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UNIT - 3
MANAGEMENT AND BUSINESS
ENVIRONMENT
TOPICS COVERED
Business Environment
Concept
Importance
Dimensions of Business Environment
Economic
Social
Technological
Political
Legal
Impact of Government Policy changes on
Business with special reference to liberalisation,
privatisation and globalisation in India
BUSINESS ENVIRONMENT
Business Environment means the sum total of those
factors which influence the business and over which the
business has no control.
BUSINESS ENVIRONMENT
“The business environment is the aggregate of all
conditions, events, and influences that surround and affect
a business firm. Business environment generally refers to
the external factors affecting, either positively or
negatively, the operation of a firm”
Totalityof External Forces
Specific &General Forces
Inter-relatedness
Dynamic Nature
Uncertainty
Complexity
Relativity
IMPORTANCE OF BUSINESS ENVIRONMENT
First Mover Advantage
 Learning about thePossibleOpportunities availableinthe
Environment
Warning Signals
 GettingKnowledgeof PossibleThreats intheEnvironment
Tapping Useful Resources
 Knowing theRequirement of Environment
IMPORTANCE OF BUSINESS ENVIRONMENT
Coping with Rapid Changes
By Constant vigil over the Business Environment
we can easily face the Rapidity of Change
Assisting in Planning and Policy
Anyone can Defeat their Competitors by
formulating their Plans with the Knowledge of
Environment
Improvement in Performance
An Organization can Improve it’s Present as well
as Future with it.
COMPONENTS OF BUSINESS ENVIRONMENT
INTERNAL ENVIRONMENT
Factors which are present within
the Business itself and are under
the direct control of the Business.
These are:
Objectives
Policies
ProductionCapacity
ProductionMethod
Management InformationSystem
ParticipationinMgt.
Compositionof Directors
Managerial Attitude
Organizational Structure
Features of HumanResource
EXTERNAL ENVIRONMENT
Factorswhich influencethebusiness andexistsoutsidethe
business
 MICROENVIRONMENT - Whicheffects particular typeof
companies
 MACROENVIRONMENT- WhicheffectsentireBusiness
Community
EXTERNAL ENVIRONMENT
MICROENVIRONMENT
 Customers
 Suppliers
 Competitors
 Public
 Market Intermediaries
EXTERNAL ENVIRONMENT
MACROENVIRONMENT
 Economic Environment
 Social Environment
 Technological Environment
 Political Environment
 Legal Environmen
1.ECONOMIC ENVIRONMENT
It refers to the combination of economic systems,
economic policies and economic conditions of a country.
ECONOMIC SYSTEM
It influence the freedom and openness of the business.
Socialist Economic System. e.g.: China
Businesses are Directed and Controlled by Government
Capitalistic Economic System. e.g.: USA
Importance is given to Private Ownership of Business
Mixed Economic System. e.g.: India
Businesses are Owned by both, Government and
Individuals
ECONOMIC POLICIES
Policies which are laid down to direct the Economic
Activities which are as follows:
Public ExpenditurePolicy
Public Debt Policy
AgriculturePolicy
Export Import Policy
Foreign Investment Policy
Employment Policy
Taxation Policy
Industrial Policy
(iii) ECONOMIC CONDITIONS
 Conditionswhich arerelatedwith theEconomic
Development of theCountry.
Theseare
Flowof Foreign Capital
Supplyof Natural Resources
General PriceLevel
Foreign Trade
PrevailingInterest rates
Per CapitaIncome
Industrial Development
Level of Economic Development
Impact of Economic Environment onBusiness
Changes Impacts
IncreaseinInterest rate
DecreaseinInterest rate
IncreaseinIncome
DecreaseinIncome
DecreaseinDemand of Goods
IncreaseinDemandof Goods
IncreaseinDemandof Goods
DecreaseinDemand of Goods
2. SOCIAL ENVIRONMENT
It refers to the combination of all characteristics of the
society in which the orgnisation exists.
Major Elements –
Traditions : Diwali, Id, Christmas and Guru Purv
Values: Freedom, Social Justice, Equality
Social trends: Health and Fitness trend among urban
dwellers.
Impact of Social Environment on Business -
Festivals
Values
Trend
Opportunities for business Social responsibility
of business
Demand of some special items (mineral water and gym)
3.TECHNOLOGICAL ENVIRONMENT
It referstoinnovations relatingtovarious business activities
Major Elements –
 Discovering newways of producing goods andservices
 Discovering newways of operating abusiness
Impact of Technological Environment onBusiness
Changes Impacts
Innovationof TV
Innovationof PhotoCopier
Innovationof Synthetic Thread
Innovationof digital watches
Adverse effect on Cinema and Radio
Adverse effect on Carbon Paper Industry
Adverse effect in Cotton Cloth Industry
Adverse effect on Mechanical Watch Industry
4. POLITICAL ENVIRONMENT
It refers to political conditions in the country and attitude of
the government towards business
Major Elements
Political stability in the country
Peace in the country
Attitude of Government towards business
Type of Government (Single Party/Coalition Government)
Ideologies of various political parties
Changes Impacts
Attitudeof oneGovt.
