INTERNAL AND EXTERNAL BUSINESS
ENVIRONMENT Introduction to Business
Environment
2. The formula for business success requires
two elements - the individual and the
environment. Remove either value and success
becomes impossible. Business environment
consist of all those factors that have a bearing
on the business. The term’ business
environment implies those external forces,
factors and institutions that are beyond the
control of individual business organizations and
their management and affect the business
enterprise. It implies all external forces within
which a business enterprise operates. Business
environment influence the functioning of the
business system. Thus, business environment
may be defined as all those conditions and
forces which are external to the business and
are beyond the individual business unit, but it
operates within it. These forces are customer,
creditors, competitors, government, socio-
cultural organizations, political parties national
and international organizations etc. some of
those forces affect the business directly which
some others have indirect effect on the
business.
ENVIRONMENT Introduction to Business
Environment
2. The formula for business success requires
two elements - the individual and the
environment. Remove either value and success
becomes impossible. Business environment
consist of all those factors that have a bearing
on the business. The term’ business
environment implies those external forces,
factors and institutions that are beyond the
control of individual business organizations and
their management and affect the business
enterprise. It implies all external forces within
which a business enterprise operates. Business
environment influence the functioning of the
business system. Thus, business environment
may be defined as all those conditions and
forces which are external to the business and
are beyond the individual business unit, but it
operates within it. These forces are customer,
creditors, competitors, government, socio-
cultural organizations, political parties national
and international organizations etc. some of
those forces affect the business directly which
some others have indirect effect on the
business.
script async src="//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>
<ins class="adsbygoogle"
style="display:block; text-align:center;"
data-ad-layout="in-article"
data-ad-format="fluid"
data-ad-client="ca-pub-8139750029121702"
data-ad-slot="3038881483"></ins>
<script>
(adsbygoogle = window.adsbygoogle || []).push({});
</script>3. Features of business environment
4. •Totality of external forces: Business
environment is the sum total of all things
external to business firms and, as such, is
aggregative in nature. •Specific and general
forces: Business environment includes both
specific andgeneral forces. Specific forces affect
individual enterprises directly and immediately in
their day-to-day working. General forces have
impact on all business enterprises and thus may
affect an individual firm only indirectly.
5. Dynamic nature: Business environment is
dynamic in that it keeps on changing whether in
terms of technological improvement, shifts in
consumer preferences or entry of new
competition in the market.
6. Uncertainty: Business environment is largely
uncertain as it is very difficult to predict future
happenings, especially when environment
changes are taking place too frequently as in the
case of information technology or fashion
industries.
7. Relativity: Business environment is a relative
concept since it differs from country to country
and even region to region. Political conditions in
the USA, for instance, differ from those in China
or Pakistan. Similarly, demand for sarees may
be fairly high in India whereas it may be almost
non-existent in France.
8. TYPES OF ENVIRONMENT
9. On the basis of the extent of intimacy with the
firm , the environmental factors may be
classified into different types-internal and
external.
10. INTERNAL ENVIRONMENT
11. The internal environment is the environment
that has a direct impact on the business .Here
there are some internal factors which are
generally controllable because the company has
control over these factors. It can alter or modify
such factors as its personnel, physical facilities,
and organization and functional means, like
marketing, to suit the environment. The
important internal factors which have a bearing
on the strategy and other decisions of internal
organization are discussed below.
12. Value system
13. The value system of the founders and those
at the helm of affairs has important bearing on
the choice of business, the mission and the
objectives of the organization, business policies
and practices.
14. Mission and vision and objectives
15. Vision means the ability to think about the
future with imagination and wisdom. Vision isan
important factor in achieving the objectives of
the organization. The mission is themedium
through which the objectives are achieved
16. Management structure and nature
17. The structure of the organization also
influences the business decisions.
Theorganizational structure like the composition
of board of directors , influences thedecisions of
business as they are internal factors . The
structure and style of theorganization may delay
a decision making or some other helps in
making quick decisions.
18. Internal power relationships
19. The relationship among the three levels of
the organization also influences on the business.
The mutual co-ordination among those three is
a an important need for a business. The
relationship among the people working in the
three levels of theorganization should be cordial.
20. Human resource
21. The human resource is the important factor
for any organization as it contributes to
thestrength and weakness of any organization .
the human resource in any organization
musthave characteristics like skills, quality, high
morale, commitment towards the work ,attitude,
etc. T he involvement and initiative of the people
in an organization at differentlevels may vary
from organization to organization. The
organizational culture and overallenvironment
have bearing on them.
