The Business Environment Microenvironment Market environment Macro environment Prof. Arjun B. Bhagwat Department of Commerce, S. M. Joshi College, Hadapsar, Pune-28 F. Y. B. Com

The business environment There is a direct relationship between successful management and the influence and impact of environmental change F. Y. B. Com

The business environment Change is a process of constant renewal and regeneration in every conceivable sphere of society Business organisation as the central component of the business environment are naturally also subject to change F. Y. B. Com

The business environment The interaction between the environment and a business organisation is an ongoing process that results in new problems and new opportunities F. Y. B. Com

The business environment: examples Technological innovation Globalisation Growth of poverty Collapse of emerging markets Shift from manufacturing jobs to service jobs New ways of doing work F. Y. B. Com

Micro - Environment Mission and objectives of the organisation The organisation and its management , e.g. marketing , financial and purchasing management Resources – human resources , capital and know how F. Y. B. Com

Market environment Consumers – needs , purchasing power and behavior Suppliers Intermediaries Competitors Opportunities & threats F. Y. B. Com

Macro - environment Technological environment Economic environment Social environment Physical environment Institutional – political environment International environment F. Y. B. Com

Strategic Management The set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives. F. Y. B. Com

The Balanced Scorecard Financial “To succeed financially, how should we appear to our shareholders?” Vision and Strategy Customer “To achieve our vision, how should we appear to our customers?” Internal Business Processes “To satisfy our shareholders and customers, what business processes must we excel at?” Learning and Growth “To achieve our vision, how will we sustain our ability to change and improve?” F. Y. B. Com

Porter’s Five Forces Industry Competition Potential entrants Threat of new entrants Suppliers Bargaining power of suppliers Industry competitors Rivalry Among Existing Firms Buyers Bargaining power of buyers Substitutes Threat of substitute products or services F. Y. B. Com

Market environment Interaction between business and its suppliers , consumers and competitors Interaction can result in opportunities or threats to a business Business awareness rely on – environmental scanning , market research and information management F. Y. B. Com

The Firm’s External Environment Remote Environment (Global and Domestic) Industry Environment (Global and Domestic) Operating Environment (Global and Domestic) Economic Social Political Technological Ecological Entry barriers Supplier power Buyer power Substitute availability Competitive rivalry Competitors Creditors Customers Labor Suppliers THE FIRM F. Y. B. Com

Macroenvironment Macro variables have an effect on the market environment , decision –making by management and on one another Emphasis is on change caused by the uncontrollables and implications for management F. Y. B. Com

Macroenvironment Technology Originates in research and development New processes , methods & even approaches to management Technology results in higher productivity Source of competitive advantage F. Y. B. Com

Macroenvironment Economic environment Influenced by technology , politics and the social and international environments. Cross influences result with change in economic growth rate , levels of employment , consumer income , the rate of inflation , interest rate & exchange rates F. Y. B. Com

Macroenvironment Economic environment Gross Domestic Product – total value of all goods and services produced within a country 7 – 8 % signals an economy which grows fast to create jobs for its country Exports more products than it imports and stable currency F. Y. B. Com

Macroenvironment Inflation – higher rate than country’s major trading partners & international competitors results with a reduction in international competitiveness Monetary policy – affects money supply , interest rates and strength of the currency F. Y. B. Com

Macroenvironment Economic environment Fiscal policy – affects business and consumers through taxation and tax reforms F. Y. B. Com

Social environment Demographic change – increasing or decreasing population rate Urbanisation Levels of education Changing role of women Consumerism Social responsibility & business ethics F. Y. B. Com

Social environment Hiv/Aids culture F. Y. B. Com

Physical environment Population & health patterns – land degradation, pollution, malnutrition and illness. Food Water Energy and climate Biodiversity F. Y. B. Com

Political – government environment Regulatory environment Labour laws Employment Equity Act 55 of 1998 Safety Health & Environment F. Y. B. Com

International environment Globalisation – borderless world F. Y. B. Com