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Environment means the surroundings, external objects, influences or circumstances under which someone or something exists. Environment of any organization is the aggregate of all conditions, events and influences that surround and affect it. Environment has a far reaching impact on organizations. The growth and profitability of an organization depends critically on environment in which it exists.
Environment means the surroundings, external objects, influences or circumstances under which someone or something exists. Environment of any organization is the aggregate of all conditions, events and influences that surround and affect it. Environment has a far reaching impact on organizations. The growth and profitability of an organization depends critically on environment in which it exists.
Environment means the surroundings, external objects, influences or circumstances under which someone or something exists. Environment of any organization is the aggregate of all conditions, events and influences that surround and affect it. Environment has a far reaching impact on organizations. The growth and profitability of an organization depends critically on environment in which it exists.
What is environment Environment means the surroundings, external objects, influences or circumstances under which someone or something exists. The environment of any organization is the aggregate of all conditions, events and influences that surround and affect it Characteristics of environment Environment is complex: The environment consist of number of factors, events, conditions and influences arising from different sources. All these do not exist in isolation but interact with each other to create an entirely new set of influences.
Environment is dynamic: The environment is consistently changing in nature. Due to many and varied influence operating, there is dynamism in the environment causing it to continuously change its shape and character.
Environment is multi faceted: What shape and character an environment assumes depends on perception of observer. A particular change in environment or a new development may be viewed differently by different observers.
Environment has a far reaching impact on organizations. The growth and profitability of an organization depends critically on environment in which it exists. Any environmental change has an impact on organization in several different ways. Types of Business Environment
Business Environment
Internal Environment External Environment
INTERNAL ENVIRONMENT 1. Structure 2. Operation procedure 3. Finance 4. Human resource 5. Marketing approach 6. R & D etc. EXTERNAL ENVIRONMENT External Environment
Micro Macro Micro Environment
Shareholders Employees Suppliers Banks Customers Distribution channels Macro Environment
Socio cultural Technological capitalist Economic socialist Political International etc.
Role of government in Business Environment Regulatory Role government makes the rules and regulation regarding the licensing , manufacturing , labor welfare policies etc. When government withdraws some strictness on regulatory function , it is called Liberalization. Participative Role government be the part of various operational fields likes banks , railway , PSU etc.. when government allows to private sector to be part of some specific operational areas , it is called privatization.
Protective Role government makes some specific rules in forms of various taxes and restrictions to protect the domestic industry. when government withdraws some restrictions to attract the FDI , FII and providing best product , it is called Globalization.
Environmental sectors 1. Economic environment 2. International Environment 3. Market Environment 4. Political Environment 5. Regulatory Environment 6. Socio Cultural Environment 7. Supplier Environment 8. Technological Environment Economic Environment The economic environment consists of macro level factors related to means of production and distribution of wealth that have on business of organization Some important factors are 1. Economic stage in which country exists 2. Economic structure adopted like Capitalistic, socialistic or mixed economy 3. Economic policies such as industrial monetary and fiscal policies 4. Economic planning such as five year plan, annual budget etc 5. Infrastructural factors such as banks, mode of transportation etc
International Environment The international environment consists of all those factors that operate at transnational, cross cultural and across border level, having impact on business of organization e.g. 1. Globalization, its process, content and direction 2. Global economic forces, block and forum 3. Global trade and commerce, its process and trend 4. Global financial system, sources of financing 5. Geopolitical situation, equation, alliances and strategic interests of nations
Market Environment The market environment consist of factors related to group and other organization that compete with and have an impact on an organizations market Some factors are as below 1. Customer or client factors such as need, preference 2. Product factors such as demand , image 3. Marketing intermediary factors like delivery systems Political Environment The political environment consist of factors related to management of public affairs and impact on business organization 1. The political system and its features like nature of political system 2. The political structure, its goals and stability 3. Political processes like operation of party system, elections 4. Political philosophy, govt role in business etc Regulatory environment The regulatory environment consists of factors related to planning, promotion and regulation of economic activities 1. The constitutional framework , directive principles 2. Policies related to licensing, monopolies and foreign investment 3. Policies related to distribution and pricing and control 4. Policies related to import and exports Socio Cultural environment The socio cultural environment consists of factor related to human relationship within society, the development, forms and function of such relationship and learned and shared behavior of groups of human being having a bearing in business of organization
Some of important factors and influences operating in social environment 1. Demographic characteristics like population, density 2. Socio cultural attitudes and values such as expectation of society from business, social custom 3. Family structure and changes in it 4. Role and position of men, women, children and aged in family and society
Supplier environment The supplier environment consists of factors related to cost, reliability and availability of factors of production or services that have impact on business of an organization Some important factors are 1. Cost availability and continuity of supply of raw material 2. Cost availability of finance 3. Cost , reliability and availability of energy used in production 4. Cost ,availability and dependability of human resource
Technological Environment The technological environment consist of those factors related to knowledge applied and material and machines used in production of goods and services that have impact on business of an organization Some important factors are 1. Sources of technology like company source , external sources and foreign sources 2. Technological development, stages of development change and rate of change of technology 3. Communication and infrastructural technology in management
Environmental scanning Environmental scanning can be defined as process by which organizations monitor their relevant environment to identify opportunities and threats affecting their business for purpose of taking strategic decisions
Factors to be considered for scanning The external environment in which an organization exists consists of a bewildering variety of factors. These are as below: 1. Events are important and specific occurrences taking place in different environmental sectors 2. Trends are general tendencies or the courses action along which events take place. 3. Issues are current concerns that arise in response to events and trends. 4. Expectations are demands made by interested groups in light of their concern for issues. Approaches to environmental scanning Kubr has suggested three approaches which could be adopted for sorting out information for environmental scanning These three approaches are
Systematic approaches Ad hoc approach Processed-form approach Systematic Approach Under this approach, information for environmental scanning is collected systematically. Information related to markets and customers, changes in legislation and regulations that have a direct impact on organizations activities etc. It could be collected continuously to monitor changes and take the relevant factors into account. Continuously updating such information is necessary not only for strategic management but also for operational activities Adhoc Approach Using this approach an organization may conduct special service and studies to deal with specific environmental issues from time to time. Such studies may be conducted for instance when an organization has to undertake special project, evaluate existing strategies or devise new strategies. Processed-Form Approach For adopting this approach the organization uses information in processed form, available from different sources both inside and outside the organization. When an organization uses information supplied by Govt. agencies or private institutions, it uses secondary source of data and the information is available in processed form. SWOT ANALYSIS
STRENGTH
WEAKNESS
OPPOURTUNITY
THREAT INTERNAL ENVIRONMENT Strength: It is an inherent capacity which an organization can use to gain strategic advantage. Eg good reputation among customers, resources, assets, people, experience. Weakness: It is an inherent limitation or constraint which creates strategic disadvantages. Eg gaps in capabilities, financial deadlines, low morale etc EXTERNAL ENVIRONMENT Opportunity: It is a favorable condition in organizations environment which enables it to consolidate and strengthen its position. Eg economic boom, favorable demographic shifts, arrival of new technologies etc Threat: It is an unfavorable condition in organizations environment which creates a risk for, or causes damage to organization. Eg economic downturn, demographic shift etc Benefits of SWOT analysis Simple to use Low cost Flexible and can be adapted to varying situations Leads to clarification of issue Development of goal alternatives Useful as a starting point for strategic analysis