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Business Environment

INTRODUCTION

Business decisions are influenced by two sets of factors

Internal factors (The Internal Environment

External Factors( The External Environment)

Business Environment presents two challenges to the enterprise

The challenge to combat the environmental threats

Exploit the business opportunities

Environmental Analysis is one of the first steps in Strategic Management

definition

“The process by which strategists monitor the economic, governmental/legal, market/competitive, supplier/technological, geographic and social settings to determine opportunities and threats to their firms”

“Environmental diagnosis consists of managerial decisions made by analysing the significance of data (opportunities and threats) of the environmental analysis”

Environmental Scanning is the monitoring, evaluating and disseminating of information from the external and internal environments to key people within the corporation.

A corporation uses this tool to avoid strategic surprise and to ensure its long-term health.

What is business environment?

Business environment includes the ‘climate’ or set of conditions, economic, social, political or institutional which have a direct or indirect bearing on the functioning of business

It signifies external forces, factors and institutions that are beyond the control of the business and they affect the functioning of a business enterprise.

Thus it is the set of external factors, such as economic factors, social factors, political and legal factors, demographic factors, technical factors etc., which are uncontrollable in nature and affects the business decisions of a firm.

Features of business environment

a. Business environment is the sum total of all factors internal & external to the business firm that greatly influence their functioning

b. It covers factors and forces like customers, competitors, suppliers, government, and the social, cultural, political, technological and legal conditions.

Continued…

c. The changes in business environment are unpredictable.

d. Business Environment differs from place to place, region to region and country to country. Ex: Political conditions in India differ from those in Pakistan. Taste and values cherished by people in India and China vary considerably.

Importance of business environment

Business environment is complicated and active in nature and has a far-reaching impact on the survival and growth of the business.

a. Determining Opportunities and Threats

b. Giving Direction for Growth

c. Continuous Learning

d. Image Building

Continued…

e. Meeting Competition

f. Identifying Firm’s Strength and Weakness: Business environment helps to identify

TYPES OF ENVIRONMENT

1) INTERNAL ENVIRONMENT

2) EXTERNAL ENVIRONMENT

Internal environment

Important internal factors which have a bearing on the decisions of a business firm are:

1. Value system

2. Vision, mission and objectives

3. Management structure and nature

4. Internal power relationship

5. Human resources

6. Company image

Value system

Vision, Mission & Objective

Management structure & nature

Internal Power Relationship

Human resources

Company Image

Miscellaneous factors

Physical assets and facilities like production capacity, technology and efficiency of the productive apparatus, distribution logistics etc., affect competitiveness of a firm.

R&D, technological capabilities determine a company’s ability to innovate and compete.

Marketing resources like quality of marketing men, distribution network etc. are important for brand extension, new product introduction etc.

Continued….

Financial factors and policies, financial position, capital structure affect business performances, strategies and decisions.

Continued….

7. Miscellaneous factors

Physical assets and facilities

R & D and technological capabilities

Marketing resources

Financial factors

External environment

Micro environment consists of the actors in the company’s immediate environment that affect the performance of the company. They are more intimately linked with the company.

Macro environment consists of larger societal forces that affect all the actors in the company’s micro environment.

Micro environment

Suppliers

Customers

Competitors

Marketing intermediaries

Financiers

Public

Suppliers: It has been observed that India maintained indigenous stocks of 3-4 months and imported stock of 9 months as against an average of a few hours to two weeks in Japan.

Steps taken:

1. Vendor development

2. Backward integration

3. Removal of dependence on single supplier

4. Move towards relationship marketing

Customers: In choosing the customer segments a company should consider factors like;

1. relative profitability

2. dependability

3. stability of demand

4. growth prospects

5. extent of competition.

The business firm should not be dependent on a single customer

With globalization Indians have become more exposed to global competition.

Competitors: An implication of customer demand is that a marketer should strive to create primary and selective demand for its products.

However many companies have restructured their business portfolio and strategies.

Seller’s market existed buyer’s market has emerged.

Firms that aid a company in promoting, selling and distributing its goods to final portfolio constitute the marketing intermediaries.

It includes agents, merchants who help the company find customers or close sales with the.

Choice of wrong marketing intermediary may land up the business in heavy losses.

Financiers: Their policies, strategies, attitudes, ability to provide non-financial assistance are much more important than the financing capabilities.

Public : A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its interests. Ex-media, citizens, local public etc.

