BUSINESS ENVIRONMENT
UNIT-1
CONTENT

• Concept
• Significance
• Components of Business environment
• Factor affecting Business Environment
• Social Responsibilities of Business
  WHAT IS BUSINESS
  Business is an economic activity which is related with continuous production
  of good and services for satisfying human wants.

1. Exchange of goods/services
2. Deals in numerous transactions.
3. Profit is main objective.
4. Risk and uncertainties.
5. Buyer and seller.
6. Marketing and distribution of goods/services.
7. To satisfy human wants.
8. Social obligation
   Business does not function in isolation or in vacuum. It is affected by internal
   and external factors. These internal and external factors collectively
   constitute business environment. Internal environmental factors are within
   the control of business, whereas external factors are beyond the control of
   business.
   ‘Environment’ refers to the system in which human beings live and they have
   to adjust themselves according to it. So it is surroundings, external agents,
   influences or circumstances under which something exists.
   *Business Environment can be defined as the aggregate of all those
   forces, factors and institutions which directly affect the working of a
   business organization.
   Some of these constituents may be static, while others may be changing.
   “Business Environment is the aggregate of all conditions, events and
   influences that surround and affect the business.”
   Keith Davis“Business Environment encompasses the climate or set of
   conditions-economic, social, political or
   institutional in which business operations are conducted.”
   Prof. Weimer
   “The term Business Environment of a company is defined as the pattern of
   all external influences that
   affect its life and development.”
   Andrews
   “The total of all things external to firms and industries that affect the function
   of the organization is called business environment.”
   Wheeler
   *CHARACTERISTICS/NATURE OF BUSINESS ENVIRONMENT
   Business Environment is very complicated, dynamic and multi-dimensional
   and affects different business institutions in different ways. It exhibits many
   characteristics like:
9. Complex
   Environment comprises of many factors. All these factors are related to each
   other. Therefore, their individual effect on the business cannot be recognised.
   This is perhaps the reason which makes it difficult for the business to face
   them.
10. Dynamic
    As is clear that environment is a mixture of many factors and changes in
    some or the other factors continue to take place. Therefore, it is said that
    business environment is dynamic.
11. Uncertain
    Nothing can be said with any amount of certainty about the factors of the
    business environment because they continue to change quickly. The
    professional people who determine the business strategy take into
    consideration the likely changes beforehand.
12. *Multi-dimensional
    Business environment is related to the local conditions and this is the reason
    as to why the business environment happens to be different in different
    countries and different even in the same country at different places.
13. Interdependent components
    The different factors of business environment are co-related. For example,
    change in the import-export policy with the coming of a new government.
    In this case, the coming of new government to power and change in the
    import-export policy are political and economic changes respectively. Thus, a
    change in one factor affects the other factor.
    *IMPORTANCE/SIGNIFICANCE OF BUSINESS ENVIRONMENT:
    Business and its environment are closely inter-related and mutually
    interdependent. Environment has its bearing on business and business has its
    bearing on environment. The success of business lies in understanding the
    environmental changes and adapting its business policies accordingly.
    The surroundings of business enterprise which are constantly changing, carry
    with them both opportunities and risks or uncertainties which can make or
    mar the future of business. Significance of the study of environment in
    business sector may be explained as follows:
14. Early identification of opportunities helps a business organization to be the
    first to exploit them.
15. A business organization should make its policies keeping in view the
    demands of environment.
16. The study of business environment is important to ensure optimum
    utilization of resources like, financial resources, human resource and
    physical resource etc.
17. Environment analysis helps the business organizations to identify strengths
    and weaknesses.
18. Environment analysis helps the business organizations to identify
    threats and explore opportunities available to business.
19. Environment analysis helps in adapting latest technological
    development which results in improved efficiency.
20. Scanning the business environment helps to understand Political Situation
    and its effect on business.
21. Scanning the business environment helps to understand economic
    policies of Government and their impact on business.
22. Because of globalization, the impact of international events on business
    is increasing. To understand global events and their impact on business,
    study of international environment is must.
23. By environmental analysis, business organizations come to know about
    the strategies of competitors to formulate counter plans.