Attitudeof another Govt.
Keeninterest of Govt.
Against MNC’s
In favour of MNC’s
Hyderabad – Cyberabad Bangalore –
Silicon Valley of India
5. LEGAL ENVIRONMENT
It refers to the sum total of all the
Acts passed by the government,
Judgements of the courts, and Decisions rendered by
various Commissions and Agencies
in the country.
Major Elements
Acts passed by the government,
Judgments of the courts, and
Decisions rendered by various Commissions and
Agencies
Changes
Removal of control fromcapital mkt.
Relaxation inFDI
Impacts
Easy collectionof funds
Entry of MNC’s
ECONOMIC REFORMS SINCE 1991
To take the Country out of Economic Difficulties and to
Speed up the pace of Economic Development the
following vital reforms were introduced:
Liberalization
Privatization
Globalization
ECONOMIC REFORMS SINCE 1991
1.Liberalization
It refers to unshackle economy from bureaucratic
cobweb to make it more competitive.
It includes:
•Freedom in determining the scale of business
activities
•Freedom to fix the prices of goods & services
•Reduction in rate of taxes
•Simplifying import export procedure
ECONOMIC REFORMS SINCE 1991
2.PRIVATISATION
An economic process through which some public
sector undertaking is brought either partially or
completely under private ownership.
It includes:
•Reducing fiscal burden of the government
•Reducing the size of government machinery
•Speeding up economic development
•Improving management of enterprises
ECONOMIC REFORMS SINCE 1991
3. Globalization
 It refers tointegratingtheeconomy with therest of theworld.
 It includes:
• Freeflowof goods &services inall countries
• Freeflowof capital inall thecountries
• Freeflowof information&technology inall thecountries
• Sameconflict solvingtechniques inall countries
MAJOR STEPS FOR ECONOMIC REFORMS
NewIndustrial Policy
NewTradePolicy
Fiscal Reforms
Monetary Reforms
Capital Market Reforms
Phasing out Subsidies
DismantlingPriceControls
IncreasingCompetition
MoreDemanding Customers
Rapidly Changing Technological Environment
Necessityfor Change
Needfor Development of HumanResources
Market Orientation
Lossof Budgetary Support tothePublic Sector
IMPACT OF GOVERNMENT POLICY ON BUSINESS AND INDUSTRY
Please be free to write query at:
Dr.Ramesh C Sharma
rameshchandersharma@gmail.com
http://rameshchandersharma.blogsspot.in
+91-94180-45154

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Business studies +2 U nit 3

  • 1. UNIT - 3 MANAGEMENT AND BUSINESS ENVIRONMENT
  • 2. TOPICS COVERED Business Environment Concept Importance Dimensions of Business Environment Economic Social Technological Political Legal Impact of Government Policy changes on Business with special reference to liberalisation, privatisation and globalisation in India
  • 3. BUSINESS ENVIRONMENT Business Environment means the sum total of those factors which influence the business and over which the business has no control.
  • 4. BUSINESS ENVIRONMENT “The business environment is the aggregate of all conditions, events, and influences that surround and affect a business firm. Business environment generally refers to the external factors affecting, either positively or negatively, the operation of a firm”
  • 5. Totalityof External Forces Specific &General Forces Inter-relatedness Dynamic Nature Uncertainty Complexity Relativity
  • 6. IMPORTANCE OF BUSINESS ENVIRONMENT First Mover Advantage  Learning about thePossibleOpportunities availableinthe Environment Warning Signals  GettingKnowledgeof PossibleThreats intheEnvironment Tapping Useful Resources  Knowing theRequirement of Environment
  • 7. IMPORTANCE OF BUSINESS ENVIRONMENT Coping with Rapid Changes By Constant vigil over the Business Environment we can easily face the Rapidity of Change Assisting in Planning and Policy Anyone can Defeat their Competitors by formulating their Plans with the Knowledge of Environment Improvement in Performance An Organization can Improve it’s Present as well as Future with it.