Companies affected by leading daily which tries to bring down share prices of the company.

NGOs have been protesting against child labour, cruelty against animals, environmental problems, deindustrialization resulting from imports etc.

However some of publics are opportunities for the business when they can be used to disseminate useful information.

Thus a company should have good relation with local publics so that they can work for mutual benefit.

Macro environment

Economic environment

Political environment

Regulatory environment

Demographic environment

Technological environment

Natural environment

Global environment

Economic environment

Business is dependent on economic environment for inputs.

Business is dependent on economic environment for selling its finished goods.

Economists are supplying macro economic forecasts to various industrial establishments.

Meaning of Economic Environment

Definition

Totality of economic factors, such as employment, income, inflation, interest rates, productivity, and wealth, that influence the buying behavior of consumers and firms

The economic environment comprises of:

Income and wealth: Income in an economy is measured by GDP, GNP and per capita income. High values of these factors show a progressive economic environment.

· Employment levels : High employment represents a positive picture of the economy. However, there are many forms of unemployment, including partial employment and disguised unemployment.

· Productivity: This is the output generated from a given amount of inputs. High levels of productivity support the economic environment.

Classifications of the Economic Environment

Microeconomic environment : It includes the economic environment of a particular industry, firm or household and is primarily concerned with price determination of individual factors. The main consideration from a microeconomic perspective is the efficient allocation of resources. This is necessary to maximize total output.

Macroeconomic environment : It includes all the economic factors in totality. The main consideration here is the determination of the levels of income and employment in the economy.

Factors Affecting the Economic Environment

Inflation and deflation: Inflationary and deflationary pressures alter the purchasing power of money. This has a direct impact on consumer spending, business investment, employment rates, government programs and tax policies.

Interest rates: Interest rates determine the cost of borrowing and the flow of money towards businesses.

Exchange rates: This impacts the price of imports, the profits made by exporters and investors and employment levels (also through the impact on the tourism industry).

Monetary and fiscal policy: This helps in attaining full employment, price stability and economic growth.

Classification of Economies

Economies of countries can be classified based on parameters:

1. Ownership of means of production

a)capitalist economy

b)socialist economy

c) Mixed economy

2. Levels of economic development

a)Developing countries

b)Developed countries

Capitalism is an economic system characterized by private ownership of productive goods and services.

Socialism is an economic and political system in which private property is abolished and the means of production (i.e., capital and land) are collectively owned and operated by the state.

Mixed economy, in which some of the means of production are owned by the government while some is held by private individuals.

ECONOMIC INDICATORS

An economic indicator is simply any economic statistic, such as the unemployment rate, GDP, or the inflation rate, which indicate how well the economy is doing and how well the economy is going to do in the future. As shown in the article "How Markets Use Information To Set Prices" investors use all the information at their disposal to make decisions.

If a set of economic indicators suggest that the economy is going to do better or worse in the future than they had previously expected, they may decide to change their investing strategy.

Types of Economic Indicators

Total Output, Income, and Spending

HDI(Human Development Index)

Rainfall Index

FDI

Employment, Unemployment, and Wages

http://economics.about.com/cs/finance/a/pricing_info.htm

Production and Business Activity

Prices

Money, Credit, and Security Markets

Federal Finance

International Statistics

Salient features of Indian Economy

Agrarian Economy

High Population

Unequal Distribution of Income and Wealth

Centralization

Prevalence of Zamindari system

Lack of proper Infrastructure

Low Percapita Income

Less Economic Welfare

Developing Economy

Mixed Economy

Low Quality of Life

Illiteracy and skill shortage

Salient features of Indian Economy Cont……

High Levels of Unemployment & Underemployment

Less Production

Unfavourable BOP

Prevalence of Povety

Lack of Social Security Measures

Scarcity of natural Resources

Lack of Capital

Brain Drain

High Dependency Burdens

Low Level of Productivity

Technological Backwardness

India at a Glance……

A Sub-continent endowed with huge natural resources and bio-diversity is protected by the mighty Himalayas on the north , the Arabian sea on the West, the Indian Ocean on the South and the Bay of Bengal on the East .

7th largest country in geographical area.

2nd largest country in population (1.2 billion).

Largest democracy in the world.

An epitome of unity in diversity- a multi-ethnic, multi-religious, multi-cultural and multi-linguistic plural society.

2nd fastest growing economy in the world.

