BUSINESS ENVIRONMENT - DPS Bokaro

BUSINESS
ENVIRONMENT

Business environment refers to the
forces (economic, social, political and
technological)     and     institutions
(suppliers, creditors, competitors,
customers etc.) beyond the control of
the firm, and with which its members
must deal in order to achieve the
organizational purpose.

Let us take up a few examples of uncertainty
in business environment in the recent past

   Kamalnath Govt. (Congress) fell down and Shivraj
   Govt. (BJP) came into power
   Corona Virus has paralyzed the entire world and the
   whole world has come to a standstill.
   No flights/ no trains/ no buses – No transportation
   from one destination to another – Loses for service
   sector companies
   People are confined to homes and businesses have
   closed down leading to higher unemployment rates
   Countries all over the world – U.K, U.S.A, France,
   Spain, Taiwan etc. are building pressure on China.

Classification of
Business Environment
Economic environment – monetary
policy, fiscal policy, industrial policy
etc.
Non - economic environment – social,
political, legal and technological
factors.

Environmental Scanning

Environmental Scanning means a
process by which organizations monitor
their relevant business environment to
identify opportunities and threats
affecting their business.

AS MANAGERS, HOW
     WOULD YOU
   RESPOND TO THE
     FOLLOWING
    SITUATIONS ?

1. If the tastes and preferences of
  the people changed?
2. If your competitors have adopted
   a price cut policy?
3. If the government cuts down the
   export duties to give a boost to
   exports?

Importance of Business
           Environment
1. Helps in identification of opportunities and getting
   the first mover advantage – By keeping in touch with
   the changes in the environment, an enterprise can
   identify opportunities and design strategies to capitalize
   the opportunities at the earliest. A lot of companies are
   offering online courses during Corona pandemic,
   pharmaceutical co. are producing more medicines and
   exporting them to meet the international demand for
   chloroquine anti-malarial drugs, big retail organizations
   like reliance mart and big bazaar have started doing
   home delivery of groceries to meet the domestic demand

Importance of Business
    Environment
Helps in identification of threats or warning
signals – environmental scanning helps to ward
off any negative or unfavourable factors that are
likely to create hurdles for the firm. Eg. Tata
Motors Nano was a warning signal for Suzuki
Maruti to cut its costs and introduce new features
in the economy.

Importance of Business
       Environment
Helps in tapping useful resources – A business gets
various resources from the environment and converts
these into desired goods and services for transfer to the
customers. If the management of the firm has a thorough
knowledge of the external environment, it can tap new
raw materials, technology and even financial resources
from the market at economical prices at the right time.
Eg. RBI has brought out a lot of economic reforms to
revive the economy like reducing CRR rate, reducing
repo and reverse repo rate. This information can be used
by businesses to benefit their operations.

Importance of Business
     Environment
Helps in coping with rapid changes – a keen watch
on the business environment will sensitize the
firm’s management to the changing technology,
competition and changing needs of customers. Eg.
We have responded and adapted to a change in the
environment by developing e-content and taking
zoom classes

Importance of Business
    Environment
Helps in Planning and Policy Formation –
Identifying opportunities and threats serve as a
basis of formulation of strategic plans and policies
to counter threats and capitalize the opportunities
in the market. Eg. Demand for Hand sanitizers ,
cheaper testing kits, ventilators, face shields etc.
have increased and a no. of new firms and
educational institutes have pooled in their
resources to help the country fight this pandemic.

Importance of Business
     Environment
Helps in improving performance – proper
understanding of the various elements of Business
environment enables a firm to improve its
performance.
Image building – if a firm is sensitive to the external
environment, it will come out with new products and
services to meet the requirements of the customers.
This would build the image or reputation of the firm
in the eyes of the customers and general public.

Test your understanding
The Government is considering a pioneer proposal to launch a
single debit-cum-credit Card and usage for the customers. The
card will be called the National Mobility Card and will have
unique advantages for making payments in metro, buses, parking
and making transactions during visits abroad. After hearing this
news, Mega Bank decided to launch a Mega Mobility card on
similar lines, so that they could be the first to exploit the
opportunity arising due to the increasing trend of digitization. In
order to improve their performance, they laid down a plan to hire
more people in their marketing department and prepared
guidelines to train their sales force to market the new card facility
being launched by the bank. By quoting the above lines, identify
and explain any two points of importance of understanding
Business Environment discussed above.