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BBA - 112 Business Environment

The document discusses the business environment and defines it as all external factors that influence business operations and decision-making. It notes that the business environment consists of internal and external factors. The external environment includes micro factors like customers and competitors as well as macro factors like economic and political conditions. Understanding how businesses interact with their environment helps them identify opportunities, threats, and adapt their strategies accordingly.

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Rishab Jain 2027203
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260 views17 pages

BBA - 112 Business Environment

The document discusses the business environment and defines it as all external factors that influence business operations and decision-making. It notes that the business environment consists of internal and external factors. The external environment includes micro factors like customers and competitors as well as macro factors like economic and political conditions. Understanding how businesses interact with their environment helps them identify opportunities, threats, and adapt their strategies accordingly.

Uploaded by

Rishab Jain 2027203
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Business Environment

BBA -112 Business Environment 12/11/2017


Concept
2

 The total of all things external to firms and industries


which affect their organisation and operation – Bayord O.
Wheeler
 Business environment encompasses the climate or set of
conditions, economic, social, political or institutional in
which business operations are conducted – Arthur M.
Weimer
 Thus, business environment means all those factors that
have an impact on business.

BBA -112 Business Environment 12/11/2017


Nature of Business
3 Environment
 Aggregative: totality of all external forces which influence the
working and decision-making of an enterprise.
 Inter-related: different elements of business environment are
closely inter-related and interdependent. A change in one element
affects the other elements.
 Dynamic: keeps on changing from time to time
 General and specific forces: general forces such as economic,
social, political, legal , natural and technological. Specific forces
such as investors, customers, competitors etc.
 Relative: a relative concept. Differs from country to country
 Inter-temporal: it changes over time
 Uncertain: difficult to forecast the future environment.
 Contextual : business environment provides the macro framework
within which the business firm operates.

BBA -112 Business Environment 12/11/2017


Significance
4

 Knowledge of environmental changes is very helpful in


the formulation and implementation of business plans. A
business can obtain this knowledge through
environmental scanning.

 Environmental scanning is a process by which


organizations monitor their relevant environment to
identify opportunities and threats affecting their business.

BBA -112 Business Environment 12/11/2017


Significance
5

 Some of the direct benefits of understanding the environment


are given below:
• First mover advantage: awareness of environment helps an
enterprise to take advantage of early opportunities instead of
losing them to competitors.
• Early warning signal: environmental awareness serves as an
early warning signal. It makes a firm aware of the impending
threat or crisis so that the firm can take timely action to
minimize the adverse effects, if any.
• Customer focus: environmental understanding makes the
management sensitive to the changing needs and
expectations of consumers.

BBA -112 Business Environment 12/11/2017


Significance
6

 Strategy formulation: environmental monitoring provides


relevant information about the business environment which serves
as the basis for strategy making.
 Change agent: business leaders create a drive for change at the
grass root level. In order to decide the direction and nature of
change, the leaders need to understand the aspiration of people and
other environmental forces through environmental scanning.
 Public image: a business firm can improve its image by showing
that it is sensitive to its environment and responsive to the
aspirations of public.
 Continuous learning: environmental analysis keeps them in touch
with the changing scenario so that they are never caught unaware.
Knowledge of changing environment can keep the organization
dynamic in its approach.

BBA -112 Business Environment 12/11/2017


Types of business environment
Business firm
7

Internal External
environment environment

BBA -112 Business Environment 12/11/2017


Internal environment
8

 Refers to all factors existing within a business firm.


 Controllable factors
 Internal environment imparts strengths or causes
weaknesses.
 Example: a company can modify or alter its organisation
structure, policies, programmes, personnel, physical
facilities and marketing mix to suit the changes in the
environment.

BBA -112 Business Environment 12/11/2017


Internal environment
9

 Main internal factors which influence the business decisions are:


• Culture - values, beliefs and attitudes of the founders and top management
• Mission and objectives- the business philosophy and purpose of a company guide its priorities, business
strategies, product market scope and development process.

• Top management structure- the composition of board of directors, the degree of professionalism of
management and the organizational structure of a company have important bearing on its business decisions.

• Power structure- the internal power relationship between the board of directors and the chief executive is an
important factor. The extent to which top management enjoys the support of shareholders and employees at
different levels also has an important bearing on decision making and working of the company.

• Company image and brand equity- the image and brand equity of the company plays a significant role in
raising finance, forming alliances, choosing dealers and suppliers, launching new products, entering foreign
markets etc.

• Human and other resources- the competence, morale and motivation of employees plays a vital role in the
success of the firm.

BBA -112 Business Environment 12/11/2017


External environment
10

 Consists of forces and factors outside an enterprise


 Uncontrollable external forces
 External environment creates opportunities and
threats for an enterprise.
 Example: a company has no control over national
income, social forces, government policies,
population etc.

BBA -112 Business Environment 12/11/2017


External environment
11
External environment

Micro Macro
environment environment

BBA -112 Business Environment 12/11/2017


Micro/ task environment
12

 Refers to those individuals, groups and agencies with


which the organization comes into direct and frequent
contact in the course of its functioning.
 Factors exercise a direct influence on the operations of the
enterprise.
 Consists of the groups in the company’s immediate
operating environment which have a stake in the
company

BBA -112 Business Environment 12/11/2017


Micro environment-
13 elements
 Customers
 Competitors
 Suppliers
 Marketing intermediaries
 Financiers
 Public
 Workers and trade union

BBA -112 Business Environment 12/11/2017


Macro environment
14

 Refers to the general environment or remote environment


within which a business firm and forces in its micro
environment operate.
 Company does not regularly or directly interact with the
macro env.
 Forces create opportunities for and pose threats to the
company.
 Less controllable factors

BBA -112 Business Environment 12/11/2017


Macro environment-
15 elements
 Political and legal environment
 Social and cultural environment
 Economic environment
 Financial environment
 Technological and physical environment
 Natural environment
 Global environment

BBA -112 Business Environment 12/11/2017


Coping with environmental changes
16

 Buffering- used to soften the impact of environment on


the organisation. Ex: stocking material, preventive
maintenance, employee training, building inventory
 Levelling- attempts to reduce fluctuations in the
environment.
 Anticipation- acquiring information about probable
changes in the environment.

BBA -112 Business Environment 12/11/2017


Coping with environmental changes
17

 Rationing- allocating organisational resources according


to a system of priorities.
 Dominating- facing the challenges and converting threats
into opportunities.
 Changing- an organization may change itself, its
operations and output.

BBA -112 Business Environment 12/11/2017

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