Ranks 10th in GDP in nominal terms and 4rth in PPP terms.

.

Basic Economic Indicators:

GDP :$1.704 trn.,10th/ $4.447 trn(June2011),3rd.

GDP Growth: 8-5% (2010-11)

GDP per capita:$1,382(nomina:139th; 2011)/ $3,608 (PPP:128th; 2011).

GDP by Sector:Agri(16.1%),Ind.(28.6%),Services

(55.5) (2010).

Inflation: (CPI): 9.44% (June 2011)

Population below poverty line: 37% (2010)

Labour force: 478 million (2010, 2nd.).Labor force by occupation:(agri.52%,ind.:14%Services: 34% (2009).

Unemployment: 9.5% (2009-10)

.

Ease of Doing Business Rank: 134

Exports: $247.4 billion (2010)

Imports : $359.3 billion (2010)

FDI stock:35.6 bn(1010) down from$156.30bn(2009)

Gross External Debt: $237.1 billion (2010 est)

Public Debt:$758 billion (2010),55.9% of gdp.

Revenues: $170.7 billion (2010 est.)

Expenditure: $257.4 billion (2010 est.)

Economic aid: $2.107 billion (2008 est.)

Foreign Reserves:$316 billion (July,2011).

Credit Rating: BBB-

Areas of Concern

High rate of Inflation( 10-12%)

Extreme Poverty (37% , more than 300 million below poverty level)

High Unemployment

Illiteracy and Education ( lack of quality education)

Lack of Health Care to the masses and Sanitation.

High Public Debt.

Corruption, Black money, stashing in foreign banks.

Crime and Violence in politics and society- lack of social justice.


Political Environment refers to the influence exerted by the three political institutions ie. legislature, executive and judiciary in shaping, directing, developing and controlling business activities.

The constitution of a country

Political Organisation

Political Stability

Image of the country and its leaders

Foreign Policy

Laws governing business

Flexibility and adaptability of laws

The Judicial System


Important economic policies such as industrial policy, policy towards foreign capital and technology, fiscal policy and foreign trade policy are often political decisions.

All these aspects have a bearing on the strategies adopted by the business firms. The stability of the government also influences business and related activities to a great extent. It sends a signal of strength, confidence to various interest groups and investors.

Cont…..

Further, ideology of the political party also influences the business organisation and its operations. You may be aware that Coca-Cola, a cold drink widely used even now, had to wind up operations in India in late seventies

In the early 1950s the Congress party adopted socialist pattern of society, this was mainly responsible for the public sector dominated economy which lasted until the early 1990s.

The dramatic changes in the political environment in the erstwhile USSR and East European countries that gave rise to drastic changes in their economic policies in the late 1980s.

And these developments encouraged a revolutionary change in India’s economic policies in 1991.

Continued….

The government expenditure forms a substantial percentage of GDP in the developed and developing countries.

Government normally plays four important roles in an economy in relation to business

1. Regulatory role

2. Promotional role

3. Entrepreneurial role

4. Planning role

In 1991 Indian economy faced severe

macro-economic imbalances:

• Huge deficit in the balance of payments

• Current Account Deficit rose to 3.2% of GDP

• Foreign currency assets dipped from US $3.4 bn (march 1990) to US $975 mn on July 12,1991

The salient features of the NEP-1991:

Liberalisation

Extending privatisation

Globalisation of the economy

Regulatory environment

Government regulation of business may cover

1. Entry into business

2. Reservation of industries to small scale, co-operative sectors, licensing system

3. Ceilings on profit margins, dividend

4. Restriction on intra-corporate investments

Government regulation may be broadly divided into direct controls and indirect controls.

Indirect controls-fiscal policy, monetary incentives/disincentives.(eg-high import duty)

Direct control-can be applied selectively from firm to firm and industry to industry

Legal Environment

This refers to set of laws, regulations, which influence the business organisations and their operations.

Every business organisation has to obey, and work within the framework of the law. The important legislations that concern the business enterprises include:

(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

Besides, the above legislations, the following are also form part of the legal environment of business

(i) Provisions of the Constitution:

The provisions of the Articles of the Indian

Constitution, particularly directive principles, rights and duties of citizens, legislative powers of the central and state government also influence the operation of business enterprises.

(ii) Judicial Decisions:

The judiciary has to ensure that the legislature and the government function in the interest of the public and act within the boundaries of the constitution. The various judgments given by the court in different matters relating to trade and industry also influence the business activities.

