Mba Business Environment Notes

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1. Module -1 Business Environment 14/10/2013
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2. Business Environment • Learning Objectives: Business Environment
Environmental Scanning-Meaning,Nature And Scope Economic And Non-
Economic Environment Interaction Between Internal And External
Environments Overview Of Political, Socio-Cultural, Legal Technological
Global Environment 24/10/2013 Babasabpatilfreepptmba.Com

3. Business Environmentwhat Is Business? Business Is An Activity Which
Involves Buying And Selling Of Goods & Services. Modern Business Covers A
Complex Field Of Industry And Commerce Which Involve Activities Related
To Both Production And Distribution. These Activities On The One Hand
Satisfy Societal Need And Desires And On The Other Hand Bring Profits To
Business Firms. All The Business Activities Are Normally Motivated By
Profits, In Case , Any Of These Activities Is Carried Out By Some
Organization For The Purpose Other Than Profit Seeking, It Cannot Be
Justifiably Considered As Business. 34/10/2013 Babasabpatilfreepptmba.Com

4. Business Environment What Are The Contribution From Business?
Economic Growth Creates Employment Opportunities Provides All Kinds Of
Goods And Services Which We Need For Consumption 44/10/2013
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5. Nature Of Modern Business Large Size Oligopolistic Character
Diversification Global Reach Of Modern Business Technological Orientation
Change Government Control 54/10/2013 Babasabpatilfreepptmba.Com

6. Nature Of Modern Business. • Business That Matters Today Is Large In
Size. • Indian Companies In Terms Of Revenues, Profits, Assets And
Stockholders Equity Are Relatively Small As Compared To The Companies In
Developed Countries. • Reliance Industries • Hindustan Lever • Telco •
Larsen And Toubro • Tata Motors • Maruti Udyog • Hero Honda 64/10/2013
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7. Nature Of Modern Business Only Four Companies Figure In The Fortune
List Of 2003. • Indian Oil • Bharat Petroleum • Hindustan Petroleum •
Reliance Industries Most Of The Fortune 500 Companies Are Located In The
Usa – Biggest Capitalist Economy, 189 Of The Worlds Largest Co’s Belong To
Us Japan - Second Largest With 104 Of The Fortune 500 Europe – Western
Europe Holds 138 Of The Worlds Largest Companies. 74/10/2013
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8. Nature Of Modern Business. Present Day Business Is Oligopolistic In Its
Nature. Small No. Of Firms Selling A Homogeneous /Differentiated Product.
Interdependence Among The Sellers. Any Change In Its Price & Sales Or In
The Quality Of Its Product, Or Any Other Variable Whose Value Under Is
Control Is Likely To Evoke Retaliation From Other Other Firms In The Same
Line Of Business. 84/10/2013 Babasabpatilfreepptmba.Com

9. Nature Of Modern Of Business Diversification: • Today Not Many
Corporate Confine Their Activities To Production Of A Single Commodity. •
Some Business Firms Prefer Related Products To Their Existing Production.
This Is Called Concentric Diversification. Ex: Maruti Udyog • Adding New
Unrelated Products Or Services For Existing Customers Is Known As
Conglomerate Diversification. • Ex: Jk Group Has Interest In Textiles,
Engineering, Computers • 94/10/2013 Babasabpatilfreepptmba.Com

10. Business Environment • Big Business Houses Usually Expand Their
Activity By Establishing New Companies Which Undertake Production Of
Unrelated New Products Or Services. This Is Conglomerate Diversification. •
Ex: Tata’s • However, Diversification May Not Always Contribute To Growth
Of A Business Enterprise. In The Recessionary Phase, It Is Quite Risky To
Aspire For Growth By Going For Unplanned Diversification. 104/10/2013
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11. Nature Of Modern Business In India Some Big Companies Including
Dcm, Britannia, Itc And Nelco Did Not Benefit From Diversification.
Companies Lacking Resources And Managerial Expertise Do Not Foray Into
New Business. In Some Of The Developed Countries Even Some Of The
Business Giants Have Preferred Takeover Of Companies Operating In Their
Own Lines Of Production Even In The Indian Markets Some Of The Business
Giants Have Preferred Takeover Of Companies In Their Own Areas. Ex:
Coco-Cola , For Example Has Taken Parle Soft Drinks, Honda Has Taken
Over Kinetic Honda Whirlpool Has Taken Over Kelvinator Refrigerators.
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12. Nature Of Modern Business Technology Orientation: Modern Business Is
Technology Oriented. People Expect That The Quality Of Products Should
Improve Overtime And The Real Cost. All This Can Be Accomplished By The
Business If It Pays Attention To Sophistication Of Technology. Modern
Companies Regard Technological Research Strategic To Their Future, They
Carry Out Their R & D Activities Very Close To Their Headquarters.
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13. Nature Of Modern Business Change: Today A Business Firm Clearly
Needs To Move Faster If The Fear Of Irrevalance Is Not To Become A
Reality. A Modern Firm Must Be Vigilant All The Time And Be Ready For
Change. Improvement In Quality, Packaging Or Product Design Is Not
Sufficient To Retain Customers, The Firm Should Promptly Introduce New
Products And Create Demand For Them. The Business Through Its Innovative
Moves Can Always Create Synthetic Wants And Thus Find Space To Produce
New Goods To Satisfy Them. 134/10/2013 Babasabpatilfreepptmba.Com

