JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY
HYDERABAD
BBA SEMESTER – III
22BBA301: BUSINESS ENVIRONMENT
Introduction to Business Environment
Welcome and Course Overview:
Introduction: Welcome to the course "Business Environment."
This course is designed to help you understand the various
external factors that impact businesses, including economic,
political, social, technological, and legal environments.
Understand the significance, nature,
and concepts of Business Environment.
Gain knowledge about industry
policies, LPG (Liberalization,
Privatization, Globalization) policies,
and regulations.
Learn about the fiscal and monetary
policies of India.
Explore India's trade policies, balance
of payments, and EXIM policy.
Understand global trade dynamics and
the role of international organizations
like the WTO.
Business Environment:
Understanding External
Factors:
The business environment
comprises all external factors that
can affect a business.
These factors can be economic,
social, legal, technological, or
political. Understanding these
Importance of Studying Business
Environment:
Influence on Business Strategy: The
business environment influences how a
company formulates its strategies.
For instance, changes in government
policies or economic conditions can
have a significant impact on a
business's operations.
Importance of Studying
Business Environment:
Adapting to Change: The
business environment is
dynamic.
Companies that can quickly
adapt to changes in the
environment are more likely to
Key Components of the Business
Environment:
Microenvironment:
Definition: The immediate environment
surrounding a business that affects its operations
directly.
Components: Customers, suppliers, competitors,
and stakeholders.
Macroenvironment:
Definition: The broader forces that affect not just
a single business but all businesses in the economy.
Components: Economic, social, political,
technological, and environmental factors.
Overview of Course Units:
Unit I: Introduction to Business Environment:
Focus on the significance and scope of the business environment, including micro and macro
factors.
Unit II: Industry Policy and Regulation:
Study industrial policies, including key policies from 1948 to 1991, and LPG policy.
Unit III: Fiscal & Monetary Policies:
Understand public finance, including revenue, expenditure, and monetary policy tools like
CRR (Cash Reserve Ratio) and SLR (statutory Liquid Ratio).
Unit IV: India’s Trade Policy & Balance of Payments:
Explore India's international trade, trade agreements, EXIM policy, and balance of payments.
Unit V: World Trade Organization (WTO):
Learn about the role and structure of the WTO, and its impact on global trade.
Relevance of the Course:
For Future Managers and Entrepreneurs: This course is essential for
students who aspire to become managers, entrepreneurs, or policy
makers. Understanding the business environment will enable you to
navigate the complexities of the global market.
For Strategic Decision-Making: Knowledge gained from this course
will help in making strategic decisions that align with both internal
capabilities and external conditions.
Course Expectations and Learning Approach:
Interactive Sessions: Classes will include lectures, discussions, and
case studies to connect theoretical concepts with real-world
scenarios.
Assignments and Assessments: You will be assessed through
assignments, quizzes, and exams. Active participation and
engagement in class are crucial.
Reading Material: Make sure to go through the suggested
readings for a deeper understanding of the topics covered in class.
Understanding the
Business Environment
Understanding the Business Environment
• Introduction to Business Environment
• Meaning of Business Environment
• Significance of Business Environment
• Nature of Business Environment
• Scope of Business Environment (Economic Environment)
• Scope of Business Environment (Political and Legal
Environment)
• Scope of Business Environment (Social Environment)
• Scope of Business Environment (Technological Environment)
• Scope of Business Environment (Environmental and
Ecological Factors)
• Scope of Business Environment (Global Environment)
Introduction to Business Environment
Definition of Business Environment: The
business environment encompasses all external
and internal factors impacting organizational
decision-making processes.
Importance in Strategic Planning: Knowing the
business environment is key to creating flexible
strategies that help a business stay ahead of
the competition."
Key Internal Factors: Internal factors like
company culture, resources, and management
play a big role in how a business operates and
performs.
Meaning of Business Environment
Comprehensive Definition: The business
environment refers to all external and internal factors
and forces that impact a business
Key Components Overview: Economic, social,
political, and technological factors collectively shape
organizational strategies and market dynamics
immensely.
Awareness and Adaptation: A business must stay
aware of these external forces and be flexible to adapt
to changes in the environment.
and Threats: Understanding
potential opportunities or
future threats.
• Ex: Corona time- Remote Work
Significance Tools
of Business • Strategic Planning: By understanding
Environment the external factors, businesses can
set realistic goals and formulate
strategies to achieve them.
• This includes making informed
decisions about market entry,
expansion, and resource allocation.