One important aspect is the phenomenon of ethnicity

Driving force behind political instability

Firms must assess political risks

Government actions that could adversely affect the long-run profitability or value of a firm

What aspects of the political environment should you consider as you do business?

Stability of government

International relations

Government bureaucracy

Political Risk – 7 Typical risk events

Expropriation of corporate assets without prompt and adequate compensation

Forced sale of equity to host-country nationals, usually at or below depreciated book value

Discriminatory treatment against foreign firms in the application of regulations or laws

Barriers to repatriation of funds (profits or equity)

Political Risk – 7 Typical risk events

Loss of technology or other intellectual property (such as patents, trademarks, or trade names)

Interference in managerial decision making

Dishonesty by government officials, including canceling or altering contractual agreements, extortion demands, and so forth

Managing Political Risk

Avoidance – either the avoidance or withdrawal of investment in a particular country

Adaptation – adjust to the political environment

Dependency – keeping the host nation dependent on the parent corporation

Hedging – minimizing the losses associated with political risk events

Economic Risk

A country’s level of economic development generally determines its economic stability

Economic risk falls into 2 categories

Government changes its fiscal policies

Government modifies its foreign-investment policies

Managers are constantly reassessing economic risk

Conclusion:

You need to follow closely the political environment in which you operate so that you can know what to do to guard yourself against any eventualities that may result from any changes in the politics of the countries where you do business.

Political changes can also create great opportunities for you as a business person and such chances can come your way if you keep yourself knowledgeable about the political climate in which you do business.

Politics of India

Political Institutions & Parties

Republic of India

A federal republic with a parliamentary system of government

capital: New Delhi

A federal system

26 states and 6 centrally administered Union Territories

2 states are partially claimed by Pakistan and China

Federal system

Relatively centralized

federal government controls the most essential government functions

defense

foreign policy

taxation

public expenditures

economic (industrial) planning

Federal system

state governments formally control

agriculture

education

law and order within states

dependent on central government for funds

Federal system

Balance of power between central and state governments

varies by time and place

state power was constrained

during the rule of Nehru and Indira Gandhi

state governments have more room to maneuver

when central government is weak

since 1998

Federal system

considerable center-state conflict when ruling political party in a state is different from national ruling party

Parallel state structure

Formal political structure of the states parallels that of the national government

national state

President Governor

Prime Minister Chief Minister

Parliament Assembly

Supreme Court High Court

The legislature

Parliamentary system of government

the executive authority is responsible to the Parliament

The legislature

bicameral Parliament

Rajya Sabha (Council of States)

Lok Sabha (House of the People)


The Upper House

Upper House


not more than 250 members

12 are nominated by the President of India

the rest are indirectly elected

by state Legislative Assemblies

The Council of States can not be dissolved

members have terms of 6 years

1/3 members retire at end of every 2nd year

Lok Sabha

House of the People

Lower House

Lok Sabha (House of the People)

545 members

2 are appointed by the President of India

the rest are directly elected from single-member districts

5-year terms unless dissolved

Lok Sabha elects its presiding officer

the Speaker

Lok Sabha

Elections held at least every 5 years

Prime Minister may call elections earlier

543 single-member districts of roughly equal population

party nomination

1st-past-the-post

winner-take-all

women’s share

Elections to Lok Sabha

Vote share of 3 major political parties

Current composition

43 parties in the 13th Lok Sabha (1999)

39 parties in the 14th Lok Sabha (2004)

Bharatiya Janata Party (BJP) 184 138

Indian National Congress (INC) 109 145

Communist Party of India (M) 34 43

other political parties 218 217

total 545 543

Indian National Congress

India’s oldest political party

since 1885

India’s premier political party

until 1990s

in 1960s many regional parties started challenging INC’s monopoly on power


Indira Gandhi

created a top-down structure

party leaders appoint party officials

some limited party elections

left-of-center, pro-poor political platform


INC moved toward the ideological center

Beginning in 1984

INC today tilts right-of-center

economic efficiency

business interests

limited government spending


INC has always attracted support from diverse social groups

in the 1990s INC has lost some of its traditional constituencies among the poor and Muslims

Bharatiya Janata Party (BJP)

