector, that provides more opportunities and enables businesses to withstand the severity of the threat. Other methods also apply. Declining economic growth and lower consumer spending will increase pressure and reduce profitability.
V. Interest rate:
Interest rates affect the demand for goods and services in the economy when they are purchased through borrowing. If interest rates are low, the demand for the product may be durable or non-durable. This gives Philip to a growing industry.
The opposite is true if the rate is high. Today, R.B.I is emerging at lowest interest rates to increase demand for durable and non-durable consumer goods, which will bring the Indian economy out of pessimism and tomorrow's rut.
The cost of capital also depends on interest rates. When they are getting capital at the lowest rates, the companies will encourage all companies to have ambitious plans and strategies in the case of borrowed funds.
VI. Exchange rate:
Exchange rates represent currency conversions to other currencies. It may be hard or soft. In 1991, the Indian Rupee was devalued to make Indian products cheaper in the global market to boost Indian exports. This was a great opportunity for all Indian exporters to export more commodities and reserves and earn forex.
Today, foreign exchange reserves are at a record high of Rs 200 billion, at least costly to boost quality production. Indian exporters do so only if they regularly understand and implement three strategies for export cost, export quality, and export volume. Therefore, it is the exchange rate that determines the fate of a country.
Q9) Explain Social environment and Technical environment.
A9) Technical environment:
The rapid development of technology has a strong impact on all organizations, not just those operating in high-tech environments such as microprocessor manufacturing, pharmaceuticals, and fiber optic technology. The combined impact of computers, digital technology, and telecommunications affects most private and public sector businesses.
As J. Shunpeter, as rightly called by everyone else, it is the "permanent gate of creative destruction." Technology change is a creative and destructive process in that it is responsible for building new things by destroying old ones. Therefore, the core of progress is destruction.
This means that destruction and construction are not contradictory and provide complementary opportunities and threats. In an era of rapidly changing technology, the secret to success is triangular strategy. That is, managers need to anticipate, innovate, and excel to be successful.
Companies that do not do so will be thrown away. When an American boxer took over Muhammad Ali, he said: Ali, you are the best, but I am the latest. We have to learn from Japanese. Before the war, "Made in Japan" was a sign that no one bought it because the product was the cheapest but the quality was the lowest.
However, today, Japanese products are completely quality conscious, "zero defects", "automobiles" or "zips", "made in Japan", so there is a great demand. It talks about their ability to predict, innovate and excel. The Japanese are the best copy cuts and can innovate and excel others. Today, of the 2000 Toyota cars, 700 land daily on the soil of America, the great power of the United States.
The strategic impact of technology changes was successfully brought about in the fall of 1982, in the article "The Emergence of Technology Portfolios" by Russian thinker Basis Petrov.
(I) It may change the relative competitive cost position within the business.
(II) Can create new markets and new business segments
(III) By reducing or eliminating segment barriers, previously independent businesses can be disrupted or consolidated.
New ideas, new products, new processes New methodologies are the result of technological change. That means that changing the order offers many opportunities for threats. That's why it pays off when strategists are constantly monitoring the technology kingdom and its impact on the company and its activities.
Social environment:
The social environment is the socio-cultural environment. The socio-cultural environment is made up of a system of values, and the attitudes, beliefs, desires, expectations, aspirations, customs and customs of society change accordingly, and there are many opportunities and threats to the business operated for society. This socio-cultural environment covers aspects of society and its components.
For a business house, it means:
(I) Expectations from the business community for society
(II) Social attitudes towards business and its management
(III) View on job achievement
(Iv) Perspectives on authority structure, responsibilities and organizational position
(V) Views on customs, traditions and customs
(VI) Class structure and labor movement
(VII) Level of education.
These socio-cultural environmental factors affect organizations in three ways:
(I) Organizational goal setting,
(II) Organizational processes and
(III) Products and services provided by the organization.
The changes that occur in society due to the changes in accepted values are right for the members of society. Therefore, what a particular age group wears, eats and entertains is determined by cultural values. Today, everyone is aware of a particular lifestyle based on social norms. The outlook on life is that life is short — enjoy it at any cost.
As a result, more and more people are thinking about traveling to faraway places. Another thing is to get rich with simple money and storms. This has led the community to rely on lottery tickets, horse racing, betting and more. This also led to antisocial activity.
Today, kidnapping and hijacking are very common for getting loot. These activities have created a demand for products and services that facilitate these activities. Countering these has also provided services and products that provide self-defense.
Women's whereabouts are no longer limited to the kitchen. They are more educated and occupy reserved positions for men because they have an equal share. This meant that they didn't have time to prepare meals to care for their children. In this way, fast food habits are revealed, the services of domestic servants are increasing, and more and more families are seeking washing machines and entertainment on small screens.
The younger generation has the freedom of video surfing, nightclub participation, expensive and high quality clothing, shoes, deodorants and toiletries. Mobile, mobike and car are the needs of these young people. Similarly, older people look younger and want to be younger, which helps maintain their hair color and health. Nowadays, people are becoming more health conscious.
With this special attention and caution, they seek mineral water, preventative medications, preventive health checks, and dietary changes. Therefore, high cholesterol is a major cause of coronary artery disease. That's why people are looking for double or table refined cooking oils that consume too little. They avoid lean meat and choose white meat, that is, chicken and fish such as beef, mutton and pork.
Recently, social awareness has been increasing. Social issues such as pollution, social responsibility of businesses, and worker safety and welfare are becoming more prominent. The social demands placed on the business community as a social responsibility are increasing. Did this affect what the business house produces? What kind of process do you adopt? How will the product be packed? And so on.
