Introduction to Business Environment-1

Introduction to Business Environment: 

Introduction to Business Environment Session1 – MMM/MIM/MHRDM/MFM Semester-III July – 2009

Instructions: 

Instructions 15 sessions Semester End Exam - 60 marks Class Participation and Attendance - 10 Marks Class Test - 15 marks Group Presentations and Vivas - 15 marks

Course Content : 

Course Content Introduction to Business Environment & Strategic Management - Social, Political Issues Economic Environment of Business - Economic Trends, Administrative pricing Global Environment -Technology Transfer & MNCs Joint Ventures Industrial Units Corporate Social Responsibility

Course Content: 

Course Content Business Ethics Corporate Governance Ecological Issues Energy Management Entrepreneurship & Family Business Houses Managing Business Resources

What is Business???: 

What is Business??? Business may be understood as the organized efforts of enterprises to supply consumers with goods and services for a profit

Characteristics of Business: 

Characteristics of Business

BUSINESS CHALLENGES: 

BUSINESS CHALLENGES Managing Bottom line Meeting stakeholders expectations Developing and retaining top talent Creating a customer responsive organisation Diminishing time to market Market agility Pricing and quality

What do you mean by Business Environment???: 

What do you mean by Business Environment??? The environment of any organization is “ the aggregate of all conditions, events and influences that surround and affect it.” Characteristics of Business Environment: Complex Dynamic Multi-faceted Far- reaching impact

Why Study Business Environment: 

Why Study Business Environment Development of broad strategies To foresee the impact of socio-economic changes at the national and international levels on firm’s ability Analysis of competitor’s strategies and formulation of effective counter measures To keep oneself dynamic

Types of Environment: 

Types of Environment Internal Environment External Environment Micro environment Macro environment Economic Non Economic

Internal Environment: 

Internal Environment Refers to all the factors that are within an organization which impart strengths or cause weaknesses of strategic nature. Controllable factors These include: Value system Mission and Objectives Management Structure and Nature

Contd….: 

Contd…. Human Resources Company Image and Brand Equity Other Factors Physical Assets and Facilities R & D and Technological Capabilities Marketing Resources Financial Resources

External Environment: 

External Environment Includes all factors outside the organization which provide opportunities or pose threats to the organization Uncontrollable factors Consists of Micro and Macro environment

Micro Environment: 

Micro Environment “ It consists of the factors in the company’s immediate environment that affect the performance of the company”.

Micro Environment Factors: 

Micro Environment Factors Suppliers Customers Marketing Intermediaries Competitors Publics Financial Community

Micro Environment of a typical car manufacturer: 

Micro Environment of a typical car manufacturer Potential Supplier Potential Customers Customers Pressure Groups For Supplies For Customers Potential Dealers Government Local Communities

Macro Environment: 

Macro Environment It comprises general trends and forces that may not immediately affect the organization but sooner or later will alter the way organization operates. Macro Environment :- Economic Non Economic

Economic Environment: 

Economic Environment Economic stages that exists at a given time in a country Economic system that is adopted by a country for example. Capitalistic, Socialistic or Mixed Economy Economic planning, such as five year plans, budgets, etc. Economic policies for example, monetary, industrial and fiscal policies Economic Indices such as National Income, Per Capital Income, Disposable Income, Rate of growth of GNP, Distribution of Income, Rate of savings, Balance of Payments etc. Economic Problems Functioning of economy

Non Economic Environment: 

Non Economic Environment Regulatory Environment Socio- Cultural Environment Demographic Environment Technological Environment Political Environment

Non- Economic Environment: 

Non- Economic Environment Cultural Environment Social Customs & Rituals and practices Lifestyle patterns Family structure Role & position of men, women, children and aged in family & society

Comparative analysis of Cultural influence on management styles: 

Comparative analysis of Cultural influence on management styles Management Concepts How perceived in US How perceived in Japan Company Team in sport Family in village Business goal To win To survive Employees Players in a team Children in Family Human relations Functional Emotional Competition Cut-throat Cooperation Sense of identification Job pride Group prestige Promotion According to abilities Length of service Work motivation Individual income Group atmosphere

Non- Economic Environment: 

Non- Economic Environment Demographic Environment Growth of population Age Composition Life Expectancy Sex Ratio Fertility and Mortality rates Inter-state migration

Macro Environment: 

Macro Environment Technological Environment Sources of technology Technological development Impact of technology Political Environment Political parties in power Political Philosophy