14. 14 Nature Of Modern Business Government Control: Since The Late
1980’s Role Of The Government In Both Developed And Underdeveloped Economies Has Diminished. Advantage Of Government In Business Is
Required To Correct Market Failure Manifested In The Form Of Monopoly &
Pollution. Government Through Monetary & Fiscal Regulation Attempt To
Create Stable Business Conditions 4/10/2013 14babasabpatilfreepptmba.Com

15. Business Environment Environment By Definition Is Something External
Of An Individual Or An Organization. Therefore In Strict Sense, Business
Environment Refers To An External Factors Which Have A Direct Or Indirect
Bearing On The Activities Of Business. Certain Aspects Of Both Internal And
External Environment Pose A Threat To Business, Other Aspects Provide
Opportunities For Business Growth. 154/10/2013
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16. Environmental Scanning • What Do You Mean By Environmental
Scanning? • It Is The Process Of Monitoring & Collecting The Information
About The Various Current And Potential Changes Taking Place In The
Environment To Facilitate In Decision Making And Problem Solving.
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17. Environmental Scanning • Objectives Of Environmental Scanning: 1. To
Provide And Understanding Of Current And Potential Changes Taking Place In
The Environment. 2. To Provide Inputs For Strategic Decision-Making. 3. To
Facilitate And Foster Strategic Thinking In Organization. 4/10/2013
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18. Benefits Of Environmental Scanning • “Firms Which Systematically
Analyze And Diagnose The Environment Are More Effective Than Those Which
Don’t” 1. Development Of Broad Strategies And Long –Term Policies Of The
Firm. 2. Development Of Action Plans To Deal With Technological
Advancements. 3. To Foresee The Impact Of Socio-Economic Changes At The
National & International Level. 4. To Analyze The Competitors Strategies And
Formulation Of Effective Counter-Measures. 5. To Keep Oneself Dynamic.
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19. Business Environment-Internal Factors • Internal Environment : • Value
System, Goals And Objectives, Management Structure, • Relationship Among
The Various Constituents, • Physical Assets, • Technological Capabilities •
Human, Financial And Marketing Resources Make The Internal Environment
Of Business. 194/10/2013 Babasabpatilfreepptmba.Com

20. 20 Business Environment-Internal Factors • Internal Environment : •
Persons Holding Top Positions In Certain Modern Enterprises Have Some
Values Which Influence Their Policies, Practices And Overall Internal
Environment. • Ex: Jrd Tata –Value System – Responsibilities Towards His
Employees Did Some Some Commendable Work In The Field Of Labor
Welfare. • Attitude Of Tata’s To Employ 8 Disabled Persons Out Of Their Total
Workforce Of More Than Sixty Thousand. • The Company Value System Need
Not Be Always Positive. It Can Be Totally Negative. • Cases Of
Pharmaceutical Companies Selling Banned Drugs World Over. • Rational
Firms Attempt Maximize Long-Run Profit. 4/10/2013
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21. Business Environment-Internal Facto • There Are Often Differences In
The Goals And Objectives Of The Various Firms, Which In Turn, Lead To
Differences In The Overall Internal Environment And Also In Priorities,
Policies And Direction Of Development. • Ex: Corporate Enterprise
Professionally Managed Or Family Controlled. • Board Of Directors - Dynamic
Entrepreneurs Capable Of Taking Quick Decisions Or The Bod May Be
Dominated By Persons With Conservative Or Bureaucratic Outlook. •
Nominees Of Financial Institutions Having Large Holdings – Their Decision
Making. • Conflicts Among Bod’s, Erosion Of Shareholders Confidence In The
Bod’s • Serious Differences Among The Senior Executives Officers On Critical
Matters Are Critical Factors In The Co’s Internal Working Conditions.
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22. Business Environment-Internal Factors • Functioning & Competitiveness
Of A Company Are Very Much Influenced By Physical Resources, Production
Technology, R&D Work And Distribution Logistics. • Co’s R&D Activity And
The Speed At Which Technological Changes Occur Determine Co’s Internal
Environment Which In Turn Influence Business Decisions. • Quality Of Human
Resources Of A Company, • Depends On Commitment, Attitude And Morale
Of The Employees Also Have An Impact On Business As An Internal Factor.
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23. Business Environment-External Factors • External Environment Of
Business Consists Of Institutions, Organizations And Forces Operating Outside
The Company. • External Environment Of Business May Be Classified Into : •
A) Micro Environment • B) Macro Environment • Micro Environment Refers To
Such Players Whose Decisions And Actions Have A Direct Bearing On The
Company. Since Modern Business Broadly Has Two Aspects, Viz, Production
And Selling Of Goods, 234/10/2013 Babasabpatilfreepptmba.Com