22. Company image and brand equity
23. The image of the company in the outside
market has the impact on theinternal
environment of the company. It helps in raising
the finance , making jointventures , other
alliances, expansions and acquisitions , entering
sale and purchasecontracts , launching new
products, etc. Brand equity also helps the
company in same
24. Miscellaneous factors
25. The other factors that contribute to the
business success or failure are as follows:•
26. Physical assets and facilities
27. :- facilities like production capacity,
technology areamong the factors which
influences the competitiveness of the firm. The
proper workingof the assets is indeed for free
flow of working of the company.•
28. Research and development:
29. - Though R&D department is basically
doneexternal environment but it has a direct
impact on the organization. This aspect
mainlydetermine the company’s ability to
innovate and compete.•
30. Marketing resources
31. : - Resources like the organization for
marketing, quality of the marketing men, brand
equity and distribution network have direct
bearing onmarketing efficiency of the company.•
32. Financial factors
33. :- factors like financial policies . financial
positions and capitalstructure are also important
internal environment affecting business
performances ,strategies and decisions.
37.
38. EXTERNAL ENVIRONMENT
39. It refers to the environment that has an
indirect influence on the business. The factors
areuncontrollable by the business. There are two
types of external environment.
40. Micro Environment
41. The micro environment is also known as the
task environment and operating environment
because the micro environmental forces have a
direct bearing on the operations of thefirm
“The micro environment consist of the actors in
the company’s immediate environmentthat affect
the performance of the company. These include
the suppliers, marketingintermediaries,
competitors, customers and the public”The
micro environmental factors are more intimately
linked with the companythan the macro factors.
The micro forces need not necessarily affect all
the firms ina particular industry in the same
way. Some of the micro factors may be
particular to a firm. When the competing firms in
an industry have the same micro elements,
therelative success of the firms depends on their
relative effectiveness in dealing with
theseelements
Suppliers
An important force in the micro environment of
a company is the suppliers, i.e., thosewho
supply the inputs like raw materials and
components to the company. Theimportance of
reliable source/sources of supply to the smooth
functioning of the businessis obvious.
Customer
The major task of a business is to create and
sustain customers. A business existsonly
because of its customers. The choice of
customer segments should be made
byconsidering a number of factors including the
relative profitability, dependability,stability of
demand, growth prospects and the extent of
competition.Competition not only include the
other firms that produce same product but also
thosefirms which compete for the income of the
consumers the competition here among these
products may be said as desire competition as
the primary task here is to fulfill the desireof the
customers. The competition that satisfies a
particular category desire then it iscalled generic
competition
Marketing Intermediaries
The marketing intermediaries include middlemen
such as agents and merchants that helpthe
company find customers or close sales with
them. The marketing intermediaries arevital links
between the company and the final consumers .
Financiers
The financiers are also important factors of
internal environment. Along with
financingcapabilities of the company their
policies and strategies, attitudes towards risk ,
ability to provide non-financial assistance etc.
are very important.
Public
Public can be said as any group that has an
actual or potentialinterest in or on
anorganization’s ability to achieve its interest.
Public include media and citizens. Growth of
consumer public is an important development
affecting business.
Macro Environment
Macro environment is also known as General
environment and remoteenvironment. Macro
factors are generally more uncontrollable than
micro environmentfactors. When the macro
factors become uncontrollable , the success of
company dependsupon its adaptability to the
environment. Some of the macro environment
factors arediscussed below:
Economic Environment
Economic environment refers to the aggregate of
the nature of economic systemof the country,
business cycles, the socio-economic
infrastructure etc. The successful businessman
visualizes the external factors affecting the
business, anticipatin
prospective market situations and makes
suitable to get the maximum with minimizecost.
Social Environment
The social dimension or environment of a nation
determines the value system of the society
which, in turn affects the functioning of the
business. Sociological factorssuch as costs
structure, customs and conventions, mobility of
labour etc. have far-reaching impact on the
business. These factors determine the work
culture and mobilityof labour, work groups etc.
Political Environment
The political environment of a country is
influenced by the political organisationssuch as
philosophy of political parties, ideology of
government or party in power, natureand extent
of bureaucracy influence of primary groups etc. .
The political environment of the country
influences the business to a great extent.