Adaptation to Changes: Businesses operate in a
dynamic environment where technological, social,
economic, and political conditions are continuously
evolving.
Understanding these changes allows businesses to
Significance adapt quickly and maintain competitiveness.
of Business Ex: Restaurant adopts delivery Services (Pendemic)
Building Competitive Advantage: Companies that
Environment understand their business environment are better to
take advantage over rivals.
Ex: technological advancements, customer trends,
and regulatory changes.
Improved Performance: A business that
continuously monitors and adapts to its environment
is more likely to improve its performance
Ex: Tech Companies
IMPORTANCE
OF BUSINESS
ENVIRONMEN
T
Dynamic: The business environment constantly changes due to factors like technology and
Nature of consumer preferences.
Business Example: A smartphone company must frequently release new models to keep up with
market demand.
Environme Complex: The business environment involves many interconnected factors that make
nt decision-making challenging.
Example: A global retailer must consider taxes, supply chains, and consumer trends when
expanding into new countries.
Uncertain: The business environment is unpredictable due to sudden external changes
like political or economic shifts.
Example: A tourism company faces unpredictability when natural disasters affect popular
travel destinations.
Multi-faceted: The business environment has multiple dimensions such as economic,
social, and technological factors that impact business.
Example: A car manufacturer must consider fuel regulations, consumer preferences, and
technological innovations when designing new models.
Relativity: The impact of the business environment differs depending on the industry,
location, and business size.
Example: A local restaurant might be more affected by neighborhood changes, while a
Scope of Business Environment
(Economic Environment)
Inflation Influences: Rising inflation erodes consumer
purchasing power, directly impacting demand for goods and
services.
Interest Rates Impact: Fluctuating interest rates affect
borrowing costs, influencing capital investment decisions
and overall business expansion.
Consumer Income Trends: Changes in consumer income
levels dictate spending habits, altering market demand and
prioritizing businesses' strategic focus.
Scope of Business Environment
(Political and Legal Environment)
Government Regulations: Government regulations
dictate operational standards, influencing compliance costs
and shaping overall business strategies significantly.
Political Stability: Political stability fosters a predictable
environment, allowing businesses to plan investments and
risk management effectively.
Legal Compliance Necessity: Ensuring legal compliance
mitigates risks, preserving corporate reputation while
ensuring sustainable operational effectiveness and
longevity.
Scope of Business Environment
(Social Environment)
Social factors like culture,
demographics, and lifestyle
trends influence consumer
preferences and workforce
management.
Example: A clothing brand adjusts
its styles to appeal to the growing
trend of sustainable fashion.
Scope of Business Environment
(Technological Environment)
Technological advancements create new
opportunities and efficiency improvements for
businesses.
Example: A restaurant adopts online ordering
and delivery apps to increase customer
convenience.
Businesses must
address
Scope of sustainability issues
Business and follow
Environment environmental
(Environmental regulations.
Example: A factory
and Ecological invests in
Factors) renewable energy
to comply with
pollution control
laws.
Scope of Business Environment
(Global Environment)
International trade policies and
globalization influence businesses
operating in multiple countries.
Example: A company adjusts its
product prices to account for
currency fluctuations in foreign
markets..
FEATURES
OF
BUSINESS
ENVIRONME
NT
Conclusion
Continuous Monitoring: Regularly assessing the business
environment is crucial for timely adaptations in strategy and
operations.
Adaptation Flexibility: Cultivating flexibility within businesses
enables rapid responses to environmental changes, driving
competitive advantages effectively.
Long-term Success: Sustained attention to evolving market
dynamics contributes significantly to sustained success in
competitive environments.
FRAMEWORK
BUSINESS ENVIRONMENT
BUSINESS ENVIRONMENT FRAMEWORK
INTRODUCTION
BUSINESS ENVIRONMENT FRAMEWORK
•Thebusiness environment is composed
of various factors that influence a
company's operations and performance.
•These factors can be categorized into
two primary dimensions:
1. Internal Environment
2. External Environment.
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INTERNAL ENVIRONMENT
BUSINESS ENVIRONMENT FRAMEWORK
The internal environment
encompasses factors within a
company's control.
These factors directly impact its
day-to-day operations and can be
managed to enhance
performance.
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INTERNAL ENVIRONMENT
1. Financial Resources
These include the funds and financial assets available to a company for its
BUSINESS ENVIRONMENT FRAMEWORK
operations, investments, and growth.
• Example: A small startup needs sufficient financial resources to purchase raw
materials and pay employees before they generate profits from sales.
