1. UNIT-1
NAMRATA SAXENA
Professor
Department of Management
SHRIRAM SCHOOL OF BUSINESS
STUDIES
BUSINESS ENVIRONMENT

2.  According to Davis, "The business environment is
the sum total of all the circumstances, events, and
factors that affect the business."
 According to Arthur M. Weimer - “Business
environment includes the climate or set of conditions
such as, economical, social, political or institutional,
in which business activities and operations take
place.”

8.  Internal Environment includes all those factors which
influence business and which are present within the
business itself. These factors are usually under the
control of business.
 Hence, the factors like physical facilities and
organization and functional means can be revised
and transformed as per the requirements of the
environment.

11.  External environment are those factors which exists
outside the business firm. The external factors of a
company are also known as uncontrollable factors like
economic factors, socio-cultural factors, demographic
factors, legal factors, technological factors, etc.
 The external factors are beyond the control of business
enterprise. Therefore, success of a firm is highly
dependent on the capability to appropriately adjust and
design the internal factors. This helps to make most of the
opportunities and overcome threats in the environment.

12.  It is a branch of economics that studies the
economic behaviour of a specific person, a
single firm or a company. It deals with the small
scale economic activities of individuals or
company.

15.  It is a branch of economics that studies the
structure, performance, behaviour and decision
making activities of an economy as a whole. It
focuses on regional, national as well as a global
scale rather than focusing on individuals’
activities.

20. BASIS OF
DIFFERENCE
MICRO-ECONOMICS MACRO -ECONOMICS
MEANING It is the study of single economic
unit. It comprises markets of goods
and services and deals with
economic issues.
It is the study of the economy as
a whole thus macroeconomics
involve gross domestic product
(GDP), unemployment, inflation
and growth etc.
AREA OF STUDY Microeconomics studies the
particular market segment of the
economy
Macroeconomics studies the
whole economy, that covers
several market segments.
DEALS WITH Microeconomics deals with various
issues like demand, supply, factor
pricing, product pricing, economic
welfare, production, consumption,
and more.
Macroeconomics deals with
various issues like national
income, distribution,
employment, general price level,
money, and more.
BUSINESS
APPLICATION
It is applied to internal issues. It is applied to
environmental and external
issues.
MAIN TOOLS Demand and Supply are the main
tools.
Aggregate demand and Aggregat
supply are its main tools.
PROVIDE It provides the solution to the It provides the solution to the

22.  SYSTEMATIC APPROACH: Under this approach, information for
environmental scanning is collected systematically. Information related to
markets and customers, changes in legislation and regulations that have a
direct impact on an organization’s activities, government policy statements
pertaining the organization’s business and industry, etc, could be collected
continuous updating such information is necessary not only for strategic
management but also for operational activities.
 Ad hoc Approach: Using this approach, an organization may conduct
special surveys and studies to deal with specific environmental issues from
time to time. Such studies may be conducted, for instance, when
organization has to undertake special projects, evaluate existing strategy or
devise new strategies. Changes and unforeseen developments may be
investigated with regard to their impact on the organization.

23.  Processed-form Approach: For adopting this
approach, the organization uses information in a
processed form available from different sources both
inside and outside the organization. When an
organization uses information supplied by
government agencies or private institutions, it uses
secondary sources of data and the information is
available in processed form.

24. 1. Identifies Business Opportunities And Threats:
 The business environment helps businesses in the identification of different opportunities and
threats. When business is capable to detect market opportunities timely, then they can easily take
advantage of the such opportunity at the earliest.
2. Helps In Planning And Policy Formulation:
 A proper understanding of the business environment helps in preparing better policies and
strategies. It conveys all existing information regarding market conditions to businesses. All
opportunities and threats of an organization are scanned through the study of the business
environment.
3. Provides Useful Resources
 Business depends on the environment in which they function for several resources. The business
environment supplies several inputs like capital, raw materials, and labour which are used by the
business for its operations.
4. Assist In Facing Competition
 The business environment communicates all details about competitors in the market to business.
Awareness regarding the actions and strategies of competitors is important for every business for
meeting competition effectively. It helps businesses in formulating plans and policies by the
competitor’s actions. Businesses can face challenges and competition in the market through
systematic planning efficient way.

30.  SWOT Analysis
 PESTLE Analysis
 ETOP
 QUEST

34.  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 of each
sector on the organization.

35.  QUEST is an environmental scanning technique that is
designed to assist with organizational strategies by keeping
adheres to change and its implications.
 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.

36.  Socialism and capitalism are the two main economic systems
used in developed countries today. The main difference
between capitalism and socialism is the extent to which the
government controls the economy.
 Socialism is an economic and political system under which
the means of production are publicly owned. Production and
consumer prices are controlled by the government to best
meet the needs of the people.
 Capitalism is an economic system under which the means of
production are privately owned. Production and consumer
prices are based on a free-market system of “supply and
demand.”

37.  Socialism is most often criticized for its provision of social
services programs requiring high taxes that may decelerate
economic growth.
 Capitalism is most often criticized for its tendency to allow
income inequality and stratification of socio-economic
classes.
 The United States is generally considered to be a capitalist
country, while many Western European countries are
considered socialist democracies. In reality, however, most
developed countries—including the U.S.—employ a mixture
of socialist and capitalist programs.

38. CAPITALISM SOCIALISM
BASIS OF
DIFFERENCE

39.  A Mixed economy is an economy that combines both the aspects of
capitalism and socialism. It follows the tenets of individualism and welfare.
It allows private property and does not intervene in the distribution of the
same and free-market but intervenes with the regulatory laws price
regulation wherever needed.
 Here, the government plays a large role in the military, international trade,
and national transportation.
 There is also a focus on welfare, healthcare from the start’s end. Despite
this, the state manages to provide ample opportunities for private businesses
and industries to grow and operate in maximum domains with the profit
motive.
Example: Russia, United Kingdom