Business Environment

• What is Business Environment?

• What is internal Factor and External
Factor?
External Factors affects business decision making

How does it affect your decision making?

Upgrade oneself is important- political environment—social factor-legal factor-

What kind of incentives are given by the government for different sectors—
MSME– people who are working in this sectors---
Taxes– MSME – tax holiday
Electrical – subsidies
Tax- GSt will decrease---

Single window policy:

 Business Environment

• Understanding the Environment within which the business

has to operate is very important for running a business
unit successfully at any place.

• Be it its nature
• Its location
• Price of Products
• The distribution system
• Or the personal policies
External Factors for Business Environment
1. Political Factors
These are all about how and to what degree a government
intervenes in the economy.
This can include –
• Government policy, rigid- crowding out (more govt. and less pvt.)
• Political stability or instability in overseas markets,
• Foreign trade policy (import and export policy)
• Tax policy,
• Labour law,
• Environmental Law (2.46 billion metric tonnes of carbon or 6.8% of the
total global emissions)
• Trade restrictions and so on.

Political factors often have an impact on organizations and how they do business.
Organizations need to be able to respond to the current and anticipated future
legislation, and adjust their marketing policy accordingly.
 Example: Impact of Political Factors
Indian IT sectors
Two US Congressmen have reintroduced a bill to curb the
use of H-1B visas, on which the Indian IT sector is
particularly dependent
 
H-1B Visa Concerns: Top 4 IT Companies Lose 21,000
Crores In Market Value HCL Technologies, Infosys, TCS,
Wipro and Tech Mahindra falling up to 4.5 per cent. If the
bill is passed in the US, the operating margins of Indian
outsourcers will he hurt. 
2.Economic Factors

Economic factors have a significant impact on how an

organisation does business and also how profitable they are.

Factors include –
 Economic growth (GDP growth rate -1991- 3 % GDP growth
rate 6 to 7%),
 Interest rates,
 Exchange rates,
 Inflation – CPI and WPI indicators to measure inflation in the
country,
 Disposable income of consumers and
 Businesses and so on.
3. Social Factors

Also known as socio-cultural factors, are the areas that

involve the shared belief and attitudes of the population.

• Religion
• Population growth,
• Age distribution,
• Health consciousness,
• Career attitudes and so on

It is important for businesses to be aware of

these factors as they change because it is a very important
component in proper marketing.
Population Pyramids of the INDIA and USA from 1950 to 2100
Age Distribution
INDIA USA
Population Pyramids of the Pakistan and Saudi Arabia from 1950 to 2100
and Age Distribution

Pakistan Saudi Arabia

https://www.populationpyramid.net/saudi-arabia/2019/
4. Technological Factors
Technology is a broad term that refers to the means by which
we can adapt to our environment, control our environment,
and even change it
You can divide technology down into two broad categories:
Products and Processes. 
Technological products are meant for consumer
consumption
While technological processes are a means to make
and improve products and services.
4. Technological Factors

• New ways of producing goods and services

• New ways of distributing goods and services

• New ways of communicating with target markets

 4.Technological Innovation

 Amazon's Next Potential Game Changer: Drone Deliveries

 Zipline and Walmart to launch drone deliveries of health and wellness products

 Walmart tests drone delivery amid escalating Amazon battle

5.Environmental Factors
These factors have only really come to the forefront in the last
fifteen years or so

They have become important due to the increasing scarcity of raw

materials, pollution targets, doing business as an ethical and
sustainable company, carbon footprint targets set by governments
(this is a good example where one factor could be classed as
political and environmental at the same time).
India is the third-largest emitter of greenhouse gases and accounts for
2.46 billion metric tonnes of carbon or 6.8% of the total global emissions
These are just some of the issues marketers are facing within this
factor. More and more consumers are demanding that the products
they buy are sourced ethically, and if possible from a sustainable
source.
6.Legal Factors
• Product regulations
• Employment regulations
• Competitive regulations (MRTP Act)
• Patent infringements
• Health and safety regulations
Cont.
Legal Factors
Consumer law
The new Consumer Protection Bill, 2015 to be introduced in
Parliament will be much stronger, mature and sophisticated as
compared to the present law enacted in 1986.

