UNIT-1 BUSINESS ENVIRONMENT

BUSINESS

Business may be understood as the organized efforts of an enterprise to supply consumers with goods and service for a profit.

Business vary in size as measured by the number of employees or by sales volume. Large organizations such as steel authority of India ltd and Tata and iron and steel company ltd count their
employees in the hundred thousands and their sales revenue in thousands of crores.

Whether a business unit has one or two people working at home ,1000 employed in a factory or 10000 operating in a multiple units spread across the country, all business share the same
purpose ;to earn profits.

The purpose of business goes beyond earning profit. It is an important institution in society. Be it for the supply of goods and services; creation of job opportunities ;offer better quality of life or
contributing to the economic growth of the country and putting it on the global map ;the role of business is crucial .society can not do with out business .it needs no emphasis that business
needs society as much.

"Business may be understood as the organized efforts of enterprises to earn profit "

CHARACTERISTICS OF BUSINESS

When we describe the characteristics of a business we keep in mind about the indian business The Indian business has something interesting and unique features such as transition,
competition, oppportunities , globalisation , technology and information.

transition

competition
information

business

technology opportunities

globalisation

Business in transition- For a long time, business in India was conducted in sheltered markets covering up inefficiencies ,low productivity and high cost. Then came 1990s,which lifted all
protectionist measures. This followed by increase globalization, changed the scenario altogether.

Pressure of competition-As stated above ,Indian businesses are competing among themselves and are exposed to competition from foreign firms. Competition though unwelcome to managers
,is a boon to customers.

Opportunities- opportunities means a time or place favorable for executing a purpose or goal. Though Indian business faces stiff competition ,it also has a plenty of opportunities which can be
exploited to ones advantage.bpo ,call centre's it and private banking are the new names that are doing round a business.

Globalization-Going international is yet another trend followed by modern business houses. Political boundaries are no barriers to business. Production facilities are being set up in different
countries and products are being sold through a global network.
Technology-Business is characterized by increasing use of technology. The impact of technology on business is pervasive. The way production function is organized, the way products are
marketed: the way employees are hired and motivated ,the way finance function is carried on and the way managers and sub-ordinates communicate with each other all are influenced by
technology.

Information-another feature of business is the need for information as for the smooth functioning of an organization , the manager needs the updated data so as to carry all the activities.

BUSINESS OBJECTIVES-

profit
quality
products
power and
services

growth challenging
BUSINESS
GOALS

employee
satisfaction
joy of
and creation
developme
nt

market service to
leadership society

1. Profit - Making profit is the primary goal of any enterprise. Profit is the excess of income over expense. Profit is the main incentive ,motivator , strong sustainer .profit enables a
businessman to realize his other objectives too.

2. Growth-growth is another primary objective of business. business should grow in all directions over a period of time. The strategies adopted to achieve growth are-

 add more products

 diversify into new areas

 integration-forward or backward

 increase market share

 cut down costs and increase productivity.

3. Power-business houses have vast resources(in the form of money, materials ,men .these resources confer enormous economic and political power on owners and managers of
business ventures.

4. Employee satisfaction and development-as per Chinese proverb-

"if you want to plan for a year, plant corn. If you want to plan for 30 years, plant a tree. But if you want to plan for 100 years ,plant men."

caring for employees continues to be an important aspect of management.

5. Quality products and services-providing quality products and services is yet another objective of business. The organization who works on providing goods and services as per
quality can only survived in this era. persistent quality of products earns a brand loyalty, a vital ingredient of successes- Hindustan unilever is flourishing mainly because of the
quality of its products some of its products like liril, vim, lifebuoy,surf,rin,close-upetc have become house hold names through out the country.

6. Market leadership-To earn market leadership is yet another objective of business to earn a niche for oneself in the market ,innovation is the key factor. Innovation may be in
product , advertising,distribution,finance or in any other field.

Challenging-business offers a vast scope and poses challenges success in a business.