2. Physical Assets and Infrastructure
This refers to the tangible assets a business owns, such as buildings, machinery,
and equipment, along with the financial resources needed to maintain them.
Having these in good condition is essential for smooth operations.
• Example: A manufacturing company relies on well-maintained machines and
enough capital to replace old equipment to keep production running efficiently.
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INTERNAL ENVIRONMENT
3. Objectives of Business
These are the specific goals a business sets to achieve, such as profitability,
market share growth, or social responsibility. Clear objectives guide the
BUSINESS ENVIRONMENT FRAMEWORK
company's strategy and decision-making process.
• Example: A company may set an objective to expand into international
markets within five years, shaping its product development and marketing
strategies.
4. Work Environment
The work environment includes the atmosphere, culture, and conditions under
which employees work. A positive and motivating environment can improve
employee productivity and job satisfaction.
• Example: A tech firm promotes a flexible work environment where employees
can work remotely, contributing to higher productivity and employee retention.
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INTERNAL ENVIRONMENT
5. Corporate Image
This is how a company is perceived by its stakeholders, including customers, investors,
BUSINESS ENVIRONMENT FRAMEWORK
and the public. A strong corporate image can attract customers, investors, and talented
employees.
• Example: A company known for its commitment to sustainability may attract
environmentally conscious consumers and employees who value corporate social
responsibility.
6. Labor-Management Relationship
The relationship between management and employees, including how well they
communicate, negotiate, and resolve conflicts. A positive relationship leads to
smoother operations, less conflict, and higher productivity.
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EXTERNAL ENVIRONMENT
BUSINESS ENVIRONMENT FRAMEWORK
The external environment
consists of factors outside a
company's control.
These factors can significantly
influence its operations and
strategies.
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EXTERNAL ENVIRONMENT
2.1. MICRO ENVIRONMENT
BUSINESS ENVIRONMENT FRAMEWORK
The micro environment consists of factors that directly influence a
business's operations on a day-to-day basis.
These are the forces closest to the company that impact its ability
to serve customers, meet production deadlines, and achieve
business goals.
Since many of these factors are under the company's influence,
managing them carefully is crucial for success.
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EXTERNAL ENVIRONMENT
2.1. MICRO ENVIRONMENT
Definition : The micro environment consists of factors within a
company’s immediate surroundings that directly influence daily
BUSINESS ENVIRONMENT FRAMEWORK
operations.
Influence: Specific to the company, affecting short-term performance.
Micro vs. Macro Environment
Micro: Customers, competitors, suppliers, employees, media, and
shareholders.
Macro: Broader factors like demographics, economy, culture, politics,
technology, and environment.
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EXTERNAL ENVIRONMENT
2.1. MICRO ENVIRONMENT
Elements of Micro Environment
BUSINESS ENVIRONMENT FRAMEWORK
The micro environment's features are tightly linked to the
company, and they do not affect other companies in the industry in
the same way, as some characteristics are unique to the firm.
As a result, we can define the Micro Environment as the
environment that the firm deals within its specific areas, such as
the industry or strategic group.
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EXTERNAL ENVIRONMENT
2.1. MICRO ENVIRONMENT
1. Key Factor – Customers
BUSINESS ENVIRONMENT FRAMEWORK
Customers: Understanding customer preferences, behaviors, and
needs is critical for success.
Focus: Businesses must tailor products and services to meet
customer demands.
Example: A restaurant catering to dietary preferences like vegan or
gluten-free options attracts a broader customer base and promotes
inclusivity
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EXTERNAL ENVIRONMENT
2.1. MICRO ENVIRONMENT
2. Key Factor – Suppliers
BUSINESS ENVIRONMENT FRAMEWORK
Suppliers: Provide essential resources for production.
Focus: A reliable supplier network ensures smooth operations and
cost control.
Example: A car manufacturer relying on consistent deliveries of
parts to meet production deadlines; any delay can halt production
and impact profits.
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EXTERNAL ENVIRONMENT
2.1. MICRO ENVIRONMENT
3. Key Factor – Competitors
BUSINESS ENVIRONMENT FRAMEWORK
Competitors: Directly influence business strategies.
Focus: Monitoring competitors’ activities helps a business stay
relevant and innovative.
Example: A smartphone manufacturer must monitor competitors'
new product releases to remain competitive in terms of features
and technology.
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EXTERNAL ENVIRONMENT
2.1. MICRO ENVIRONMENT
4. Key Factor - Employees
BUSINESS ENVIRONMENT FRAMEWORK
Employees: Skills, motivation, and productivity directly affect
performance.
