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with goods and services for a profit Purpose-To earn profit Business may be defined as human activity directed towards producing or acquiring wealth through buying and selling goods - Lewis H. Haney Business represents the organized efforts of enterprises to supply consumer with goods and services - Musselman and Hughes
Characteristics of Business
1. 2. 3. i) ii) iii) 4. 5. 6. 7. 8.
Dynamism Vastness Diversification Concentric Diversification Horizontal Diversification Conglomerate Diversification Globalization Science Information Government interference Competition
Environment
The aggregate of all conditions, events and influences
that surround and affect it Environment factors or constraints are largely if not totally, external and beyond the control of individual industrial enterprises and their managements. These are essentially the givers within which firms and their managements must operate in a specific country and they vary, often greatly, from country to country. - Barry M. Richman and Melvyn Copen
Characteristics of environment
Complex 2. Dynamic 3. Multi-faceted 4. Has a far reaching impact
1.
Business environment
Refers to those aspects of the surroundings of business
enterprise, which affect or influence its operations and determine its effectiveness Business environment is the aggregate of all conditions, events and influence that surrounds and affect it - Kieth Davis The environment includes factors outside the firm, which can lead to opportunities for or threats to the firm. Although there are many factors, the most important of these factors are socio economic, technological, supplier, competitors and the government - W.F. Glueck and Lawrence R. Jauch
Internal environment 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Financial resources Physical and human resources Objectives of business Managerial policies Morale and commitment of Human resources Value system Brand and corporate image Labor management relationship Technological and R&D capabilities Marketing resources
External environment
Macro/ General Environment 1. 2. 3. 4. 5. 6. 7. Economic Political Socio-Cultural Technological Natural Demographic International/ Global
Internal environment
Refers to factors existing within a business firm
Generally regarded as controllable factors
Value system Mission and objectives Management structure and nature Internal power relationship Human resources Company image and brand equity Other factors Physical assets and liabilities R & D and Technological capabilities Marketing resources Financial factors
External environment
Refers to factors existing outside
the business firm Uncontrollable in nature Includes economic factors, sociocultural factors, government and legal factors, demographic factors, geo-physical factors etc,.
Inputs
Outputs
Competitive
Physical
Sociological
Educational
Political/ Legal
Historical
Physical/ Geographical
Interaction Matrix II
National Environment Non National Environment Local Regional International Economic Non-economic Economic Non-economic Economic + + + + + + + + + + National Economic Environment National Non Economic Environment
Non-economic
Interaction Matrix 3
Present Environment Non-Present Environment PAST Economic Non-Economic Present Economic Environment Present NonEconomic Environme nt + +
+ +
FUTURE
Economic
Non-Economic
+
+
+
+
First Mover Advantage Early warning signal Customer Focus Strategy formulation Change agent Public image Continuous learning
environment: The political environment consists of factors related to the management of public affairs and their impact on the business of an organization
Political system
A system of politics and government
Definition-a political system is a complete set of
institutions, political organizations, interest groups (such as political parties, trade unions, lobby groups), the relationships between those institutions and the political norms rules that govern their functions (constitution, election law) A political system is composed of the members of a social organization (group) who are in power
Anarchy Dictatorship Autocracy Oligarchy Theocracy Monarchy Democracy Indirect democracy Plutocracy Aristocracy Meritocracy Stratocracy Cleptocracy
Libertarianism
Conservative
Socialism
Lascist
Payment of tax International business can bring the foreign exchange Employment can be provided Provide information relevant during budget-source of information Information in Policy formulation For welfare of people, voluntary programs e.g. temple, shopping complex Infrastructure development help government by having contracts form government Eg. Dams
road transportation Technology, right types and at right time should be provided Govt. should take initiative in R & D Crumbling competition Restricting monopoly Encouraging small scale industries Increase export
individual
1. Family
Often called as basic social institution The minimal form of family consists of a husband, wife
and children A family is a group of persons united by the ties of marriage, blood or adoption constituting a single household, interacting and inter-communicating, with each other in their respective social role of husband and wife, mother and father, son and daughter, brother and sister, cradling and maintaining a common culture - Burgess and Locke
Characteristics of family
Primarily based on mating relationship
Reckoning of descent either through father or mother
is necessary Child bearing and economic factors Relationships are socially sanctioned and traditional in nature Living together
2. Social class
Used to describe the ranks of
people in a society Relatively permanent and homogenous divisions in a society into which individuals or families sharing similar values, life styles, interests, wealth, status, education, economic position and behavior can be catagorized. - Roger D. Blackwell
Culture
Culture is everything that is socially learned and shared by
the members of a society Culture is the sum of learned beliefs, values, and customs that serve to direct the consumer behavior of members of a particular society Beliefs-consist of the very large number of mental or verbal statements that reflect a persons particular knowledge and assessment of something Values-Are also beliefs Customs-are overt modes of behavior that constitute culturally approved or acceptable ways of behaving in specific situations
Values-Criteria
1.