24. Micro Environment Of Business • The Micro Environment Of Business
Can Be Divided : 24 Business Customers Input Suppliers Competitors
Workers & Their Unions Publics Marketing Intermediaries 4/10/2013
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25. Micro Environment Of Business 25 Micro Environment Has Great
Relevance On Co’s Business Operations. The Players In Micro-Environment
Do Not Effect All The Companies In An Industry In The Same Way. Their
Decisions And Actions Often Differ In Accordance With The Size, Capability
And Strategies Of Each Company. Ex: 1. Suppliers Of Inputs Are More
Accommodating If The Company Is Large. 2. Competitor Does Not Mind
Starting Price War If The Rival Co. Is Small 4/10/2013
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26. Business Environment • Suppliers Of Inputs: Important Factor In Co’s
Success Is Low Cost Of Production Of Goods. • Availability Of Raw Materials
Without Any Interruption Especially Raw Materials Thru Out The Year Lessen
The Financial Burden On The Company. • Sometimes Monopolistic Suppliers
Manages To Secure Monopoly Control Over The Supply Of Some Strategic
Raw Material, Such As Iron Ore Or Copper, It Starts Regulating Its Supply To
Generate Maximum Possible Monopoly Profits. • No Co. Should Depend For
The Supply Of Some Input On Single Source. • Supply Management Should
Be High On Agenda Of The Company. 264/10/2013
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27. Business Environment-Internal Factors • Workers And Their Unions: •
Labor Is An Important Input In Production. • Any Policy That Disturbs Labor
Peace At The Company Level May Adversely Affect Its Competitiveness. •
Also Constant Conflict Between Labor And Management Will Not Allow The
Company To Grow And Overtime May Transform Into A Sick Unit.
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28. Business Environment-Internal Factors • Customers: Demand For
Product – Individuals, Business Enterprises, Institutions & The Government. •
Loyalty Depicts Customer Satisfaction. • Universally Accepted Fact That The
Satisfaction Of Customers Is The Ultimate Bench Mark Of The Co’s Success.
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29. 29 Business Environment-Internal Factors • Marketing Intermediaries:
Wholesalers, Retailers, Distribution Firms Agents Etc Constitute An Important
Element . • Co. Lacking Its Own Distribution Channels Can’t Afford To Have
Conflict Or Strained Business Relations. • Some Co’s Adopt Direct Mail Or
Data Base Marketing. • Ex; Nestle –Slump In Demand For Baby Products –
France • Co. Could Have Responded To This Situation By Lowering Production
Laying-Off Workers. 4/10/2013 29babasabpatilfreepptmba.Com

30. 30 Business Environment-Internal Factors • Competitors: Brand
Competition: Affect Sales Operations Of The Business Firms. • A Company
Encounters Various Forms Of Competition. The Most Common Competition
Which A Company’s Products Faces Is From Differentiated Products Of Other
Companies. • Ex: In The Air Conditioner Market Voltas Air Conditioner Faces
Competition From Other Branded Air Conditioner Such As Videcon, Elgi,
Samsung Companies. • Public : Environmentalists, Consumers Protection
Groups & Media Persons May Influence Both Production & Sales. 4/10/2013
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31. Macro Environment • Macro Environment Of Business Consist Of The
Following Factors: • A. Economic Environment • National • Global • B. Non –
Economic Environment • Political • Socio Cultural • Demographic •
Technological • Natural 4/10/2013 31babasabpatilfreepptmba.Com

