What is Business?

• It is a continuous production and distribution of

goods and services with the aim of earning
profits under uncertain market conditions.
• It is a form of regular activity conducted with an
objective of earning profits for the benefit of those
on whose behalf the activity is conducted.
Objectives of Business
• Profit
• Growth
• Customer Satisfaction
• Employee Satisfaction
• Quality products and services
• Market Leadership
• Employment creation
• Service to Society...
BUSINESS ENVIRONMENT
• Business environment consists of individuals,
institutions and other forces which are outside
the control of a business but that potentially
affect is performance.
Characteristics of Business Environment
• Business environment is complex in nature.
• It is constantly changingprocess.
• It is different fordifferent business units.
• It has both long term and short term impact.
• Unlimited influence of externalenvironment
factors.
• It is very uncertain.
• Inter-related components.
• It includes both internaland external
environment.
 Types of Business Environment
• Mainly Business Environment divided into two
types. These are:
1. Internal Environment
2. External Environment
 Internal Environment
• The factors which can be controlled by
company or
• Primary factors which directly affect the
growth of organization….. men, material,
money, machines and management.
Types of Internal Environment
1. Value System
2. Mission & Objectives
3. Management Structure and Nature
4. Internal Power relationship
5. Human Resources
6. Company Image & Brand Equity …..
 External Environment
• Those factors which are beyond the control of
business enterprise are included in external
environment.
• External Environment is divided into two parts
1. Micro Environment: The environment which
is close to business and affects its capacity to
work is known asMicro Environment.
2. Macro Environment: It includes factors that
create opportunities and threats to business
units. Following are the elements of Macro
Environment.
Micro Environment
• Suppliers
• Customers
– Wholesalers
– Retailers
– Industries
– Government and Other Institutions
– Foreigners
• Market Intermediaries
– Middleman
– Marketing Agencies
– Financial Intermediaries
– Physical Intermediaries
• Competitors
• Public
 Macro Environment
• Economic Environment: It is very complex and
dynamic in nature that keeps on changing
with the change in policies or political
situations. It has three elements:
– Economic Conditions of Public
– Economic Policies of the country
– Economic System
– Other Economic Factors: Infrastructural Facilities, Banking,
Insurance companies, money markets, capital marketsetc.
 Macro Environment
• Non-Economic Environment: Following are
included in non-economic environment:
1. Political Environment: It affects different
business units extensively. Components are
• Political Belief of Government
• Political Strength of the Country
• Relation with othercountries
• Defense and Military Policies
• Centre State Relationship in the Country
• Thinking Opposition Parties towards BusinessUnit
 Macro Environment
2. Socio-Cultural Environment
– Influence exercised by social and cultural factors, not within the
control of business, is known asSocio-Cultural Environment.
– These factors include: attitude of people to work, family
system, caste system, religion, education, marriage etc.
3. Technological Environment
– A systematic application of scientific knowledge to practical
task is known as technology.
– Everyday there has been vast changes in products, services,
lifestyles and living conditions, these changes must be analysed
by every business unit and should adapt these changes.
 Macro Environment
4. Natural Environment
– It includes natural resources, weather, climatic conditions,
port facilities, topographical factors such as soil, sea, rivers,
rainfall etc.
– Every business unit must look for these factors before
choosing the location for theirbusiness.
5. Demographic Environment
– It is a study of perspective of population i.e. its size,
standard of living, growth rate, age-sex composition, family
size, income level (upper level, middle level and lower
level), education level etc.
– Every business unit must see these features of population
and recognize their various needs and produce accordingly.
Macro Environment
6. International Environment
– It is particularly important for industries directly
depending on import or exports.
– The factors that affect the businessare
• Globalization
• Liberalization
• Foreign business policies
• Cultural exchange
Components of BusinessEnvironment
Evaluating the Environment

Potential
Entrants

Existing
Supplier Competitions Buyer

Substitutes
 Characteristics

Impact of Importance
Govt. policy
Business
Environment

Economic Dimensions
Environment
 CHARACTERISTICS
• Totality of external forces.
• Specific and General forces.
• Inter-related.
• Dynamic nature.
• Uncertain.
• Complex
• Relative.
IMPORTANCE
• Identify opportunities and give first mover
advantage.
• Identify threats and give warning signals.
• Tap useful resources.
• Cope with rapid changes.
• Assist in planning and policy formulation.
• Improves performance.
DIMENSIONS
Legal

Technological Political

Dimensions

Economic Social
 Legal Environment
• Legislations passed by:
▫ Parliament
▫ Court
▫ State

• Rules or laws of a country

Political Environment
• Constitution of the country
• Prevailing political system
• Political ideology of ruling party
• Extent and nature of Government intervention
in business.
• Nature of relationship of our country with
foreign countries.
• Nature and profile of political leadership
 Social Environment
• Concern with quality of life
• Life expectancy, birth and death rates
• Expectations from the workforce
• Education system and literacy rates
• Consumption habits
• Consumer preference
• Festivals, religious beliefs
Economic Environment
• Relative role of Private and Public sectors
• Rate of savings and investments
• Volume of imports and exports
• Money supply in the economy
• Balance of payments and changes in foreign
exchange reserves
• Agricultural and industrial production trends
• Growth rate of GNP and Per Capita Income
Technological Environment
• Research and development activities
• Innovations in products and processes
• Import and export of technology
• New equipments
• Innovations in scientific and engineering fields
• New ways of communication
ECONOMIC ENVIRONMENT IN INDIA

