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Unit 1

Business and its Environment

Business is an economic activity, which is
related with continuous and regular
production and distribution of goods and
services for satisfying human wants under
uncertain market conditions
Nature of business
Earning profit
Link between buyer & seller
Exchange of goods &
Creation of jobs
Better quality of life
Economic growth
Marketing & distribution of goods
Social obligations
Risks & uncertaninties
significance of business
Improve standard of living
Efficient utilisation of resources
Better quality and large variety of goods
Creates utilities (wants)
Employment opportunities
Workers welfare
Business environment
It aggregate of all conditions, events and
influence that surrounds and affect it

Important factors- socio-economic,

technological, supplier, competitons,
Nature of business environment
1. Environment is inseparable part of business
2. Environment is dynamic
3. Business lacks control over Environment
4. Internal & external Environment factors
5. Environment is complex
6. Opportunities and obstacles
7. Long lasting impact
8. uncertainty
Basic of business Environment
Internal Environment
External Environment
Internal Environment
Financial resources
Physical & human resources
Objectives of business
Management policies
Morale & commitment of human resource
Work Environment
Brand & corporate image
Labour management relationship
Technological and R&D
Promoters' vision
Marketing resource
External Environment
A) Micro / Operating Environment
1. Suppliers 2. Customers 3. Market intermediaries
4. Competitors 5. public

b) Macro / general Environment

1. Economic 2. Political 3. Socio- cultural
4. Technological 5. Demographic 6. global
Political Environment
It related to the management of public affairs
that impact the business of the organisation

It primary factor economic development for

stable, honest, efficient and dynamic
Political forces affecting business
Government laws
National defense posture
Foreign policy
Political stability
Political organisation
Political institutions
1. Legislature : parliament president ;
lok Sabha, Rajya sabha- law
i) Delegated legislature: RBI,SEBI,Election
ii) Ordinances: (limited time)
2. Executive :council of ministers(dept)
board : railway board
3. judiciary: supreme court-high court-district
Political system
It is a system of political and government
1. Libertarian political system open system
2. Authoritarian political system mixed system
3. Totalitarian political system closed system
Most political system is mixture of
Anarchy no law
Autocracy tribal leader
Theocracy religion leader
Monarchy king
Influence of political system in
Political ideology of government
Political stability in the country
Relation of government with other countries
Defense and military policy
Thinking of opposition parties
Policies towards MNC
Government control and restrictions
Treatments of foreign investors
Business & society
Factors affecting business society
Changing societal expectations
Ethical reasoning and actions
Government regulation of business
natural environment
New technology
Social objective of business
Supply of quality goods & services
Adoption of fair trade practices
Economic well being of the employees
Social & psychological satisfaction of employees
Development of human resources
Well being of economically backward people
Creation of employment
Promotion of social justice
Contribute to revenue of the country
Self sufficiency and export promotion
Social responsibility of business
The personal obligation of every one as he
acts for his own interest to assure that the
rights and legitimate interests of all others are
not impinged
Social responsibility of business
1. Responsibility towards shareholders/owners
2. Responsibility towards employees/workers
3. Responsibility towards customer
4. Responsibility suppliers
5. Responsibility towards creditors
6. Responsibility towards competitors
7. Responsibility towards government
8. Responsibility towards society
1. Responsibility towards shareholders
Run the business efficiently
Utilisation of capital and other resources
Fair return of capital invested
2. Responsibility towards employees or
Provide wages
Safety standards
Workers compensation insurance
Positive working climate
3. Responsibility towards customers
Fair prices
Honest advertising
After sales services
Consumer safety
Regular supply
Attend complaints
4. Responsibility towards suppliers
Regular orders
Fair terms and conditions
Reasonable credit period
Payment of dues
Future development plans
5. Responsibility towards creditors
Financial health
Reasonable interest
Health atmosphere
6. Responsibility towards competitors
Not to offer high sales commission to
distributors, agents
Not to offer to customer heavy discount/ free
Not to defame competitors
7. Responsibility towards government
Pay taxes
Environmental regulations
Labor laws
Avoid restrictive trade practices
Financial disclosure
Avoid corruption
8. Responsibility towards society
Protection of environment
Reasonable use of resources
Reservation for weaker section
No participation in anti-social activities
Development of backward region
Financial assistance
Employment generation
Advantage of social Responsibility of
Changed public expectations
Better environment of business
Public image
Balance of responsibility with power
Business has resources
Moral responsibility
Disadvantage of social Responsibility
of business
Profit max
Society cost
Lack of social skills
Social overhead cost
Lack of accountability
Lack of broad support
Social Responsibility initiatives in india
Tata group
Mahindra & Mahindra
Bharat Petroleum
Maruti Udyog
Hero group
Reliance Group
Environmental pollution and control
Environment pollution means any solid, liquid
or gaseous substances present in such
concentration as may be or tend to be
injurious to environment and human.
Causes of environmental pollution
1. Nature sources of pollution
a) Volcanic eruptions
b) Forest fires
c) Dust storms
d) Bacteria, spores, pollens
e) Decay organic
2. Man made sources
a) Industries
b) Automobiles
c) Over population
d) Deforestation
e) Nuclear explosions
f) Construction of roads, dams
g) Wars
h) Fertilizers
i) mining
Types of pollution & controls
Air pollution how
Soil pollution
Water pollution
Noise pollution
Marine pollution
Nuclear pollution
Thermal pollution
Business & culture
Culture consist of patterns, explicit and
implicit of and for behaviour acquired and
transmitted by symbols, constituting the
distinctive achievement of human groups,
traditional ideas, values, & cultural system.
Religions & beliefs
Social collectives
Status & roles
Impact of culture on business
Religion & custom
Change in preferences- socio-culture
Change in demographics
Advertising techniques
Internal environment
Business & government
Responsibilities of business towards government
1. Obey laws
2. Taxes
3. Social responsibilities
4. Providing inputs to the government
5. Government contracts
6. Government services
7. Active participation in politics
Responsibilities of government
towards business
1. Proper laws
2. Maintenance of law & order
3. Providing money & credit
4. Building infrastructure
5. Research basic, commercial
6. Providing information
7. Preserving competition
8. Awarding patent and copy rights
9. Protections
Role of government in business
Regulatory role of government
Promotional role of government
Entrepreneurial role of government
Planning role of government
End of unit 1