Penalizing Celebrity endorsements for false and misleading Ads ,

product-liability ,
Setting up of a Central Consumer Protection Authority, Unfair
Terms of Contract and many other provisions .
Amity Law School student Paras Jain recovered Rs
15 lakh in damages from India’s first and biggest
fairness cream brand Emami, for causing
psychological hardship to his brother Nikhil Jain,
through its allegedly false claims of fairness,
reported The Telegraph.
 Punishment
A parliamentary panel has recommended a hefty penalty and
a jail term of up to five years to celebrities endorsing
misleading advertisements.

 Celebrities endorsing misleading ads can be fined up to

₹10 lakh..

• or repeat offences, the authority can impose a fine of

up to ₹50 lakh and a jail term of up to five years.
 7.Ethical Factors
The most recent addition to PESTEL is the extra E - making it
PESTELE or STEEPLE. This stands for ethical, and includes
ethical principles and moral or ethical problems that can arise in a
business. (PESTELE or STEEPLE analysis is a planning tool for
marketing strategies.
 Assessment
PESTLE Analysis
P for Political factors
E for Economic factors
S for Social factors
T for Technological factors
L for Legal factors
E for Environmental factors
E for Ethical Factors

PESTLE analysis, which is sometimes referred to as PEST

analysis, is a concept in marketing principles. Moreover,
this concept is used as a tool by companies to track the
environment they’re operating in or are planning to launch
a new project/product/service, etc.
Importance of Business Environment
1. Determining opportunities and Threats
2. Giving Direction for Growth
3. Continuous Learning
4. Image Building
5. Meeting Competition
6. Identifying Firm’s Strength and Weakness
1.Determining opportunities and Threats

After assessing the strengths and weaknesses of your business for your

business plan, look for external forces, like opportunities and threats, that

may have an effect on its destiny. These changes include

When listing opportunities,

Consider Emerging Technologies,

Availability Of New Materials,

New Customer Categories,

Changing Customer Tastes,

Market Growth,

New Distribution Or Location Opportunities,

Positive Changes In Your Competitive Environment, And

Other Forces That Can Affect Your Success.

When listing threats,

Consider The Impact Of Shrinking Markets,

Altered Consumer Tastes And Purchase Tendencies,
Raw Material Shortages,
Economic Downturns,
New Regulations,
Changes That Affect Access To Your Business, And Competitive Threats,
Including New Competing Businesses And Competitive Mergers And
Alliances.

Also think about the impact of expiring patents, labor issues, global issues, and new
products that may make your offering outdated or unnecessary.
Oppournities in India
• Make in India drive
• Global giants such as GE, Siemens, HTC, Toshiba, and Boeing have
either set up or are in process of setting up manufacturing plants
in India(
https://www.ibef.org/industry/manufacturing-sector-india.aspx)
• India's Market Of More Than A Billion Consumers And Increasing
Purchasing Power.
 2.Giving Direction for Growth

The interaction with the environment leads to opening up new frontiers of growth for
the business firms. It enables the business to identify the areas for growth and
expansion of their activities.
• Market penetration.
• The aim of this strategy is to increase sales of existing products or services on existing markets,
and thus to increase your market share
• Market development.
• Market development is a strategic step taken by a company to develop the existing market
rather than looking for a new market
• Product development
• Product development, also called new product management, is a series of steps that includes the conceptualization,
design, development and marketing of newly created or newly rebranded goods or services.

• Diversification.
• It is the practice of introducing a new product into your supply chain in order to increase profits.
 3.CONTINUOUS LEARNING
Your future success depends on how you take the initiative by yourself.
Where should you focus your continuous learning? 
Business strategy and innovation.
Knowing how to create, evaluate and sell ideas is a must in today’s knowledge-centric
economy
What is business strategy?
• Business strategy is the means by which it sets out to achieve its desired ends
(objectives).
• It can simply be described as a long-term business planning. Typically a
business strategy will cover a period of about 3-5 years (sometimes even
longer).
 e.g. raising the finance to build a new factory or plant.

 Strategies are also concerned with deciding on what products to allocate major resources to - for
example when Reliance launched Jio in this country.
 Microsoft's expenditure on research and development from 2002 to 2021 (in million
U.S. dollars)

Microsoft’s research and development expenditure amounted to around 20.7 billion U.S. dollars in its 2021 fiscal year, a
record high. Microsoft ranks second among software and computer service companies worldwide in terms of R&D spend,
behind only Google’s parent company Alphabet.
4. Image Building

Environmental understanding helps the business organizations

in improving their image by showing their sensitivity to the
environment within which they are working.