The major political party in India today

right-leaning, Hindu-nationalist party

first major party to mobilize explicitly on the basis of religious identity


better organized than INC

disciplined party members

carefully selected party cadres

clear and respected authority line within the party


Traditional supporters

urban, lower-middle-class groups

base of support widened since mid-1980s

Hindu nationalism

north-central India

decline of Indian National Congress

Muslims as convenient scapegoat for frustration

BJP’s rapid rise to power

electoral success from 1989 to 1999

difficulty in forming alliance with other parties

break with past traditions

relatively moderate, centrist position

BJP formed governing coalition in 1998

collapsed in 1999

BJP formed a new coalition in 1999

more broadly based than previous coalition


economic liberalization and stability

privilege the interests of the Hindu majority

Prime Minister

Leader of the majority party leader in Lok Sabha becomes the prime minister

prime minister nominates a cabinet

members of Parliament in the ruling coalition

Council of Ministers

effective power is concentrated in the office of the prime minister

where most of the important policies originate

Prime Ministers of India

38 years in the Nehru-Gandhi family

more and more rapid turnover

The President of India

Head of the State

Commander-in-Chief of the armed forces

elected by an electoral college

national Parliament

state legislature

5-year terms

can be reelected

The President of India

Ceremonial office

symbolize national unity

supposedly above partisan politics

mostly acts on the advice of the prime minister

President plays a significant role when the selection of a prime minister is complex

in 1998 President requested BJP to form govt.

INDIAN CONSTITUTION

The followings are the main salient features of Indian constitution.

A large written constitution

A borrowed constitution.

Fundamental Rights.

Directive principles of state policy.

Parliamentary form of Govt.

Secularism

Independent & Integrated Judiciary

Federalism.

Judicial Review.

Fundamental Duties.

Constitution of India

Preamble:

“We, the people of India, having solemnly resolved to constitute India into a Sovereign, Socialistic, Secular, Democratic Republic and secure to all citizens

Justice – social, economical and political,

Liberty – of thought, expression, belief, faith & worship,

Equality of status and opportunity and promote among them all,


Preamble:

Fraternity assuring the dignity of individual and unity and integrity of the nation,

in our constituent assembly this 26th November, 1949,

do hereby adopt, enact and give to ourselves this

Constitution”


Whether preamble is a part of Constitution?

Yes

Ordinarily ‘preamble’ is not considered part of a statute & therefore at one time it was thought that the Preamble does not form part of the Constitution

This view is no longer correct

Supreme Court has held that Preamble is part of Constitution

Supreme Court has referred to the Preamble several times while interpreting constitutional provisions


Whether preamble can be amended?

Yes - Supreme Court has declared that:

• Preamble is part of Constitution

• It can be amended subject to the condition that it does not affect the basic structure of the Constitution


Whether preamble has been amended any time?

Yes – through 42nd Amendment Act, 1976

Three terms were included in the Preamble:

• Secular

• Socialistic

• Integrity

These are not new since these are already included in spirit in various provisions of the Constitution

• Constitution of India

FUNDAMENTAL RIGHTS:

Fundamental Rights are incorporated in Articles 12 to 35, forming part III of the Constitution

Some of the rights are available only to citizens of India while others are available to all the persons

Rights guaranteed fall under following broad categories:

• Right to equality (Art 14)

• Prohibition of discrimination (Art 15)

• Abolition of untouchability (Art 17)

• Right to freedom protection of life and personal identity(Art 21)

• Right to freedom of speech, expression, movement (Art 19)

• Right against exploitation (Art 23 & 24)


Rights guaranteed fall under following broad categories:

• Right to freedom of conscience, practice of religion(Art 25 &28)

• Right to minorities for conservaton of their culture(Art 29 & 30)

• Right to enforce the Fundamental Rights(Art 32)

Constitution – important Articles

Article 12 – Defining “the State”

Article 13 – Prohibiting the State from making any law

which takes away the fundamental rights

Article 14 – Right to Equality

Article 15 – Prohibits State from discriminating against

citizens on grounds of religion,race,sex,

caste,place of birth but enables States to

make special provision for women and

children


Article 16 - Equal opportunity in the matter of public

employment

Article 16(4) – Provision for reservation in appointment

in favour of backward class of citizens

which are not adequately represented

in the services under Govt.