Fully effective consumerism is responsible (responsible for the enactment of MRTP and consumer protection laws. Consumerism has influenced standards of technology, product quality, marketing activities and after-sales service. This is all about the business community producing and selling products and services that are determined by socio-cultural values.
Q10) Write short notes on Demographic environment and Political and legal environment.
A10) Demographic environment:
Demographic characteristics deal with populations such as family size, fertility rate, growth rate, age structure, family size, education level, language, caste, income level, earners and non-earners. The demand for goods and services depends on those demands, the demand is the potential or real market, and the market means the real and potential consumers.
There is a positive relationship between population growth and demand for goods and services. Lower fertility has a direct or indirect impact on products and services for infants.
If the population is made up of older people than young people, they are in high demand for preventative and therapeutic medical services, medicines, awakening sticks, hair color, etc. If you have a lot of young people, you will need everything from convenience goods, specialty goods, and shopping goods by consumer segment.
Dislikes, style movements, fashion, and their part-time or full-time income.
These changes in population offer many opportunities and pose challenging threats as well. The availability of skilled and cheap workforce, and the increasing demand for consumer goods and services, may allow multinationals to invest in new activities.
Consumers in different countries may prefer "Made in India" products, where Indian companies have a cost advantage. It attracts foreign investment, which leads to optimal use of national resources and increased imports and exports.
Population change cannot be underestimated in many ways that provide good opportunities to pose a threat on the same path. It is up to the business house to form strategies for success and implement them to embrace these opportunities by effectively handling threats.
Political and legal environment:
The political and legal environment is, of course, called the regulatory environment. National, state and local governments play a constructive role as citizen administrators. To protect and promote the interests of citizens, they rely on regulatory activities that can be undertaken through constitutional provisions, government policy and industrial law.
As for the constitutional provisions of India, the Constitution of India was passed by the Constituent Assembly in 1949. Constitutional provisions provide guidelines for central and state governments to control and regulate socio-economic policies.
The provisions of the Constitution are divided into "basic rights" and "directive principles." Basic rights are set out in Articles 15, 16, 19, 23, and 24. Article 15 prohibits discrimination against citizens on the grounds of religion, race, caste, gender, or place of birth. Article 16 describes equal opportunity for all citizens in public employment, savings and the provision of settlements by the state.
Article 19 states that all citizens have the right to practice any profession, profession, trade or business. Article 23 describes the right to human exploitation and transportation. Article 24 provides for the prohibition of child labor under the age of 14 in factories, mines or dangerous work. Directive principles are principles and laws that can be enforced by a court.
These serve as guidelines for these governments and businesses. The main ones are:
(1) Promotion of people's welfare.
(2) Minimize income inequality and eliminate inequality in status facilities and citizens' opportunities.
(3) Secure appropriate means of livelihood for citizens.
(4) Equal amount of money paid to both men and women for equal work
(5) Providing fair and human working conditions and relieving childbirth
(6) Ensuring wages and working conditions to provide an appropriate standard of living.
(7) Participation in worker management.
(8) Proper distribution of ownership and management of natural resources to prevent the concentration of a small number of wealth and instead serve the public interest of the community.
When it comes to government policy, these are based on industrial resolutions. Industrial resolutions embody government policy in power. Government policy is both positive and negative in the approach. Policy frameworks and implementations provide four roles: regulation, publicity, entrepreneurship, and planners.
The "regulatory role" consists of:
(I) Restrictions on private sector participation in areas such as defense, industry and nuclear power.
(II) Management of plant capacity and location.
(III) Set an upper limit on expenses, ……… Lower limits on wages and bonuses, and provisions for legal welfare measures.
(IV) Regulations on equity participation and foreign investment.
(V) Corporate tax, professional tax, taxes such as entertainment expenses,
(VI) Import / export rules, tariffs, tariffs, etc.
"Promotional roles" include:
(I) Development of infrastructure for industrial and commercial activities such as roads, industrial parks, telecommunications equipment, electricity.
(II) Support for subsidies, investment subsidies, tax incentives, tax exemption periods, subsidized water or electricity charges, etc.
(III) Provide financial and financial incentives.
The "entrepreneurial role" has something to do with:
(I) Participation in businesses and industries where private sector participation is inadequate, that is, power generation and distribution.
(II) Ownership and management of reserved industries such as defense production, nuclear power, oil and gas.
(III) Management of industry in the public sector.
The role of planning covers the following areas:
(I) 5-year plan
(II) Industry prioritization
(III) Foreign participation and bilateral agreements with other states or countries.
(IV) Greenfield area development plan
(V) Regional development plans and programs.
Focusing on "industrial law", many laws have been passed from time to time to regulate industry and commerce.
Activities, protection of employee interests.
The most important things that the business community should take into account are the Indian Contract Act of 1872, the Trade Union Act of 1926, the Employee (Industry) Permanent Order Act of 1946, the Industrial Dispute Act of 1947, and Exports of 1947. Immigration law, capital issues. 1947, 1948 Factory Law, 1948 Employee National Insurance Law, 1951 Industrial Development and Regulation Law, 1952 Employee Reserve Fund Law, 1955 Mandatory Commodity Law, 1956 Indian Enterprise Law, 1956 Securities Contract (Regulation) ) Law, Trade Marking Act 1958, Weight and Measurement Act 1958, Income Tax Act 1961, Borm Act 1965, Exclusive and Restricted Trade Practices Act 1969, Water (Contaminated and Contaminated) Control) Act, Household Electrical Appliances (1976 Quality Control Act, 1981 Air (Pollution Prevention and Control) Act, 1986 Consumer Protection Act, 1986 Environmental Protection Act, 1992 Indian Securities Trading Committee law.
There is a tax law that is revised every year. The same applies to price control regulations.
These laws and sets are very important to administrators. Because his policies and strategies can't hate local law.