32. Economic Environment Of The Business (National) • Business Enterprise
Is Essentially An Economic Institution. It Conducts Its Activities In The
Market System With The Objective Profit Maximisation. • In Modern Economy
There Are Five Sectors Contribute To The Development Of The Economy They
Are: • The Business Sector • The Household Sector • The Capital Market •
The Government • These Factors Determine The Prospects Of Business
Activity. In A Recessionary Situation Business Firms Encounter Steep Fall In
Effective Demand Leads To Business Slowdown. Developed Financial System
–Precondition For The Efficient Mobilization Of Financial Resources For The
Business. 4/10/2013 32babasabpatilfreepptmba.Com

33. Global Environment • Globalization- Expansion Of Business Activities
Across Boundaries Of The Nation States. • It Refers To A Process Of
Increasing Economic Openness Growing Economic Interdependence And
Deepening Economic Integration Between Countries In The World Economy.
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34. Global Environment • Over The Past Ten Years The Indian Economy Is
Integrates Into The Global Economy. • The Three Policy Measures Initiated
To Realize The Objectives Of Globalization Are: • 1. Exchange Rate
Adjustment And Rupee • Convertibility. • 2. Import Liberalisation & • 3.
Opening Upto Foreign Capital 4/10/2013 34babasabpatilfreepptmba.Com

35. Political Enviroment • A Stable & Dynamic Political Environment Due
Influences Business Growth. • In A Capitalist Economic System Corporate
Firms Are Very Powerful, Yet They Have To Operate Within The Parameters
Which Are Determined By The Broad Policies Of The Government. • Ex: Mrtp
Act, Fera Because Of The Experiences Of The Colonial Era, Foreign Capital &
The Multinationals Corporations Were Suspects. 4/10/2013
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36. Legal Enviornment • Govt. Sets The Legal Framework Within Which
Business Firms Operate. • Legislations Defining: Property And Business
Organizations, • Laws Of Contracts • Bankruptcy( One Who’s Assets Are Used
To Repay Debts), • Mutual Obligations Of Labour & Management • Laws And Regulations, The Way The Business Are Carried Out Constitute Legal Environment Of Business. 4/10/2013 36babasabpatilfreepptmba.Com

37. Legal Enviornment • Economic Legislations Can Be Classified Into Two Categories: • 1. Legislations – Facilitatory Role In Business. • Ex: Contract
Act –Rules For Systematic Exchange Transactions. • 2. Legislations- Restrictive Role In Business • Ex: Sherman Anti-Trust Act In 1890, Clayton
Anti-Trust Act 1914 • Federal Trade Commission Act 1914 Of Usa To Prevent Unfair • Monopolistic Unfair Practices. • In India – Mrtp-Monopolies &
Restrictive Trade Practice Act-1969. • Foreign Exchange Regulation Act (Fera) -1973 –Directly Regulated The Foreign Exchange Related Transactions
Of The Indian Business. • Both Mrtp & Fera – Diluted – Stringent & Restrictive In Nature. 4/10/2013 37babasabpatilfreepptmba.Com

38. Socio-Cultural Environment • Business Firms Operate In A Socio-Cultural Environment & Their Strategies Needs To Be Formulated Keeping
This Factor In View. • Ex: Western Countries Are Modern & Liberal. • People-More Receptive To New Products & No Prejudice Against Any Kind Of
Advertising. • Health Conscious-Product Injurious To Health Of The People Can’t Be Successfully Introduced. 4/10/2013 38babasabpatilfreepptmba.Com

39. Socio-Cultural Environment • Muslim Societies –Conservative. Womens Still Under Purdah. • Demand For Cosmetics & Western Cloths Are Limited. •
Business Firm Aiming At Capturing Markets For Its Products In These Diversified Societies Has To Be Careful About The Cultural Sensitivities Of
These Societies. • India- Liberal Outlook, Modeling By Young Women For Advertising Fashionable Products, Wine & Beer Is Acceptable In Indian
Society. 4/10/2013 39babasabpatilfreepptmba.Com


40. Technological Environment Technology- Knowledge About Machines & Processes. Any Business- Cannot Survive With Outdated Techniques In International Competition. Four Decades Ago –Technology Of Fiat Was
Unsophisticated. Users Had No Choice & Thus Product Survived For A Long Period. Setting Up Of Maruti Udyog Ltd., The Situation Changed Due To
Superior Technology. Technological Environment Affects Business From The Demand Side As Well. Ex: In A Country Where Power Is Scarce, Demand For
Electrical Appliances Will Be Limited. Erratic Power Supply And Frequent Load Shedding Creates Market For Inverters.