Business environment:the definition of business environment, “the sum total of all individuals, institutions and other forces(like suppliers, competitors, consumer groups, media, government, customers, economic conditions, market conditions, investors, technologies, trends) that are outside the control of a business enterprise but the business still depends upon them as they affect the overall performance and sustainability of the business.”For business we need….. • Finance • Social norms • Proper market conditions • The sale of products/services • The labour • Natural resources and raw material • Legal support Concept of business: • Profit concept of business • Profit –cum-service concept of business Importance of business environment: • Identifying firm’s strength and weakness: • Determining opportunities and threats: • Giving direction for growth: • Continuous learning: • Meeting competition:

2. *What do you mean by
Business Environment??
MEANING: The term Business Environment is composed of two
words ‘business’ and ‘environment’. In simple terms, the state in
which a person remains busy is known as business. On the other
hand, the word ‘Environment’ refers to the aspects of surroundings.
Therefore, Business Environment may be defined as a set of
conditions – Social, Legal, Economical, political or Institutional
that are uncontrollable in nature and affects the functioning of
organisation.

3. Importance Of Business Environment.
 Firm to identify Opportunities and getting the first mover advantage. E.g. Maruti for small cars.
 Firms to identify threats and early warning signals. E.g.. Multinational entering Indian market.
 Continuous learning: Environmental analysis makes the tasks of managers easier in dealing
with business challenges.
 Meeting competition: It helps the firms to analyse the competitors strategies and formulate their
own strategies accordingly.
 Identifying firms strengths and weaknesses.

4. a)Business environment is compound in nature.
b)Business environment is constantly changing process.
c) Business environment is different for different business units.
d)It has both short term and long term impact.
e) It is very uncertain.
f) It includes both external and internal environment.
g) Inter – related components.
h)Unlimited influence of the external environment factors.

5. Types of business environment.
 On the basis of the extent of intimacy with the firm, the environmental
factors may be classified in to different types or levels. As indicated BELOW,
there are, broadly, two types of environment, the internal environment, i.e.,
factors internal to the firm and external environment, i.e., factors external to
the firm which have relevance to it.
BUSINESS
DECISIONS
External environmentINTERNAL ENVIRONMENT

6. INTERNAL ENVIRONMENT
INTERNAL ENVIRONMENT INCLUDES 5M’S THAT IS ….
1.MAN
2.MACHINE
3.MONEY
4.MACHINERY
5.MANAGEMENT.
BUSNIESS CAN MAKE CHANGES IN THESE FACTORS
ACCORDING TO THE CHANGE IN THE FUNCTIONING OF
ENTERPRISE.

7. EXTERNAL ENVIRONMENT.
 The external factors, are those factors which are beyond the control of a
company. The external environmental factors such as the political factors,
sociocultural factors, government and legal factors, demographic factors, geo-
physical factors etc.; are, therefore, generally regarded as uncontrollable factors.
 Some of the 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..

8. Micro environment
 Microenvironment is an internal part of a company.. It is very
close to the business and effects its capacity to work.
 It consists of :
• Suppliers
• Employees
• Marketing Intermediaries
• Customers
• Competitors
• Publics

9. Micro
environment
Market
intermediate
Employees
Suppliers
customers
competitors
public

10. SUPPLIERS
 Suppliers provide products and services needed to add value to own
product and services.
 These services must be provided on time and should meet ones
specifications of quality.
 If requirements are not met then the production as well as the quality
suffers. It also changes the perception of a customer to some extent.
1) A supplier should be reliable.
2) There should be more than one supplier in a company.
IMPORTANT

11. The ‘TOYOTA’ Case
 During 2009 – 2011 , Toyota had to recall nearly 10
million vehicles all around Europe as the
accelerators were not working properly.
 It was because the supplier had supplied faulty
mechanical accelerators.
 Due to the faulty accelerators there were many
accidents out of which nearly 37 were fatal and
ended in death.
 Out of 10 million cars nearly 7 million were Toyota
Camry and Corolla.
 Toyota repaired all these cars and sent them back
to their owners , but they lost the trust of the
customers.