2. 3. 4. 5.
They are relatively few in number They serve as a guide for culturally appropriate behavior They are enduring or difficult to change They are not tied to specific objects or situations They are widely accepted by the members of a society
Characteristics of culture
1. i) ii) iii) 2. 3. 4. 5. 6. 7. 8.
Culture is invented An ideological system A technological system An organizational system Culture is learned Culture is socially shared Cultures are similar but different Gratifying and persistent Adaptive Organized and integrated Prescriptive
Elements of culture
Knowledge and beliefs 2. Ideals 3. Preferences
1.
3.
4. 5. 6. 7. 8. 9.
10.
11. 12.
13.
Culture creates people Culture and globalization Culture determines goods and services Peoples attitude to Business Attitude to work Collectivism and individualism Ambitious or complacent Education Family Authority View of scientific method Ethics in business Religion
Contd..
14. Marriage
15. Time dimension 16. Cultural resources
Governments are large purchasers of goods and services 2. Governments subsidize firms and industries and thus help them survive and prosper 3. Governments protect home industries against unfair foreign competition
1.
4.
5. 6.
7.
Industries act 1951 Indian companies Act 1956 Income tax act 1961 MRTP act 1969 Foreign exchange regulation act 1973 Sick industrial companies act 1985, and Consumer Protection Act 1986
SEBI
Constituted in 1988 and made statutory in 1992
Objective/ Purpose of the SEBI Act : To protect the interest of the investors To promote the development of the securities market To regulate the securities market For matters connected there with or incidental there to
country and related aspects such as rate of technological progress, institutional arrangements for development and application of new technology etc. Systematic application of scientific or other organized knowledge to practical tasks - J.K. Galbraith
Component of macro or indirect action environment Dynamic which cause s Future shock Has far reaching effects Self-reinforcing Different from science
Technology
Knowledge of methods to perform certain tasks or
solve problems pertaining to products or services Provides information about Product design, Production techniques, quality assurance measures, human resource development and management systems
Features of technology
Change
Widespread effect Self-reinforcing
Transfer of technology
The process by which commercial technology is
disseminated May or may not be legally binding contract but involves the communication, by the transferor, or the relevant knowledge to the recipient
industrial property, except for trademarks, service marks and trade names when they are not part of transfer of technology transactions The provision of know-how and technical expertise in the form of feasibility studies, plans, diagrams, models, instructions, guides, formulae, basic or detailed engineering designs, specifications, equipments, for training, services involving technical advisory and managerial personnel and personnel training
Contd..
The provision of technological knowledge
The provision of technological contents
Proposal and planning Product design Manufacturing technology Quality assurance Plant design & Construction Start up Value engineering Product development External support
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6.
7.
Product competitiveness and market potential Customer preferences Speed of introduction of new products and processes Comparative studies of technology gap between India and outside Availability of technology for import in strategic areas Suitability of technology in context to organizational culture Outflow of resources, foreign exchange etc.