Example: Being Human Foundation which provides affordable

health-care and primary education to underprivileged people
across the country
5 Ways to Build Up Your Business Image
Build a Terrific Website
Create a Persuasive Ad Campaign.
Use the Press to Tell Your Story.
Target Influential and Influencers. 
Get One-on-One with Customers. 
 5. Meeting Competition
1. Regulated Market to Unregulated Market
Why do domestic firms fear the presence of foreign ?
I. Advantage over Indian firms
II. Substantial financial resources,
III. advanced technology,
IV. superior products,
V. powerful brands, and seasoned marketing and management skills.
VI. Often, the very survival of local companies in emerging markets is at stake.
 Cont..

Many of these managers assume they can respond in one of only three ways:
•by calling on the government to reinstate trade barriers or provide some other
form of support,
•by becoming a subordinate partner to a multinational, or

•by simply selling out and leaving the industry.

We believe there are other options for companies facing stiff foreign competition.
Identifying Firm’s Strength and Weakness

Business environment helps to identify the individual strengths and

weaknesses in view of the technological and global developments.

• Start with a SWOT analysis. ...

• Consult with others. ...
• Closely monitor customer complaints. ...
• Match your business against the competition. ...
• Join a peer advisory board.
 TYPES OF BUSINESS ENVIRONMENT

• 1. ECONOMIC ENVIRONMENT
• 2. NON-ECONOMIC ENVIRONMENT
 TYPES OF BUSINESS ENVIRONMENT

ECONOMIC ENVIRONMENT NON-ECONOMIC ENVIRONMENT

1.Gross Domestic Product, 1.Social Environment

2.Per Capita Income, 2.Political Environment
3.Markets For Goods And Services, 3.Legal Environment
4.Availability Of Capital, 4.Technological Environment
5.Foreign Exchange Reserve, 5.Demographic Environment
6.Growth Of Foreign Trade, 6.Natural Environment
7.Strength Of Capital Market Etc.
How Economic Environment will help
Business Environment?
• GDP
 TYPES OF BUSINESS ENVIRONMENT

1.Economic environment; and

(a)ECONOMIC ENVIRONMENT

The survival and success of each and every business enterprise

depend fully on its economic environment. The main factors that
affect the economic environment are
 1. Gross Domestic Product
The total market value of goods produced and services provided in a
country during one year.

In the list of top 50, All economies will experience a positive growth
rate in 2020. India is the fastest-growing economy with 12.55%,
followed by China (8.44%) in nominal and Peru (8.5%) in ppp terms.
Pakistan has the lowest growth rate of 1.5%, followed by Finland
(2.28%) and Egypt (2.47%)
2. Per Capita Income
Per capita income or average income measures the average

income earned per person in a given area (city, region, country, etc.) in a

specified year. It is calculated by dividing the area's total income by its total

population.

The per capita income in real terms (at 2011-12 prices) during 2020-21 is

estimated at Rs. 86,659 as compared to Rs. 94,566 during 2019-20.

3. Markets For Goods And Services
Indian consumer segment is broadly segregated into urban and
rural markets, and is attracting marketers from across the world.

The sector comprises of a huge middle class, relatively large

affluent class and a small economically disadvantaged class, with
spending anticipated to more than double by 2025.
World View on Indian Market

According to Global corporations the growth in India’s consumer

market would be primarily driven by a favorable population
composition and increasing disposable incomes.
World View on Indian Market

A recent study by the McKinsey Global Institute (MGI)

Average household incomes will triple over the next two decades, making the
country the world’s fifth-largest consumer economy by 2025, up from the
current 12th position.
4. Availability of Capital
Over the next five years, India's public sector banks, the workhorses of
the financial system, could face a major shortage of capital.

Indian banks need at least $15 billion fresh capital: Fitch  

5. Foreign Exchange Reserves
What is Foreign Exchange Reserves?

Forex reserves are foreign currency assets held by the central banks of countries. 

Description: These assets include foreign marketable securities, monetary gold, special

drawing rights (SDRs) and reserve position in the IMF. The main purpose of holding

foreign exchange reserves is to make international payments and hedge against exchange

rate risks. 
List of countries by foreign-exchange reserves
 6. Growth of Foreign Trade
• Are we Importing Country?

