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Unit x economic environment of business

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1 Unit x economic environment of business

2 Business environment The business environment can be described as the sum of all factors over which general management does not have control, at least in the short run. Business environment consists of the totality of all factors which are external to, and largely beyond the control of individual business firm.

3 The environment is often described as external to the firm.
There are some factors that may be within the firm but beyond the immediate control of management. For example:- if attitudes and beliefs of employees are not easily changeable by management (and thus not within the control of management), we can say that those attitudes and beliefs are an environmental factor within the firm.

4 The environment in which a company does business is often not well understood or studied by managers, especially in smaller and newer firms. A certain amount of knowledge of markets and competition will come with time and experience, but deliberate study of the environment can give managers a significant strategic advantage over intuition and experience alone.

5 Characteristics of environment
Environment is complex Environment is dynamic Environment is multi faceted Environment has a far reaching impact

6 Environmental factors
By Philip Thomas : Political conditions Social conditions Economic conditions Legal/regulatory conditions Business conditions Technological conditions

7 Political conditions Political and legal environment is an important element particularly in mixed economy like India and affects directly the working of business organization. The political environment in India can be analyzed in three respect -- political atmosphere -- government approach towards business -- laws regulating to business

8 Social conditions The social environment is consists of factors related to human relationships, and the development forms and functions of such a relationship having a bearing on the business of an organization. some of the important factors are: Demographic characteristics Social concerns Social attitudes and values Family structure and changes Role of women in society

9 Economic conditions The economic environment consists of macro-level factors related to the means of production and distribution of wealth that have an impact on the business of an organization. some of the important factors are: The economic stages Economic structure Economic planning Economic policies Economic indices Infrastructural factors

10 Legal/regulatory conditions
The regulatory environment consists of factors relating to planning, promotion, and regulation of economic activities by the government that have an impact on business of an organization. some of the important factors are: The constitutional framework, directive principles, fundamental rights, and division of legislative powers between Central and State governments.

11 Strategies & policies related to distribution and pricing & their control.
Policies related to imports & exports Policies related to licensing, monopolicies, foreign investment and financing of industries. Policies related to public sector, small scale industries, development of backward areas, control of environmental pollution & consumer protection.

12 Business conditions Business or market conditions consists of factors related to the groups and other organizations that compete with and have an impact on an organization’s markets & business. Some of the vital factors are: Customer or client factors Product factors Marketing intermediaries factors Competition related factors

13 Technological conditions Technological environment is important for business as it consists of those factors related to knowledge applied, and the material and machines used in the production of goods and services that have an impact on the business.

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