12. Market Intermediaries
 Market intermediates work as a link between .business and final consumers.
 It IncludeS
 The middlemen and merchants who “help the company find customers or close sales
with them”
 Physical distribution firms which “ assist the company in stocking and moving goods
from their origin to their destinations”
 Marketing service agencies which “assist the company in targeting and promoting its
products to the right markets”

13. Customers.
 CUSTOMERS are the king of market. Success of business depends
upon the level of their customer’s satisfaction.
 E.g. Toyota cars in year 2002 had issues with its clutch system. They
recalled the faulty cars and resolved the issue. It was expected
because of this the market share will fall for Toyota but nothing
happened. Why??? Because their previous experience with Toyota
products or services means they're more likely to opt for Toyota after
the problem is resolved.
 Types of customers:
1.wholesaler
2.retailer
3.industries
4.government and other institutions.

14. Every company faces a wide range of competitors.
The competitors affect the business's profits by trying to take business
away from them.
Their activities affect business’s profits.
Every move of the competitors effects the business.
 Companies must gain a strategic advantage by positioning their products
and services against their competitors in the minds of their customers..
If a company provide better products for a lower cost -- and possibly faster
-- than its competition, then that company can compete with them in ways
they may not be able to match.

15. Publics
 Publics mean any group who has actual interest in business
enterprise .
 Why should you care about Publics? It's simple. Publics can help,
or hinder your ability to get your message out to your customers,
and collect value from them.
 Publics can be categorized to :-
• Financial Publics
• Media Publics
• Government Publics
• Local Publics
• General Publics
• Internal Publics

16. Macro Environment
 A company and the forces in its micro environment operate in a
larger macro environment of forces that shape opportunities
and pose threats to the company. The macro forces are,
generally, more uncontrollable than the micro forces. When the
macro environment is uncontrollable, the success of a company
depends on its adaptability to the environment.
 For example: if the cost of the imported components increases
substantially because of the depreciation of the domestic
currency, a solution may be their domestic manufacture.

18. Economic Environment
 There is close relationship between business and its
economic environment. Business obtains all its needed
inputs from the economic environment and it absorbs
the output of business units.
 It is very complex and dynamic in nature that keeps on
changing with the change in policies or political
situations.

19. Non-economic environment.
.
 The non-economic environment exercises a strong
influence on business. Normally the non-economic
environmental factors are the key factors for all kinds of
business activities.
 Following are included in the non economic environment:
Technological environment
Socio-culture environment
Natural environment
Political environment

20. Technological Environment
 Technology is understood as the systematic application of scientific or other
organized knowledge to practical tasks. Technology changes fast and to keep
pace with it, businessmen should be ever alert to adopt changed technology in
their businesses.
 It relates to the scientific improvements and innovations proving newer and
better methods of operating business. A businessman has to monitor regularly
the technological changes taking place in his industry and Implementing them
so that he can remain in the business.
 The adaptation of latest technology benefits in two ways……….
1. product can be sold at a cheaper price
2.over of S.P is reduced its adds to the profitability of the organisation.

21. Social and cultural environment:
 It refers to desires, attitudes, expectations, education, beliefs,
historical backgrounds, standards of education etc. This social
environment is reflected through the social institutions, social
groups, the values and accepted behaviour pattern 0f the people.
 Cultural environment includes customs, traditions, religions etc. The
demand for products is affected by these cultural factors.

22. .
Natural environment:
• Natural environment is a state in which all
living and non-living things occur in a
particular region.
• It includes natural resources, weather,
climatic conditions, topographical factors
such as soil, sea, river, rainfall etc.

23. Political environment:
 Business & politics are closely related to each other. Every business has to
function within the political framework of the country.
 Political factors or environment refers to three political institutions such
as legislative, executive and judiciary. The legislature decides on a
particular course of action and the government is the executive to
implement whatever decided by the parliament. The judiciary has to
ensure that both the legislature and executive function are in the public
interest and within the constitution.