By T. Samuel Pongen

Christ University

BBA

Dimensions of Business

Environment

Business Environment The combination of internal and external

factors that influence a company's operating situation.

Macro environment

Micro Environment

Internal Environment

TYPES OF ENVIRONMENT

BUSINESS DECISION

INTERNAL FACTORS

EXTERNAL FACTORS

Internal Environment

Company Image and Brand

Human Resources

Internal Power Relationship

Management Structure and Dimensions

Mission and Objectives

Value System

EXTERNAL ENVIRONMENT

Micro Environment

Macro Environment

MICROENVIRONMENT

Suppliers

Market Intermediaries

Competitors Customers

Publics

MACROENVIRONMENT

Economic Environment

The totality of economic factors, such

as employment, income, inflation, interest

rates, productivity, and wealth,

that influence the buying

behaviour of consumers and institutions.

Economic environment can be divided into three

parts. We shall now study their effect on

business. They are as under:

(i) Economic system

(ii)Economic policies

(iii) Economic conditions

(i) Economic System:

It is necessary to know about the economic

system prevailing in a country in order to

understand the economic environment. Economic

system influences the freedom or openness of

business. Economic system is mainly of three

kinds:

(a) Socialistic Economic System

(b) Capitalistic Economic System

(c) Mixed Economic System.

(ii) Economic Policies:

Economic policies deeply influence the business

of a country. The economic policies are laid down

to direct the economic activities.

Economic activities include import-export,

employment, tax structure, industry, public

expenditure, public debt, foreign investment, etc.

In order to direct all these economic activities, the

following economic policies are laid down:

For example, under the import-export policy,

restrictions on imports will benefit the indigenous

industry.

(iii) Economic Conditions:

Economic conditions are those conditions which

are related with the possibilities of economic

development of a country. On the basis of the

economic conditions the government starts

various programmes for the welfare of the people.

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Some of the examples of economic conditions

are as under:

(a) Flow of Foreign Capital

(b) Supply of Natural Resources

(c) Level of Economic Development

(d) Rate of Interest

(e) National Income

(f) Industrial Development

(g) Foreign Trade

(h) General Price Level.

Political Environment

Political environment is the outcome of a

combination of various ideologies advocated by

different political parties.

Factors connected with the activities of the

government are included in it, e.g., the type of

government (single-party government or multi-

party government), the attitude of the government

towards different industries, progress in passing

different laws.

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The following are some of the examples of the impact of the political environment on business:

(i) In 1977, the Janata Government adopted a stringent attitude towards the multinational companies. As a result of this attitude, the multinational companies like the IBM and the Coca-Cola had to ignore India.

(ii) The new government encouraged the multinational companies for investment in India. This led to the opening of the doors of the Indian market for the multinational companies. Consequently, the Coca-Cola entered the Indian market once again.

TECHNOLOGICAL

ENVIRONMENT

Technological environment in 1990s The success or failure of any business is highly dependent

on the type of technology in use, the level of technological developments, the speed with which new technologies are adopted and diffused, the type of technology that are appropriate etc.

For many years in the past, India did not have a favorable attitude towards latest technology to meet foreign standards. The reservation of products for the small scale sector sometimes comes in the way of adoption of modern technology if it involves capital investment higher than the specified limit.

Technological environment in 1990s It is only after the introduction of liberalization and

globalization of Indian economy drastic changes have come in the technological standards in India. Also very high duty structure made the import of latest technology not only expensive but also almost impossible.

Today, the scenario has changed. Free availability of foreign exchange, welcoming foreign collaborations, FDI, JVs, and setting up of MNCs have led to development of various R & D centers in many firms. Even the development taken place in the infrastructure has also facilitated the technological development

Ethics in the use of business

technology

Scientific advances allow businesses to use

technology to reach goals more easily and more

completely than ever before. In some areas, however,

such applications of technology start infringing on the

rights of individuals and may be unethical.