Article 19 – Right to freedom

Freedom of speech and expression

To assembly peacefully without arms

To form associations or unions

To move freely throughout the territory of India

To reside and settle in any part of India

To practice any profession or to carry out any

procession, trade or business


Article 19 – Freedom of speech and expression is subject to the following restriction:

Security of the State

Friendly relations with foreign states

Public order

Decency or morality

Contempt of Court

Constitution – Directive Principlies

Directive Principles of State Policy embodied in Part IV of the Constitution(Art 36 to 51)

Contain the principles ‘Fundamental in the governance of the country”

Directive Principles of Constitution

State shall strive to promote welfare of people securing social, economic and political justice

State shall strive to minimise inequalities in income

State shall direct its policy towards securing the same

Ownership & control of the material resources of the community are so distributed as best to subserve the common good

Directive Principles of Constitution

Operation of the economic system does not result in the concentration of wealth and means of production to the common detriment

Securing living wage of worker, just and humane conditions of work, participation of workers in management

Securing uniform civil code for the citizens throughout the territory of India

Constitution – Fundamental Duties

Article 51A – Fundamental Duties of every citizen:

To abide by the Constitution and respect its ideals and institutions, the National Flag & National Anthem

To cherish and follow the noble ideals which inspired our national struggle for freedom

To upheld and protect the sovereignty, unity and integrity of India

To defend the country and render national service when called upon to do so


To promote harmony and the spirit of common brotherhood amongst all the people of India transcending religion, linguistic and regional or sectional diversities, to remove the practices derogatory to the dignity of women

To value & preserve the rich heritage and our composite culture

To protect & improve the natural environment including forests, lakes,rivers and wild lives & have compassion for living creatures


To develop the scientific spirit, humanism and

the spirit of inquiry and reform

To safeguard public property and adjure

violence

To strive towards excellence in all spheres of

individual and collective activity, so that the

nation constantly rises to higher levels of

excellence and achievement


Article 309 - Acts of the appropriate Legislature to regulate the recruitment, and conditions of service of persons appointed, to public services and posts

Art 310. (1) Every person who is a member of a defence service or civil service or all-India service, holds the post under the Union during the pleasure of the President of India


Art 311(1)- No person who is a member of a civil service of the Union or an all-India service shall be dismissed or removed by an authority lower than appointing authority

(2) No such person as aforesaid shall be dismissed or removed or reduced in rank except after an inquiry


Provisions of Article 311(2) shall not apply :

(a) where a person is dismissed or removed or

reduced in rank on the ground of conduct which

has led to his conviction on a criminal charge

(b) where the authority empowered to dismiss or

remove or reduce him in rank is satisfied that for

some reason, to be recorded in writing, that it is

not reasonably practicable to hold such inquiry


©Where the President is satisfied that in the interest of

the security of the State it is not expedient to hold

such inquiry

FUNDAMENTAL RIGHTS

• RIGHT TO EQUALITY which has following articles

• Equality before Law

• Prohibition of discrimination on the grounds of Religion Race Caste Sex or place of birth.

• Equality of opportunity in matters of Public Employment

• Abolition of Untouchability

• Abolition of Titles

The Judiciary

Fundamental contradiction in constitution

principle of parliamentary sovereignty

principle of judicial review

The Judiciary

judiciary tries to preserve the constitution’s basic structure

to ensure that legislation conforms with the intent of the constitution

parliament tries to assert its right to amend the constitution

Demographic environment

Demographic bases of market segmentation include:

1. Age structure

2. Gender

3. Income distribution

4. Family size

5. Occupation

6. Education

7. Social class

8. Religion

9. Race

10. Nationality

Technological environment

Technology is one of the important determinants of global competitiveness.

The type of technology in use, level of technological developments, speed with which new technologies are adopted and diffused, appropriate technologies are important for business.

Innovations may help companies to increase market share, capture new markets, create new market segments, industries and markets.

Natural environment

Environment is the source and support of everything used by businesses.

The geographical and ecological factors such as natural resource endowments, weather and climatic conditions, topographical factors, locational aspects in the global context, port facilities etc. are all relevant to business.

Continued….

Geographical factors influence

1. Location of certain industries

2. Choice of technology

3. Demand pattern

Depletion of natural resources, environmental pollution and disturbance of the ecological balance have caused great concern.

Ex-Indian pharmaceutical company is affected by WTO’s acceptance of product patents.

Import and investment liberalizations mandated by WTO has changed competitive environment in India.

War or political tensions globally , uncertainties, strained political relations between nations etc. affect business.

Developments in information and communication technologies have significant implication for business.