• Are we Exporting Country?

• What is our trade deficit?

India is a net importer in January 2021 with a trade deficit of USD 14.75 billion,
as compared to trade deficit of USD 15.30 billion in January 2020, declined by
3.57%.
 7.Strength of Capital Market

The capital market is a vital of the financial system. Capital market provides the support

of capitalism to the country.

The Indian capital market is also undergoing structural transformation since

liberalization.
 Aim of Reform
The chief aim of the reforms exercise is to
1. Improve market efficiency,
2. Make stock market transactions more transparent,
3. Curb unfair trade practices and to bring our financial
markets up to international standards.
INTERNATIONAL ACCOUNTING STANDARDS

International Financial Reporting Standards (IFRS) is a set

Of accounting standards developed by an independent, not-for-profit
organization called the International Accounting Standards Board
(IASB).

IFRS Standards address this challenge by providing a high quality,

internationally recognized set of accounting standards that bring
transparency, accountability and efficiency to financial markets
around the world.
Harshad Mehta scam
Estimated Size: Rs 4,000 crore
Central figure: Harshad Mehta
Discovered: In 1992
Modus Operandi: Used money from banks to make personal gains via investment in shares
C R Bhansali’s Scam
Estimated Size: Rs 1,200 crore
Central Figure: CR Bhansali
Discovered: 1996
Modus Operandi: Raised public money through FDs, MFs and debentures via nonexistent
firms and invested them in stocks for personal gains
Ketan Parekh Scam
Estimated Size: Rs 800 crore
Central Figure: Ketan Parekh
Discovered: 2001
Modus Operandi: Circular trading in selected stocks via borrowed money from banks to manipulate
share prices
Satyam Scam
Estimated Size: Rs 14,162 crore
Central Figure: Ramalinga Raju
Discovered: 2009
Modus Operandi: The top management of the software company cooked up accounts to show
inflated sales, profits and margins from 2003 to 2008.
Sahara Housing Bonds
Estimated Size: Rs 24,029 crore
Central Figure: Subrata Roy
Discovered: 2010
Modus Operandi: Bonds issued to 29.6 million investors without following SEBI regulations and
investor protection measures mentioned therein
Performance of Indian Stock Market

India's stock market is the second-best performer among

the top 15 countries in 2021 and soon it may overtake
France to become the sixth biggest in the world. New
Delhi:

India's stock market is now the seventh biggest, up three

spots, in the world as total market capitalisation increased
to $2.7 trillion.08-Feb-2021
Non-Economic Environment
1.Social Environment
2.Political Environment
3.Legal Environment
4.Technological Environment
5.Demographic Environment
6.Natural Environment
1. Social Environment
The social structure and the values that a society cherishes have a
considerable influence on the functioning of business firms.

Customs,
Traditions,
Values,
beliefs,
poverty,
literacy,
life expectancy rate.
2.Political Environment
Attitude towards the business firms

Stability of the government

Ideology of political parties

 CPI

The communist parties are known for their ‘anti-business’

ideology. Perennially a proponent of subsidies, minority
appeasement and preservation of human rights, the Left
parties are facing existential crisis after 2014 General
Elections.
• Raghasudha -----Equal Income distribution

• Venkatesh---rebellion

• Social equality -
Congress

Congress supports liberal nationalism, which can also be referred as a more

tolerant nationalism with space for equality, freedom and rights.
 BJP

The BJP and its coalition partners have focused mainly

on neoliberal economic
 Legal Environment
Coca-Cola continues to face crisis in India due to their
mismanagement of water resources, including the forced closure of
their bottling plant by government authorities in Kerala in 2005

The closure of its 15 year old plant in Varanasi, the refusal by

government authorities to allow a fully-built expansion plant to
operate in Varanasi in August 2014

the withdrawal of the land allocated for a new bottling plant by the

government in Tamil Nadu due to large scale community protests in
April 2015.
Patanjali’s sales growth rates in the last three years have been
scorching, with revenues growing at a 55 per cent annual rate
when the FMCG market was inching up at 8-9 per cent.