Governments and ethically operated companies are

aware of these limitations. Governments have passed

privacy laws and regulated communication

companies. Some companies self-censor and apply

internal policies to limit unethical behavior.

Businesses that wish to be considered ethical must

look at whether applying certain technologies may

harm some individuals and constrain such

applications to what is absolutely necessary.

Privacy

Individual privacy is one area that has been

identified clearly as a base for unethical business

behavior through the application of technologies.

Companies can track Internet usage, buying

habits and individual movement as well as collect

personal information about millions of customers

or even potential clients.

While governments have passed legislation

restricting the collection of personal data and

allowing individuals some control over what

companies can collect and store, ethical

businesses must decide -- independently of

legislation -- what is appropriate behavior.

Content

With new technologies allowing the easy creation

and distribution of images and videos, both

individual employees and companies need

guidelines as to what is acceptable. Without such

guidelines, some of this content will be offensive

to some of the company staff and to some

members of the public.

Security

Companies monitor employees and visitors and

collect much additional information in the name of

security. Ethical issues arise from the continuous

monitoring of employee activity and the recording

of security camera images.

An unjustified level of employee surveillance is

ethically questionable; the ethical company must

try to establish a level of monitoring it can justify.

The surveillance of non-employees, such as

visitors or suppliers' representatives, must be

constrained to an even lower level to be ethically

acceptable.

2G Spectrum Scam

The 2G spectrum scam involved politicians and

government officials in India illegally

undercharging mobile telephony companies for

frequency allocation licenses, which they would

then use to create 2G subscriptions for cell

phones.

The shortfall between the money collected and

the money which the law mandated to be

collected is estimated to be Rs.1,76,645 crore, as

valued by the Comptroller and Auditor General of

India based on 3G and BWA spectrum auction

prices in 2010.

Legal Environment

Many Acts are passed from time to time in order

to control and regulate business activities.

The sum total of all these Acts creates legal

regulatory environment. Acts are mossy passed

to regulate such business activities as sale-

purchase, industrial disputes, labour, regulating

partnership business, regulating company

business, foreign exchange, etc.

What is Social Environment?

Social environment is the totality of conditions

which concern in the effecting of the activity

feature of a human being. Those conditions

promote or hinder, motivate or restrain, the

characteristic activities of a living being.

Why Study Social

Environment?

Businesses live within society and the

interrelation between businesses and

stakeholders takes place within a social

environment.

They interrelate with society on many

levels: owners, customers, suppliers,

employees, government and the

community as stakeholders

Cultural Environment

The cultural environment mean a environment

which affect the basic values, behaviours, and

preferences of the society-all of which have an

effect on business decisions. Socio-cultural

environment.

All companies often include an examination of the

socio-cultural environment prior to entering their

markets.

Case of McDonalds In India.

A Company, which got benefit due to social

environment of India was McDonalds.

All the ethical decisions to respect the tastes of

the Indians and their religious beliefs were taken

care of.

McDonalds made sure that it altered the menu to

better suit the taste and religious beliefs of

Indians.

Business Environment presents two challenges to the enterprise

The challenge to combat the environmental threatsExploit the business opportunities

Business and Society

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Course focuses on large businesses (visibility,

power, widely recognized brands), but issues apply

to small and medium-sized companies as well.

BusinessThe collection of private,

commercially oriented organizations

SocietyA broad group of people and other

organizations, interest groups,

a community, a nation.

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Society as Macroenvironment

Segment Focus

Social Demographics, lifestyles, social values

Political

Processes for passing of laws and election

of officials. Interactions between firms,

politics, and government

EconomicNature and direction of the economy in

which business operates

TechnologicalChanges in technological advancements

taking place in society

Business Relationships

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Society’s Expectations Versus

Business’s Actual Social Performance

Society’s

Expectations

of Business

Performance

So

cia

l P

erf

orm

an

ce:

Exp

ecte

d a

nd

Actu

al

1960s

2000s

Time

Social

Problem

Business’s Actual

Social

Performance

Social

Problem