8. Joy of creation-it is through business strategies new ideas and innovations are given a shape and are converted into use full products and services for the benefit of customers.
 9. Service to society-Business is A part OF society and has several obligations towards it. some of them are as follows-

 providing safe and quality goods at reasonable prices.

 providing employment.

 maintaining and protecting ecology.

 supporting less privileged sections of people in society like

 scheduled castes and scheduled tribes, the physically handicapped women and children.

10. GOOD CORPORATE CITIZENSHIP-Good corporate citizenship implies that the business unit complies with the rules of the land ,pay taxes to the government, cares for its
employees and customers.

What is Environment?
Environment literally means the surroundings ,external forces ,external objects ,influences or circumstances under which something exists. the environment of any organization is
the aggregates of all conditions ,events and influences that surround and affect it. Since an environment influences an organization in many ways hence its understanding is
important. The concept of environment can be understood by looking at external forces which have a bearing on the functioning of business.
Business environment is a set of political, economic, social and technological (PEST) forces that are largely outside the control and influence of a business, and that can potentially
have both a positive and a negative impact on the business.
A business, constitutes of two types of factors viz,, internal and external

by the firms general environment it is composed of those elements that are outside the firm but more or less influence the decisions of the company if you are going to take a long
term decisions. This environment is also termed as the external environment. General environment consists of the six elements over which you have no direct control .

These segments are demographic, economic, political/legal , socio- cultural , technological and global.

1. Demographic Segment-Demographic segment includes forces such as the population , age, structure, geographic distribution ,and income distribution. All these forces play a vital
role in strategic management and strategy decision - making. It is important to consider all these forces. Determining the number of people residing in a particular geographic area
will help the organization to detect the market opportunities in that particular region.
2. Economic segment-the economic segment is the most significant environmental force for business organizations, study of economic environment helps the organization to detect
the possible market and low -cost resources. The economic segment includes inflation rates, interest rates, personal savings, currency value, unemployment level, gross domestic
product.
3. Technological environment-Technological is another important aspect of external environment that affects the organization in its strategic management process. Technological
segment may be the determining factor for organization expansion and its scope in the market. Company's existence often depends on its ability to stay on the cutting edge of
technology. For example-Singapore is one of the countries which offer high technology in the area of telecommunications and computer machines.
4. Legal/political segment-political segment is another major segment of the external environment. it is not necessary that the company will get the good returns on its investments
even though there are favorable conditions of the country. Legal aspect is the important segment so as to perform the company well.
5. socio- cultural segment- social and cultural segment is another important aspect of external environment. Companies may face problem if they do not consider local societies and
cultures.socio- cultural forces are related to the work force diversity, religious ,traditions , career preferences , attitudes , languages, lifestyles and other basic variables.
6. Global-in the present business is not limited to the domestic country only but now the companies are generating revenues by treating the world as a whole market.for this they are
doing business globally. hence , they are selling their products in another countries.

LEVELS OF STRATEGY

It is worth stressing that strategy exists at different levels in the organization .once managers have determined "what is our business ,what will it be and what should it be and what should it be?
then they have a basis for setting challenging but achievable goals.

Corp
orat
e
strat
egy

Business strategy

Functional strategy
 1. CORPORATE LEVEL STRATEGY

it is the process of defining overall character and purpose of the organization ,the business it will enter and leave and how resources will be distributed among those businesses. Strategy at this
level is typically developed by top management(the board of directors, CEO etc).the decisions are broad based , carry greater risk and affect most parts of the organization(the type of business
that the organization should enter ,changes required in growth strategy ,acquisition and diversification strategy)

2. BUSINESS LEVEL STRATEGY

it is the planning process concerned primarily with how to manage the interests and operations of a particular unit within a organization, commonly known as strategic business unit
(SBU).a strategic business unit is a distinct business with its own set of competitors ,that can be managed reasonably independently of other business within the
organisation.generally the heads of the respective business units develop business strategies ,with the approval of top management. Strategies at this level are aimed at deciding
the competitive advantage to build , determining responses to changing market situations ,allocating resources within the business unit and co-coordinating functional -level
strategies developed by functional managers.
3. FUNCTIONAL LEVEL STRATEGY-it is the process of determining the policies and procedures for relatively different functions of an enterprises like marketing, finance ,human
resource etc. these are developed by functional managers and are typically reviewed by business unit heads.