Patanjali’s turnover growth at 150%, Ramdev targets Rs 10000

crore revenue
3. Legal Environment
(i) Companies Act, 1956
(ii) Foreign Exchange Management Act, 1999
(iii) The Factories Act, 1948
(iv) Industrial Disputes Act, 1972
(v) Payment of Gratuity Act, 1972
(vi) Industries (Development and Regulation) Act, 1951
(vii) Prevention of Food Adulteration Act, 1954
(viii) Essential Commodities Act, 2002
(ix) The Standards of Weights and Measures Act, 1956
(x) Monopolies and Restrictive Trade Practices Act, 1969
(xi) Trade Marks Act, 1999
(xii) Bureau of Indian Standards Act, 1986
(xiii) Consumer Protection Act, 1986
(xiv) Environment Protection Act
(xv) Competition Act, 2002
1. Companies Act, 2013

1. INCORPORATION OF COMPANY AND MATTERS INCIDENTAL

THERETO
2. PROSPECTUS AND ALLOTMENT OF SECURITIES
3. SHARE CAPITAL AND DEBENTURES
4. ACCEPTANCE OF DEPOSITS BY COMPANIES
5. REGISTRATION OF CHARGES
6. MANAGEMENT AND ADMINISTRATION
7. DECLARATION AND PAYMENT OF DIVIDEND
8. ACCOUNTS OF COMPANIES
9. AUDIT AND AUDITORS
10.APPOINTMENT AND QUALIFICATIONS OF DIRECTORS
11.MEETINGS OF BOARD AND ITS POWERS
12.APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL
13.INSPECTION, INQUIRY AND INVESTIGATION
14.PREVENTION OF OPPRESSION AND MISMANAGEMENT
15.REGISTERED VALUERS
4, Industrial Dispute Act
The objective of the Industrial Disputes Act is to secure industrial peace and
harmony by providing machinery and procedure for the investigation and
settlement of industrial disputes by negotiations.

Here are four other large industrial projects in India that have recently been
wracked by protests.

1. In 2008, August, the Supreme Court gave South Korean steel firm POSCO the
use of large swathes of forestland in Orissa for a $12-billion plant that
protesting farmers said would displace thousands of people. The protests
delayed the start of construction on the plant, which could be India's single
biggest foreign investment to date.
• 2. In the same month, the Supreme Court allowed
Vedanta Resources to mine bauxite in hills considered
sacred by tribal people in Orissa. The mining would feed
an alumina refinery, part of an $800-million project that
has been widely opposed. Environmentalists say the
open-cast mine will wreck the rich biodiversity of the
remote hills and disrupt key water sources vital for
farming.
Cont..
3. In 2008. Goa, famous for its beaches and tourist industry, in
January dropped plans to build special economic zones for industry
after protests from political and environmental groups.

4. West Bengal last year aborted a plan for a special economic zone
for a chemicals complex in Nandigram after fierce protests. At least
35 villagers were killed in clashes between locals and communist
party workers and the state government put all SEZs on hold in the
state.
Demographic Environment

Demographic segmentation is one such way.

Based on age,

gender,

ethnicity,

income group and several other parameters,

businesses segment the market and identify the target group that are
most likely to become their customers. These parameters taken
together is known as the demographic environment
India
Age structure: 0-14 years: 27.71% (male 186,420,229/female
164,611,755)
15-24 years: 17.99% (male 121,009,850/female 106,916,692)
25-54 years: 40.91% (male 267,203,029/female 251,070,105)
55-64 years: 7.3% (male 46,398,574/female 46,105,489)
65 years and over: 6.09% (male 36,549,003/female 40,598,872) (2016
est.)

China
Age structure: 0-14 years: 17.1% (male 126,732,020/female 108,172,771)
15-24 years: 13.27% (male 97,126,460/female 85,135,228)
25-54 years: 48.42% (male 339,183,101/female 325,836,319)
55-64 years: 10.87% (male 75,376,730/female 73,859,424)
65 years and over: 10.35% (male 67,914,015/female 74,205,210) (2016
est.)
In near future India will be the largest individual contributor to
the global demographic transition. A 2011 
International Monetary Fund Working Paper found that
substantial portion of the growth experienced by India since the
1980s is attributable to the country’s age structure and changing
demographics.

The U.S. Census Bureau predicts that India will

surpass China as the world’s largest country by 2025,
with a large proportion of those in the working age
category. Over the next two decades the continuing
demographic dividend in India could add about two
percentage points per annum to India’s per capita GDP
growth
 Natural Environment
Natural environment is the group of natural resources which is
used by business

Availability of Natural Resource

THANK YOU