24. Environment analysis helps in understanding the market conditions
    i.e. change in demand/supply, change in fashion, taste, boom or
    depression etc.
    SCANNING BUSINESS ENVIRONMENT
    There is a close and continuous interaction between business and its
    environment. So it is essential to understand and scan the environment to
    ensure effective utilization of resources. SWOT analysis is an analysis
    undertaken by business firms to understand their external and internal
    environment.
    SWOT analysis is applied to formulate effective organizational strategies.
    Through SWOT analysis, the business firms can match Strengths and
    Weaknesses existing with an organization with the Opportunities and Threats
    existing in the external environment.
    COMPONENTS/TYPES/CONSTITUENTS/FACTORS OF BUSINESS
    ENVIRONMENT
    Every business faces two types of environments simultaneously i.e. Internal
    Environment and External Environment.
25. INTERNALENVIRONMENT
    All those factors within an organization which impart strengths or cause
    weaknesses constitute the internal environment. These factors can be
    controlled by business but they are quite important in shaping the behavior of
    people working in it. Hence, managers have to take internal factors into
    account while taking actions.
26. EXTERNALENVIRONMENT
    All those factors outside the organization which provide opportunities or pose
    a threat to the organization make up the external environment. These factors
    are those over which the business organization has no control.
    According to William Glueck and Jauck
    “In environment there are external factors, which constantly bring
    opportunities and threats to the business firm. In includes Economic, Social,
    Technological and Political conditions.”
    Examples of situations that may cause change in the external environment
    include:
    (i) Improvement in production techniques
    (ii) Fluctuations in the levels of demand
    (iii) Fluctuations in interest rates
    (iv) Changes in laws and regulations
    (v) Changes in taxation
    (vi) New social trends, fashions or life styles
    (vii) International influences
    TYPES OFEXTERNAL ENVIRONMENT

MICRO ENVIRONMENT
Micro environment consists of factors in the company’s immediate
environment that affect the performance of the company. These include the
suppliers, marketing intermediaries, competitors, customers and the public.
According to Philip Kotler
“The micro environment consists of factors in the company’s immediate
environment which affect the performance of the business unit. These include
suppliers, marketing intermediaries, competitors, customers and the public.”
According to Hill and Jones
“The micro environment of a company consists of elements that directly
affect the company such as
competitors, customers and suppliers.”
MICRO ENVIRONMENT

1. Suppliers
   Suppliers are important for any business unit. Suppliers are those who
   supply the inputs like raw material and components to the company.
   Organizations should keep two things in mind regarding suppliers:
   Reliability
   Multiple suppliers.
2. Customers or clients
   A business exist only because of its customers. Hence, a major task of a
   business is to create and sustain customers. Monitoring the customer’s
   sensitivity is a pre-requisite for business success.
   A company may have different types of customers
   (i) Individual and household customers
   (ii) Government bodies
   (iii) Foreign customers
   (iv) Retail customers
   (v) Wholesale customers
   To succeed in capturing and sustaining customers, following points must be
   kept in mind:
   (i) Buyer’s behaviour data can be used in constructing a customer profile.
   (ii) Geographical factors should also be analyzed to know the opportunities
   and threats.
   (iii) In the era of free trade, foreign customers can be attracted by
   making such products which can compete with foreign products.
   (iv) Single customer of a company is full of risks as it places the company
   in a poor bargaining position.
   (v) The business firm should make separate products for separate
   segments. Following can be the basis of segmentation:
   (a) Income level of customers
   (b) Age of customer
   (c) Personality and life style of customers
   (d) Tastes and preferences of customers
   (e) Quantity to be purchased by customers
   (f) Education level of customers
3. Competitors
   Competitor means other business units which are making similar products or
   a very close substitute of our product. Competitors play a vital role in running
   the business enterprise. Business has to adjust its various activities according
   to the behaviour of the competitors.
4. Market Intermediaries
   Every business enterprise may be assisted by market intermediaries which
   include agents, brokers who help the company find customers. It is a link
   between company and final consumer. Market intermediaries help the
   company to promote, sell and distribute its goods to final buyers.
   Examples:
   Wholesalers, retailers, advertising agencies, consultancy firms, banks,
   insurance companies, warehouse, transport agencies etc.