Features of a Strategy-

1. Strategy is all about winning.

2. Strategy offers broad guidelines.
3. Strategy is foreword looking.
4. Strategy's life span is limited.
5. Strategy is generally a product of top management thinking.
6. Strategy is dynamic and flexible programmed of action.
ELEMENTS OF STRATEGY

goals

scope logic

competitive
advantage

Strategy should have four elements-

I. GOALS-A strategy invariably indicates the long term goals toward which all efforts are directed. For example-long term goals might be to dominate the market ,to be the technology
leader or to be the premium quality firm. Such goals help employees give their best in a unified manner and enable the firm to specify its competitive position very clearly to its rivals.
II. SCOPE- strategy defines the scope of the firm that is ,the kind of products the firm will offer ,the markets it will pursue and the broad areas of activity it will undertake .it will ,at the
same time throw light on the activities the firm will not undertake.
III. COMPETITIVE ADVANTAGE-A strategy also contains a clear statement of what competitive advantages the firm will pursue and sustain. Competitive advantage arises when a firm
is able to perform an activity that is distinct or different from that of its rivals.
IV. LOGIC-This is the most important element of strategy. For example-a firms strategy is to dominate the market for inexpensive detergents by being the low cost, mass market
producer. Here the goal is to dominate the detergent market, the scope is to produce low cost detergent powder for the Indian mass market. The competitive advantage is the firms
low cost. Yet this example does not explain why this strategy will work. Why the firm will get ahead of others by limiting its scope and by being the low cost producer in the detergent
industry. The why is the logic of the strategy. To see how logic is the core of a strategy ,consider the following expanded version of a strategy:"our strategy is to dominate the Indian
market for inexpensive detergent powder by being the low cost producer selling through mass market channels. Our low price will generate high volumes. This in turn will makes us
a high volume ,low cost producer. The economies of scale would help us to improve our bottom line even with a low price.

STRATEGIES VS TACTICS
Strategy is a comprehensive plan designed to ensure that the basic objectives of an enterprises are achieved. It includes determination of a specific course of action that is capable
of meeting competition as well as fulfilling an enterprises objectives. It is action based and more specific than objectives.
To achieve clarity ,managers now a days talk about four types of strategies:
 MAST
ER
STRAT
EGIES

PROGRAMME STRATEGIES

SUB-STRATEGIES

TACTICS

MASTER OR GRAND STRATEGIES- it cover the entire pattern of an organizations objectives, policies and specific resources deployment. These are called as the grand strategies. These
strategies are derived from a careful situational analysis of the organization and its environment.

PROGRAMMED STRATEGIES-These are more specific and are concerned with the deployment of resources to achieve basic organizational objectives.

PROGRAMMED STRATEGIES-These are more specific and are concerned with the deployment of resources to achieve basic organizational objectives.

SUB-STRATEGIES-These are more detailed than programmed strategies and focus on the attainment of specific objectives.

TACTICS-These are the action plans of specific, step by step methods by which strategies are executed. Tactics convert

the philosophy of management into practice and force the enterprise to go down to the nuts and bolts of its operations. Tactics are formulated at the supervisory level and their primary focus
is on implementing policy decisions taken at the top level. They are short term in nature and mainly concentrate on people and their actions.

Difference between strategies and tactics are given below-

STRATEGIES TACTICS

 Developed by management Employed and related to l

lower level
 Generally the focus is on long term the focus is on short term
 Uncertainty level is quite high decisions are more certain
 Affect various parts of an organization reach is limited to only
specific segments

hence we can say that tactics are nothing but sub-strategies developed at lower level.

VISION- The dictionary meaning of vision is" the act or power of anticipating that which will or may come to be". A vision is a broad explanation of why the firm exists and where it is trying to
lead. The vision provides the point of reference. The vision seeks to answer the following questions-

 Where do we go from here?

 What changes lie a head in the business landscape?

 What difference will these changes make to the company's present business?