• Privatisation

• Globalisation

• Liberalisation
Privatisation
• Means giving greater role to private sector in
nation building process and reducing the role of
public sector.
• Planned disinvestment
• Dilution of stake of govt. in public sector.
• If dilution of govt. ownership beyond 51% , it
would result in transfer of ownership and
management to private sector.
Globalisation

• Means integrating the various economies of the

world, leading towards emergence of a cohesive
global economy. Implies a boundary-less world
where:
▫ Free flow of goods and services across nations.
▫ Free flow of capital across nations.
▫ Free flow of information and technology across
nations.
▫ Free movement of people across borders.
Liberalisation
• Means freeing the Indian business and industry from all
unnecessary controls and restrictions.
• Abolishing licensing.
• No restrictions on expanding or contraction of business
restrictions.
• Removal of restrictions on movement of goods and services.
• Freedom in fixing prices of goods and services.
• Reduction in tax rates.
• Lifting of unnecessary controls on economy.
• Simplifying procedures for import and export.
• Making it easier to attract foreign capital and technologies to
India.
IMPACT OF GOVT. POLICY CHANGES
• Increasing competition
• More demanding customers
• Rapidly changing technological environment
• Necessity for change
• Need for developing human resources
• Market orientation
• Loss of budgetary support to the Public sector
Industrial Policy
• Meaning
– Is an important document.
– Government’s policy towards industries.
• Why industrial policy?
– To prevent the imbalances in the development of
industries.
– To demarcate areas among the public and private
sector.
– To direct the flow of scarceresources.
– To prevent the wasteful use of scarceresources.
Industrial Policy
• It indicated the respective roles of the public,
private, joint and cooperative sectors; small,
medium and large scale industries and
underlined the national priorities and the
economic development strategy.
• It also expressed government’s policy towards,
foreign capital and technology, labour policy,
tariff policy etc., in respect of the industrial
sector.
Industrial Policy
• Government’s policy towards industries.
• The industrial development, and thereby the
economic development to a very significant
extent, has been guided, regulated and
promoted by the industrial policy.
Industrial Policy, 1991
• Objectives of the policy

– Tomaintain the sustained growth in productivity.

– Toachieve optimum utilization of humanresources.

– Toattain the international competitiveness.

– Toenhance gainfulemployment.

– Toabolish the monopoly of any sector in any fieldof

manufacture except on strategic or securityground.
Initiatives in the following area
• Industrial licensing

• Foreign investment

• Foreign technology agreement

• Public sector policy

NEW INDUSTRIAL POLICY
• De-licensing
• Decrease in role of Public sector
• Disinvestment
• Liberalisation of foreign capital
• Liberal policy for technical collaboration
• Setting up of FIPB
• De-reservation under small scale industries
 Diversification
Spree

Sharply
Improve
Compensation Joint Ventures
Levels

Managerial
response to
changes in
business env

Customer
Brand Building
Focus

Use of Latest
Technology
DEMONETISATION
 What Is Demonetization?
“Demonetization is the withdrawal of a
particular form of currency from circulation.”
It is a process by which a series of currency
will not be legal tender.
The series of currency will not acceptable as
valid currency.
 What Happenedin
Demonetization?
On 8th November 2016, Government of India had
announced that from today onward rupees 500
and 1000 rupee note will not be a legal tender.
Means that 500 and 1000 rupee notes will not be
accepted by anyone except the organization
declared by the government.
Public can deposit and change the currency from
the banks and post offices till 30th December
2016.
 Demonetization Historyand
Background In India?
This is not the First time, When Indian Currency
is Demonetized in India .
Earlier it was done in 1946 with the complete ban
of Rs. 1000 and Rs. 10000 Notes to deal with the
unaccounted money i.e. Black Money.
Second time, it was done in 1978 by Govt headed
by Morarji Desai when Rs. 1000, Rs. 5000 and Rs.
10000 Notes were demonetized.
Making India A Cash less Society .
 What are the causesof
Demonetization?
There can be many causes of Demonetization in
any economy such as :
 Black Marketing
 Corruption

 Fake currency in the economy etc.

 Accumulation of Black Money

 Tax Evasion
 Tax
administration
measure

Aims to create a
Measure to
less cash or
cash lite Features improve tax
compliance
economy

Channelising of
savings into
formal financial
system
Impact of Demonetisation
• Money/ Interest Rates
▫ Decline in cash transactions
▫ Increase in bank deposits
▫ Increase in financial savings
• Private Wealth
▫ Declined since some high denomination notes
were not returned.
▫ Real estate prices fell.
• Public Wector Wealth
▫ No effect
• Digitalisation
▫ Online transaactions increased. (RuPay, AEPS)
• Real Estate
▫ Prices Declined
• Tax Collection
▫ Increased due to increased disclosure.
Thank You!!