Macro Environment: 

Macro Environment Regulatory Environment Constitutional framework Policies relating to pricing and foreign investment Policies related to the public sector, SSIs, development of backward areas and control of environmental pollution

International environment: 

International environment Important factors that operate at global level which have an impact on organization are: Growth of world economy Distribution of world GDP International institutions IMF,WTO ILO Economic relations between nations Global human resource-nature and quality of skills, mobility of labor Global technology and quality standards Global demographic patterns

WTO and its relevance for Indian companies: 

WTO and its relevance for Indian companies The main guidelines of WTO are: Trade without discrimination Growing market access Promotion of fair competition The response of Indian government to WTO constitutes the following actions Reduction of tariffs Opening Indian markets for Global Players Rationalizing industrial licensing and removal of controls on the size of operations

WTO and its relevance for Indian companies: 

WTO and its relevance for Indian companies The impact of WTO on Indian companies is likely to include the following : Increasing competition Consolidation of activities in core competence areas Improvements in infrastructure to negate structural disadvantages. Shake out of minor players and M&As to gain global scale.

Overview of Business Environment: 

Overview of Business Environment MACRO ENVIRONMENT ECONOMIC Environment MICRO ENVIRONMENT BUSINESS Internal Environment Values, Mission & Objectives. Human Resources, Co. Image & Brand Equity TECHNOLOGICAL FACTORS MARKETING INTERMEDIARIES DEMOGRAPHIC FACTORS SOCIAL CULTURAL FACTORS Non - Economic Environment

Environmental Analysis & Strategic Management: 

Environmental Analysis & Strategic Management Environmental Scanning The process by which organizations monitor their opportunities and threats affecting their business is known as environmental scanning SWOT Analysis

Tools for Analyzing the Environment: 

Tools for Analyzing the Environment PEST Analysis PESTLE STEEPLE S - Social T - Technological E - Economic E - Environmental P - Political L - Legal E - Ethical

Critical Success Factors (CSFs): 

Critical Success Factors (CSFs) CSFs are those areas in which good results will help ensure an organization’s success against competition and where poor results usually lead to declining performance A strategy is defined as a unified, comprehensive and integrated plan relating the strategic advantages of the firm to the challenge of the environment.

Competitive Environment- Michael Porter’s Five Forces Model: 

Competitive Environment- Michael Porter’s Five Forces Model

Competitive Environment- Michael Porter’s Five Forces Model: 

Competitive Environment- Michael Porter’s Five Forces Model Threat of the entry of new competitors Existence of Barriers to Entry Economies of scale Product differentiation Brand Equity Capital requirements Access to distribution channels Absolute cost advantages Government policies

Contd..: 

Contd.. The intensity of competitive rivalry Number of Firms and their Relative Market Share, Strengths Rate of industry growth –Demand conditions High Fixed cost Exit barriers Product Standardization Informational complexity and asymmetry Threat of Substitutes

Contd…: 

Contd… Bargaining power of customers: buyer concentration to firm concentration ratio buyer volume buyer switching cost relative to firm switching costs buyer information availability ability to integrate backward availability of existing substitute products buyer price sensitivity price of total purchase

Contd…: 

Contd… Bargaining power of suppliers supplier switching costs relative to firm switching costs degree of differentiation of inputs presence of substitute inputs supplier concentration to firm concentration ratio threat of forward integration by suppliers relative to the threat of backward integration by firms cost of inputs relative to selling price of the product

Sixth Force in Michael Porter Model: 

Sixth Force in Michael Porter Model According to Andrew Grove- former CEO of Intel sixth force are complementary goods

Michael Porter’s International Competitiveness Model- PORTER DIAMOND: 

Michael Porter’s International Competitiveness Model- PORTER DIAMOND Why a nation achieves success in a particular industry? Why Japan -- automobile, cameras Why Germany -- engineering

Porter Diamond: 

Porter Diamond Four broad attributes of a nation shape the environment in which local firms compete, and these attributes promote or impede the creation of competitive advantage (Diamond of four mutually reinforcing factors)

Porter Diamond: 

Porter Diamond 1. Factor Endowments– A nation’s position in factors of production such as skilled labor, capital, infrastructure necessary to compete in a given industry 2. Demand Conditions 3. Related and Supporting Industries 4. Firm Strategy, Structure, Rivalry – the conditions in the nation that govern how companies are created, organized and managed and the nature of domestic rivalry

PowerPoint Presentation: 

Thank You