Hence a vision gives the organization a sense of purpose and a set of values that unite employees in a common destiny. The most common vision is the one that inspires and this inspiration
often takes the form of asking for the best, the most or the greatest. The most effective vision is the one that inspires and this inspiration often takes the form of asking for the best.The vision of
an IT company is

"To be a globally respected corporation that provides best of breed business solutions ,leveraging technology, vendors and society at large."
MISSION- A Mission statement outlines the fundamental purpose of the organisation.a vision becomes tangible as a mission statement .if the vision statement answers the question "where do
we go from here ? The mission statement answers "what is our business"?

 A mission statement typically gives the organization its own unique identity, business emphasis and a path for development. A mission statement incorporates four elements:

 Customer needs, or what is being satisfied.

 Customer groups, or who is being satisfied.

 The company's activities, technologies and competencies or how the firm goes about creating and delivering value to customers and satisfying their needs.

 The company's concern for survival, its philosophy , its self- concept and its concern for public image.

The mission statement of any companies are as follows-

"To achieve our objectives in an environment of fairness, honesty and courtesy towards our clients, employees ,vendors and society at large".

Objectives-

Mission statements are more specific than a vision statements, but are not to be taken as concrete directions for action. Objectives render mission statements more concrete. In other words,
mission statement seek to make a vision more specific and objectives are attempts to make mission statements more concrete.

Thus , objectives therefore represent the operational side of an organization.

It may be stated that a typical business seeks to achieve more than one objective and hence the objectives vary with passage of time.

Business Policy

The term business policy comprises of two words-Business And Policy.

business- business means exchange of commodities and services for increasing utilities.

policy-policy means guidelines or limits within which individuals and organizations must work to cherish the desired goals.

According to Dale and Yoder,

"A management policy is a predetermined selected course established as a guide towards accepted goals and objectives. Policies established the frame work of guiding principles that facilitate
delegation to lower levels and permit individual managers to select appropriate tactics or programmes".

According to Edmond and gray-

"A business policy is nothing more than a well developed statement of directions and goals. Goals involve definitions of precisely what the business is or should be and the particular kind of
company it should be. Direction guides the action of the firm to accomplish these goals."

Features of a business policy-

 Policies are general statements of principles for the attainment of objectives which serve as a guide to action for the executives at different levels.
 Policies have a hierarchy i.e. For each set of objectives at each level of management their is a corresponding set of policies.
 The policies delimit the area within which a decision is to be made .
 Policies in general are meant for mutual application by sub-ordinates. They are framed to suit a specific situation to which they are applied.
 Policies serve an extremely useful purpose. They avoid confusion and provide clear-cut guidelines at all levels to sub-ordinates
Functions of business policy-
 business policy establishes parameters within which business decisions are to be made.
 business policy serves as the most useful co-ordination technique since it guides the general direction of activities and decisions.
 business policy provides an effective means of communication among the various groups and organizational units
 policy guidelines play a crucial role in developing executives by establishing the parameters wit which decisions have to be taken.
Qualities Of A Business Policy-
 It must be as per the objective of the firm.
 It should prescribe the methods of accomplishment in broad terms.
 It must prescribe criteria for current and future action.
 It must be stable but amendable as per business requirements and economic conditions.

Types of policies-
 different kinds of policies are brought out from different sources from time to time .if the sources of a policy originate from the top level ,it is known as originated policy. If with the
help of originated policy something else is derived ,what is derived out of the originated policy is known as derived policy.
when the workers are dissatisfied with the management policy they may call it as biased policy. When a local self government or the state government designed any policy ,it is
called as the public policy.
every business keeps its trade secrecy as very confidential ,and then it is called as private policy.
if the measures are simply stated it is known as the general policy.
the policy coming from the top communicated to the middle and lower grade staff is termed as top down policy.
bottom-up policy speaks of the policy matters generating from the lower ranks and conveyed through the supervisors and ultimately reaches to the top management.
importance of business policy-

 It Helps In Solving Business Problems.

 It Helps In Providing Stability.
 It Helps A Manager To Improve His Managerial Powers.
 It Helps In Administration.
 It Helps In The Optimum Utilization Of The Resources.
 It Ensures Consistency.
 It Helps In Determining The Specific Routes.
Limitations of business policy-