Legal Environment
Legal environment includes flexibility and
adaptability of law and other legal
rulesgoverning the business. It may include the
exact rulings and decision of the courts.
Theseaffect the business and its managers to a
great extent.
Technical Environment
The business in a country is greatly influenced
by the technological development.The
technology adopted by the industries determines
the type and quality of goods andservices to be
produced and the type and quality of plant and
equipment to be used.Technological
environment influences the business in terms of
investment in technology,consistent application
of technology and the effects of technology on
markets
Environmental technology
From Wikipedia, the free encyclopedia
Sustainable urban design and innovation:
Photovoltaic ombrière SUDI is an autonomous
and mobile station that replenishes energy for
electric vehicles using solar energy.
Environmental technology (abbreviated as
envirotech) or green technology (abbreviated as
greentech) or clean technology (abbreviated as
cleantech) is the application of one or more of
environmental science, green chemistry,
environmental monitoring and electronic devices
to monitor, model and conserve the natural
environment and resources, and to curb the
negative impacts of human
involvement.Sustainable development is the
core of environmental technologies. The
termenvironmental technologies is also used to
describe a class of electronic devices that can
promote sustainable management of resources.
Water Purification
Water purification: The whole idea/concept of
having dirt/germ/pollution free water flowing
throughout the environment. Many other
phenomena lead from this concept of purification
of water. Water pollution is the main enemy of
this concept, and various campaigns and
activists have been organized around the world
to help purify water. Considering the amount of
water usage that is under current consumptions,
this Concept is of utter Importance.[1]
[edit]Air Purification
Air Purification: basic and common green plants
can be grown indoors to keep air fresh because
all plants remove CO2 and convert it intooxygen.
The best examples are: Dypsis lutescens,
Sansevieria trifasciata, and Epipremnum aureum.
[2]
[edit]Sewage treatment
Sewage treatment is conceptually similar to
water purification. Sewage treatments are very
important as they purify water per levels of its
pollution. The more polluted water is not used
for anything, and the least polluted water is
supplied to places where water is used
affluently. It may lead to vaious other concepts
of environmental protection, sustainability etc.[3]
[edit]Environmental remediation
Environmental remediation is the removal of
pollutants or contaminants for the general
protection of the environment. This is
accomplished by various chemical, biological,
and bulk movement methods, in conjunction
with environmental monitoring. (encyclopedia of
medical concepts)[4]
[edit]Solid waste management
Solid waste management is the purification,
consumption, reuse, disposal and treatment of
solid waste that undertaken by the milk
government or the ruling bodies of a city/town.
[5]
[edit]Renewable energy
Renewable energy is energy that can be
replenished easily. For years we have been
using sources like wood, sun, water, etc. for
means for producing energy. Energy that can be
produced by natural objects like wood, sun,
wind, etc. is considered to be renewable.[6]
[edit]eGain forecasting
Egain forecasting is a method using forecasting
technology to predict the future weather's
impact on a building.[7] By adjusting the heat
based on the weather forecast, the system
eliminates redundant use of heat, thus reducing
the energy consumption and the emission
ofgreenhouse gases.[8]
[edit]Energy Conservation
Energy conservation is the utilization of devices
that require smaller amounts of energy in order
to reduce the consumption of electricity.
Reducing the use of electricity causes less fossil
fuels to be burned to provide that electricity.
The demographic environment
by ADMIN on APRIL 28, 2006
THE DEMOGRAPHIC ENVIRONMENT – SOME
INTERESTING STATISTICS FOR CURRENT AND
FUTURE MARKETERS
The main demographic force that marketers
monitor is population, because people make up
markets. Marketers are keenly interested in the
size and growth rate of population in cities,
regions; and nations; age distribution and ethnic
mix; educational levels; household patterns; and
regional characteristics and movements.
Demographic trends are highly reliable for the
short ad intermediate run. There is little excuse
for a company’s being suddenly surprised by
demographic development. The singer Company
should have known for years that its sewing
machines business would be hurt by smaller
families and more working wives, yet it was
slow in responding..
World wide Population Growth
The world population is showing explosive
growth. It totaled 6.1 billion in 2000 and will
exceed 7.9 billion by the year 2025. Here is an
interesting picture:
If the world were a village of 1,000 people, it
would consist of 520 women and 480 men, 330
children, and 60 people over age 65, 10 college
graduates and 335 illiterate adults. The village
would contain 52 North Americans, 55 Russians,
84 Latin Americans, 95 East and West
Europeans, 124 Africans, and 584 Asians.
