Business Environment

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• Business is an economic activity
with the object of earning an
income, profit and there by
accumulate wealth.

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• A business environment is a
combination of internal and
external environmental forces
and factors that influences the
business operation of a business
and its ability to serve its
customers.

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• Internal business environment –
material, machines, workers,
money, etc.
• External business environment – two
categories,
1. Macro environment
2. Micro environment.

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• Microenvironment – the forces close to the
company that affect its ability to serve
its customers.
• The company, suppliers, marketing
intermediaries, customer markets,
competitors and publics.

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• Suppliers are an important link in the
company’s overall customer value delivery
system.
• They provide the resources needed by the
company to produce its goods and services.
• Supplier problems can seriously affect
marketing.

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• Marketing intermediaries are firms that
help the company to promote, sell, and
distribute its goods to final buyers; they
include resellers, physical distribution
firms, marketing service agencies, and
financial intermediaries.

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• Consumer markets - individuals and
households that buy goods and services for
personal consumption.
• Business markets - buy goods and services
for further processing or for use in their
production process.

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• Reseller markets - buy goods and services to
resell at a profit.
• Government markets - government agencies
that buy goods and services to produce public
services.
• International markets - buyers in other
countries, including consumers, producers,
resellers, and governments.

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• The marketing concept states that to be
successful, a company must provide
greater customer value and satisfaction
than its competitors do.
• Marketers must do more than simply adapt
to the needs of target consumers.

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• A company’s environment is surrounded by
several types of public.
• There are several types of public, such as
financial public, media public, local
public, general public and internal public.

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• Financial public – banks, financial institutions
and stock holders. They influence the
company’s ability to obtain funds.
• Media public – newspapers, magazines, radio
and T.V. They carry news, features and
editorial opinion.
• Local public – neighborhood residents and
community organizations.
• Internal public – workers, managers,
volunteers and the board of directors.

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• Macro environment – the larger
societal forces that affect the
microenvironment
• Demographic, economic,
natural, technological,
political, legal, and cultural
forces.

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a. General Economic conditions:
• Agricultural and industrial output trends
• Per capita income and income
distribution pattern
• Pattern of savings and expenditure
• Price levels
• Employment trends
• Impact of government policies and
• Economic systems

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a. Industrial conditions:
• Market growth of the industries
• Demand patterns of the industry
• Stages of product life cycle

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c. State of supply of Resources for
Production:
• Production determines inputs, which
are available for production.
• Land
• Labour
• Capital
• Machinery and equipment and
• Managers

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• The pattern and changes in the
society based on age, educational
background, marital status, family
size, family life style, religion,
nationality etc.
• It is useful for marketing decisions,
marketing segmentation and
formulation of marketing strategies.

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• It determines the value systems of the
society.
• Social factors are caste, customs,
conventions, cultural heritage and
respect for seniority, etc.
• Social environment has the following
dimensions:
1. Changes in people’s life styles
2. Concern for social problems and
3. Growth of consumerism

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• Higher expenditure on R and D
• Concentration of product improvement
and development
• Accelerating pace of technological change
• Greater emphasis upon the regulation of
technological change

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• Marketer has to operate his business in a
given the political environment and his
operations are affected by the
government programmes at different
levels.
• Changes in political climate leads to
changes in Govt. policies.

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Political Changes:
• Stable government leading to very few policy changes
• Frequent changes in government leading to frequent
changes in policies
• Cyclical changes
Political factors to be considered by the marketers
• Role of private sector in the economy
• Government procedure and changes in government
policies
• Type and stability of government
• Role of small scale sector in the economy
• Role of service sector in the economy

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• Marketing decisions are strongly affected
by laws pertaining to competition, price
setting, distribution arrangements,
advertising, etc.

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Laws Affecting Business are:
• Essential commodities act – 1955
• The Companies Act - 1956
• Environment protection act - 1986
• Consumer protection act – 1986
• Securities and Exchange Board of India Act –1992.
• Taxation laws