  • 9. INTERNAL ENVIRONMENT Factors which are present within the Business itself and are under the direct control of the Business. These are: Objectives Policies ProductionCapacity ProductionMethod Management InformationSystem ParticipationinMgt. Compositionof Directors Managerial Attitude Organizational Structure Features of HumanResource
  • 10. EXTERNAL ENVIRONMENT Factorswhich influencethebusiness andexistsoutsidethe business  MICROENVIRONMENT - Whicheffects particular typeof companies  MACROENVIRONMENT- WhicheffectsentireBusiness Community
  • 11. EXTERNAL ENVIRONMENT MICROENVIRONMENT  Customers  Suppliers  Competitors  Public  Market Intermediaries
  • 12. EXTERNAL ENVIRONMENT MACROENVIRONMENT  Economic Environment  Social Environment  Technological Environment  Political Environment  Legal Environmen
  • 13. 1.ECONOMIC ENVIRONMENT It refers to the combination of economic systems, economic policies and economic conditions of a country. ECONOMIC SYSTEM It influence the freedom and openness of the business. Socialist Economic System. e.g.: China Businesses are Directed and Controlled by Government Capitalistic Economic System. e.g.: USA Importance is given to Private Ownership of Business Mixed Economic System. e.g.: India Businesses are Owned by both, Government and Individuals
  • 14. ECONOMIC POLICIES Policies which are laid down to direct the Economic Activities which are as follows: Public ExpenditurePolicy Public Debt Policy AgriculturePolicy Export Import Policy Foreign Investment Policy Employment Policy Taxation Policy Industrial Policy
  • 15. (iii) ECONOMIC CONDITIONS  Conditionswhich arerelatedwith theEconomic Development of theCountry. Theseare Flowof Foreign Capital Supplyof Natural Resources General PriceLevel Foreign Trade PrevailingInterest rates Per CapitaIncome Industrial Development Level of Economic Development Impact of Economic Environment onBusiness Changes Impacts IncreaseinInterest rate DecreaseinInterest rate IncreaseinIncome DecreaseinIncome DecreaseinDemand of Goods IncreaseinDemandof Goods IncreaseinDemandof Goods DecreaseinDemand of Goods
  • 16. 2. SOCIAL ENVIRONMENT It refers to the combination of all characteristics of the society in which the orgnisation exists. Major Elements – Traditions : Diwali, Id, Christmas and Guru Purv Values: Freedom, Social Justice, Equality Social trends: Health and Fitness trend among urban dwellers. Impact of Social Environment on Business - Festivals Values Trend Opportunities for business Social responsibility of business Demand of some special items (mineral water and gym)
  • 17. 3.TECHNOLOGICAL ENVIRONMENT It referstoinnovations relatingtovarious business activities Major Elements –  Discovering newways of producing goods andservices  Discovering newways of operating abusiness Impact of Technological Environment onBusiness Changes Impacts Innovationof TV Innovationof PhotoCopier Innovationof Synthetic Thread Innovationof digital watches Adverse effect on Cinema and Radio Adverse effect on Carbon Paper Industry Adverse effect in Cotton Cloth Industry Adverse effect on Mechanical Watch Industry
  • 18. 4. POLITICAL ENVIRONMENT It refers to political conditions in the country and attitude of the government towards business Major Elements Political stability in the country Peace in the country Attitude of Government towards business Type of Government (Single Party/Coalition Government) Ideologies of various political parties Changes Impacts Attitudeof oneGovt. Attitudeof another Govt. Keeninterest of Govt. Against MNC’s In favour of MNC’s Hyderabad – Cyberabad Bangalore – Silicon Valley of India
  • 19. 5. LEGAL ENVIRONMENT It refers to the sum total of all the Acts passed by the government, Judgements of the courts, and Decisions rendered by various Commissions and Agencies in the country. Major Elements Acts passed by the government, Judgments of the courts, and Decisions rendered by various Commissions and Agencies Changes Removal of control fromcapital mkt. Relaxation inFDI Impacts Easy collectionof funds Entry of MNC’s
  • 20. ECONOMIC REFORMS SINCE 1991 To take the Country out of Economic Difficulties and to Speed up the pace of Economic Development the following vital reforms were introduced: Liberalization Privatization Globalization
  • 21. ECONOMIC REFORMS SINCE 1991 1.Liberalization It refers to unshackle economy from bureaucratic cobweb to make it more competitive. It includes: •Freedom in determining the scale of business activities •Freedom to fix the prices of goods & services •Reduction in rate of taxes •Simplifying import export procedure
  • 22. ECONOMIC REFORMS SINCE 1991 2.PRIVATISATION An economic process through which some public sector undertaking is brought either partially or completely under private ownership. It includes: •Reducing fiscal burden of the government •Reducing the size of government machinery •Speeding up economic development •Improving management of enterprises
  • 23. ECONOMIC REFORMS SINCE 1991 3. Globalization  It refers tointegratingtheeconomy with therest of theworld.  It includes: • Freeflowof goods &services inall countries • Freeflowof capital inall thecountries • Freeflowof information&technology inall thecountries • Sameconflict solvingtechniques inall countries
  • 24. MAJOR STEPS FOR ECONOMIC REFORMS NewIndustrial Policy NewTradePolicy Fiscal Reforms Monetary Reforms Capital Market Reforms Phasing out Subsidies DismantlingPriceControls
  • 25. IncreasingCompetition MoreDemanding Customers Rapidly Changing Technological Environment Necessityfor Change Needfor Development of HumanResources Market Orientation Lossof Budgetary Support tothePublic Sector IMPACT OF GOVERNMENT POLICY ON BUSINESS AND INDUSTRY
  • 26. Please be free to write query at: Dr.Ramesh C Sharma rameshchandersharma@gmail.com http://rameshchandersharma.blogsspot.in +91-94180-45154