Communication would be difficult because 165
people would speak Mandarin, 86 English, 83
Hindi/Urdu, 64 Spanish, 58 Russian and 37
Arabic, and the rest would speak one of over
200 other languages. There would be 329
Christians, 178 Moslems, 132 Hindus, 62
Buddhists, 3 Jews, 167nonreligious, 45 atheists,
and 86 others.
The population explosion has been a source of
major concern. Unchecked population growth
and consumption could eventually result in
insufficient food supply, depletion of key mineral,
overcrowding, pollution, and an overall
deterioration in the quality of life. Moreover,
population growth is highest in countries and
communities that can least afford it.
The less developed regions of the world
currently account for 76% of the world
population and are growing at 2% per year,
whereas the population in the more developed
countries is growing at only 0.6 % per year. In
developing countries, the death rate has been
falling as a result of modern medicine, but the
birth rate has remained fairly stable. Feeding,
clothing, and educating children, while also
providing a rising of living, is nearly impossible
in these countries.
Explosive population growth has major
implications for business. A growing population
does not mean growing markets unless these
markets have sufficient purchasing power.
Nonetheless, companies that carefully analyze
their markets can find major opportunities.
In order to curb its skyrocketing population, the
Chinese government has passed regulations
limiting families to one child. One consequence
of these regulations: These children are spoiled
and fussed over as never before. Known in China
as “little emperors,� Chinese children are
being showered with everything from candy to
computers as a result of the “six pocket
syndrome.� As many as six adults—parents,
grandparents, great-grandparents, and aunts and
uncles—may be indulging the whims of each
child. This trend has encouraged toy
companies, such as Japan’s Bandai
Company, Denmark’s Lego Group, and the
US’s Hasbro and Mattel to aggressively enter
the Chinese market.
Population Age Mix:
National Population varies in their age mix. At
one extreme is Mexico, a country with a very
young population and rapid population growth.
At the other extreme is Japan, a country with
one of the world’s oldest populations. Milk,
diapers, school suppliers, and toys would be
important products in Mexico. Japan’s
population would consume many more adult
products.
There is a global trend toward an aging
population. According to a survey in The
Economist, more people will grow old in this
century than ever before. In 2004 or 2005, the
population of people aged 60 or over will
surpass the proportion of under fives. There are
unlikely to be more toddlers than seniors. It is
the start of what the Japanese are calling The
Silver Century. The graying of the population is
affected by another trend, the widespread fall in
fertility rates. In most countries, women are not
having enough babies to replace the people who
die. The result will be fewer working people to
replace those who retire. In a decade’s time,
many countries—Japan, the United States, and
the European countries, for instance—will face
problem of having to support a vastly large
population of elderly people.
A population can be subdivided into six age
groups:
1. Preschool
2. School-age Children.
3. Teens.
4. Young adults age 25 to 40.
5. Middle-age 40 to 65.
6. The older-adults age 65 and up.
For marketers, the most populous age groups
shape the marketing environment. In the United
States, the “baby boomers,� the 78 million
people born between 1946 and 1964, are one of
the most powerful forces shaping the
marketplace. Baby boomers are fixated on their
youths, not their age.
With many baby boomers well into their fifties
and even the last wave turning 40, demand for
products to turn back the hands of time has
exploded. According to one survey, half of all
boomers were depressed that they no longer
young and nearly one in five were actively
resisting the aging process.
The 40-plus age group will be 60% bigger than
the 18to 39 group by 2010, and it now controls
three-quarters of the country’s wealth. As
they search for the fountain of youth, sales of
hair replacement and coloring aids, health club
memberships, home gym equipment, skin
tightening creams, nutritional supplements, and
organic foods have all soared.
Boomers grew up with TV advertising, so they
are an easier market to reach than the 45 million
born between 1965 and 1976, dubbed
Generation X. Generation Xers are typically
cynical about hard sell marketing pitches that
promise more than they can deliver, but some
marketers have been able to break through.
Both baby boomers and Generation-Xers will be
passing the torch to the latest demographic
group Generation Y or the echo boomers, born
between 1977 and 1984. Now numbering 72
million, this group is almost equal in size to
baby boomers. One distinguishing
characteristics of this age group is their utter
fluency and comfort with computer and Internet
technology. To them digital technology is no
more intimidating.
Finally business environment is a crucial aspect to be considered by investors.