Focus: Training and incentives are crucial for maintaining a
competitive workforce.
Example: A hotel chain implementing employee training to improve
customer service, leading to enhanced guest satisfaction and repeat
business.
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EXTERNAL ENVIRONMENT
2.1. MICRO ENVIRONMENT
5. Key Factor – Intermediaries
BUSINESS ENVIRONMENT FRAMEWORK
Intermediaries: Help distribute products and services to customers.
Focus: Strong relationships with distributors and retailers maximize
market reach and sales potential.
Example: A cosmetic company needs strong relationships with
retailers to ensure its products are available in major stores.
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EXTERNAL ENVIRONMENT
2.1. MICRO ENVIRONMENT
6. Key Factor – Publics
BUSINESS ENVIRONMENT FRAMEWORK
Publics: Include media, government, and interest groups that
influence a company’s image and operations.
Focus: Positive media coverage enhances reputation, while
regulatory bodies ensure compliance.
Example: A company launching a health product must meet
regulatory standards before releasing it to the market.
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EXTERNAL ENVIRONMENT
2.2. MACRO ENVIRONMENT
BUSINESS ENVIRONMENT FRAMEWORK
The macro environment refers to larger external
forces that influence business decisions and
performance.
These forces are typically beyond the control of
the business but must be understood and
adapted to for long-term success.
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EXTERNAL ENVIRONMENT
2.2. MACRO ENVIRONMENT
Key External Factors Shaping the Business Environment:
BUSINESS ENVIRONMENT FRAMEWORK
1. Economic Environment: Economic factors like inflation, interest rates, and
unemployment rates affect consumer purchasing power and business costs.
These factors influence business decisions on pricing, investments, and
market expansion.
Example 1: During an economic recession, a retail business may experience
a drop in sales as consumers cut back on discretionary spending, forcing the
business to adjust pricing or introduce promotions.
Example 2: A tech startup may benefit from low-interest rates by securing
affordable loans to expand operations, allowing it to innovate and grow in
favorable economic conditions.
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EXTERNAL ENVIRONMENT
2.2. MACRO ENVIRONMENT
Key External Factors Shaping the Business Environment:
BUSINESS ENVIRONMENT FRAMEWORK
2. Technological Environment: Advances in technology create new
opportunities and challenges for businesses. Keeping up with technological
changes allows companies to improve efficiency, reach new markets, and
enhance customer experiences.
Example 1: The rise of online shopping has transformed traditional retail
businesses, forcing them to adapt by creating e-commerce platforms to
compete.
Example 2: A ride-sharing company like Uber utilizes GPS and mobile apps
to match drivers with passengers, revolutionizing the transportation
industry and offering convenience to customers.
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EXTERNAL ENVIRONMENT
2.2. MACRO ENVIRONMENT
Key External Factors Shaping the Business Environment:
BUSINESS ENVIRONMENT FRAMEWORK
3. Socio-Cultural Environment: Demographic changes, values, and lifestyle
trends affect consumer behavior and business strategies. Businesses must
align their offerings with social trends to remain relevant and meet
consumer expectations.
Example 1: The increasing demand for eco-friendly products has led many
businesses to offer sustainable alternatives, such as biodegradable
packaging, to appeal to environmentally conscious consumers.
Example 2: A restaurant chain catering to health-conscious consumers might
introduce plant-based options to its menu to meet the growing trend of
veganism.
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EXTERNAL ENVIRONMENT
2.2. MACRO ENVIRONMENT
Key External Factors Shaping the Business Environment:
BUSINESS ENVIRONMENT FRAMEWORK
4. Ecological Environment: Environmental concerns like climate change,
resource scarcity, and sustainability affect business operations and
reputation.
Companies are under increasing pressure to adopt eco-friendly practices to
meet regulatory requirements and consumer demand for sustainable
products.
Example 1: A beverage company may be required to reduce plastic usage in
packaging to meet environmental regulations and satisfy consumer demand
for sustainability.
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EXTERNAL ENVIRONMENT
2.2. MACRO ENVIRONMENT
Key External Factors Shaping the Business Environment:
BUSINESS ENVIRONMENT FRAMEWORK
5. Political Environment: Government policies, political stability, and
trade regulations directly affect business operations, especially for
multinational corporations.
Changes in taxation, labor laws, and trade agreements can create
challenges or opportunities.
Example 1: A change in trade tariffs between countries can influence the
cost of importing raw materials, affecting profit margins for
manufacturers.
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THANKYOU
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BUSINESS ENVIRONMENT FRAMEWORK