markets
inequalities and imbalances The global economic environment is characterized by intermittent recessions during the last two decades The GDP and exports of the developing countries are projected to grow
GATT
Signed at Geneva on 30th November 1947
Came into force on 1st January 1948 Objective of GATT: To raise standard of living To ensure full employment To ensure a large and steadily growing volume of real
income and effective demand To develop the full use of the resources of the world To expand production and international trade
WTO
Established on 1st Jan 1995
India is one of the founder members of WTO Objectives: To improve standard of living of people in the member
countries To ensure full employment and broad increase in effective demand To enlarge production and trade of goods
Environmental scanning
Meaning and definition:
various factors influencing the business Environmental analysis is the process by which strategists monitor the environmental factors to determine opportunities for and threats to their firms. Environmental analysis also consists of managerial decisions made by assessing the significance of the data (opportunities and threats) of the environmental analysis - Jauch and Glueck
Documentary and secondary sources Mass media Internal sources External agencies Formal studies Spying and surveillance
Strategist-Related factors Age of the organization Size and power of the organization Geographic dimension of the organization Type of business Influence of business organization Volatility of environment Managerial caliber
Effective utilization of resources Helps in converting threats to opportunities Changing color of environment Narrowing down the alternatives Strategic management starts with environmental scanning Constant monitoring of the environment Useful for the managers Prediction of future
SWOT analysis
Credited by Albert Humphrey
Helpful Harmful
Internal origin
W
T
External origin
SWOT analysis
A strength could be:
Your specialist marketing expertise. A new, innovative product or service. Location of your business. Quality processes and procedures. Any other aspect of your business that adds value to
2005 were in excess of $1 billion US, representing a growth of around 28%. For the last couple of years it has held its position as market leader (it took it from rivals Hewlett-Packard). The Dell brand is one of the best known and renowned computer brands in the World. Dell cuts out the retailer and supplies directly to the customers. It uses information technology, and Customer Relationship Management (CRM) approaches to capture data on its loyal consumers. So a customer selects a generic PC model, and then adds items and upgrades until the PC is kitted out to the customer's own specification. Components are made by suppliers, never by Dell. PC's are assembled using relatively cheap labour. You can even keep track of your delivery by contacting customer services, based in India. The finished goods are then dropped off with the customer by courier. Dell has total command of the supply chain.
SWOT analysis
A weakness could be:
Lack of marketing expertise. Undifferentiated products or services (i.e. in relation
to your competitors). Location of your business. Poor quality goods or services. Damaged reputation.
Weaknesses
The company has such a huge range of products and
components from many suppliers from a plethora of countries, that there is the occasional product recall that can cause Dell some embarrassment. In 2004 Dell had to recall 4.4 million laptop adapters because of a fear that they could overheat, causing electric shocks or fires. Dell is a computer maker, not a computer manufacturer. It buys from a group of concentrated hi-tech component manufacturers. Whilst this is a tremendous advantage in terms of business operations, allowing Dell to focus on marketing and logistics, the company is reliant on a few large suppliers, and to an extent is locked in for periods of time (i.e. unable to switch supply dues to the lack of large suppliers in the World).
SWOT analysis
An opportunity could be:
A developing market such as the Internet. Mergers, joint ventures or strategic alliances. Moving into new market segments that offer improved
Opportunities
Kevin Rollins replaced Michael Dell in 2004 as Dell's Chief Executive Officer.
Dell remained the company's Chairman. Despite founder Dell's massive success, new blood and a change in management thinking could lead the company into a new, even more profitable period. Dell was born in 1965, and founded Dell in 1984 with $1000 whilst studying at the University of Texas. He became the youngest Fortune 500 CEO in 1992, and will be a tough act to follow. Dell is pursuing a diversification strategy by introducing many new products to its range. This initially has meant good such as peripherals including printers and toners, but now also included LCD televisions and other non-computing goods. So Dell compete against iPod and other consumer electronics brands. Dell is making and selling low-cost, low-price computers to PC retailers in the United States. The PC's are unbranded and should not be recognised as being Dell when the consumer makes a purchase. Rebranding and rebadging for retailers, although a departure for Dell, gives the company new market segments to attack with the associated marketing costs.
SWOT analysis
A threat could be:
A new competitor in your home market. Price wars with competitors. A competitor has a new, innovative product or service. Competitors have superior access to channels of
Threats
The single biggest problem for Dell is the competitive rivalry that exists
in the PC market globally. As with all profitable brands, retaliation from competitors and new entrants to the market pose potential threats. Dell sources from Far Eastern nations where labour costs remain low, but there is nothing stopping competitors doing the same even sourcing the same or similar components from the same or similar suppliers. Remember, Dell is a PC maker, not a PC manufacturer. Dell, being global in its marketing and operations, is exposed to fluctuations in the World currency markets. Although it is a very lean organization, orders do have to be placed some time ahead due to their size or value. Changes in exchange rates could leave the company exposed to potential loses in parts of its supply chain.
Criteria
Historical criteria 2. Normative criteria 3. Competition equality criteria
1.
discussion of the business situation, alternative strategies, and finally the choice of strategy Key external opportunities and internal threats are systematically compared to internal strengths and weakness in a structured approach
ETOP Study
Involves dividing the environment into different
Economic
Regulatory Market Technological - Favorable impact
Dimensions of ETOP
Issue selection 2. Accuracy of data 3. Impact studies 4. Flexibility in operations
1.