5. Public
   Public is any group that has actual or potential interest in the business. To
   achieve this interest, it has its impact on the business. Public includes users
   and non-users of the product like Environmentalists, NGOs, Local
   Community, Media.
   EXTERNAL ENVIRONMENT
   A company and the forces operate in a larger Macro environment that shape
   opportunities and pose threats to the company. These factors are generally
   more uncontrollable than the micro forces.
   According to Philip Kotler
   “Macro environment includes forces that create opportunities and pose threat
   to the business unit. It includes economic, demographic, natural,
   technological, political and cultural environments.”
   According to Hill and Jones
   “The macro environment consists of the broader economic, social, political,
   legal, demographic and technological setting within which the industry and
   the business units are placed.”
6. ECONOMIC ENVIRONMENT
   Economic environment consists of economic factors that influence the
   business in a country. It is very complex and dynamic in nature that keeps on
   changing with the change in policies or political situations.
   Key components of economic environment are:
   (A)Economic Conditions of Public
   (B)Economic Policies
   (C) Economic System
7. POLITICAL-LEGALENVIRONMENT
   Political environment affects different business units significantly. A stable
   and dynamic political environment is essential for business growth.
   Whenever there is a change in the Government in a democratic country, it is a
   sign of change in economic policies. The Political environment of business
   depends on:
8. Ideology of the Government
9. Political Establishment
10. Political Stability in the country
11. Relations with other countries
12. Defense and Military Policy
13. Centre State Relationship
14. Approach of Opposition parties towards business
    LEGAL ENVIRONMENT
    Legal environment constitutes the laws framed by the Government
    and various legislations passed in the parliament. The businessman
    cannot overlook the legislations because he has to perform his
    business transactions with in the framework of legal environment.
    Every aspect for business is regulated by law in India. Government
    has also framed legislations which regulate and control the business.
    Some of the main legislations regulating the business are as follows:
15. Industrial Dispute Act, 1947
16. Factories Act, 1948
17. Consumer Protection Act, 1986
18. Companies Act, 1956
19. Foreign Exchange Management Act 1999
20. Securities and Exchange Board of India Guidelines, 2000
21. SOCIAL & CULTURAL ENVIRONMENT
    Business is an integral part of society and both influence each other.
    Influence exercised by social and cultural factors is known as socio-cultural
    environment. These factors include: attitude of people, family system, caste
    system, religion, education, marriage, habits and preferences, languages,
    urbanization, customs and traditions, ethics etc.
22. TECHNOLOGICAL ENVIRONMENT
    A systematic application of scientific knowledge is known as technology.
    Everyday there are vast changes in products, services, lifestyles and living
    conditions, these changes must be analyzed by every business unit and should
    adapt these changes.
23. DEMOGRAPHIC ENVIRONMENT
    Demographic environment refers to the study of the features of population
    i.e. size of population, growth rate, gender ratio, age composition, income
    level, education level, family size, family structure etc. All these factors
    affect size of demand, tastes, fashion, liking, preferences of consumer etc.
24. NATURAL OR ECOLOGICAL ENVIRONMENT
    It includes geographical and ecological factors such as natural resources,
    weather and climatic conditions, port facilities, topographical factors such as
    soil, rivers, rainfall, pollution etc. Every business unit must look for these
    factors before choosing the location for their business.
25. INTERNATIONAL/ GLOBAL ENVIRONMENT
    International environment is important for industries directly depending on
    import and export. A recession in foreign market or protection policy by
    foreign nations may create difficulties for industries depending on exports.
    Liberalization of import may help some industries but may adversely affect
    other industries. Following factors of International environment affect
    business:
26. Globalization
27. Liberalization
28. International agreements and declarations
29. International terrorism
30. Cultural exchange
    SOCIAL RESPONSIBILITY OF BUSINESS
    Social Responsibility of Business can be defined as the obligation an
    organization’s management team has towards the interests and welfare of the
    society or community that provides it with resources and environment to not
    only survive but flourish.
    In other words, Social Responsibility is the way your company gives back to
    and takes care of the community it is located in and the greater society we are
    all a part of.
    “Conceptually social responsibility may be taken up to mean intelligent and
    objective concern for the welfare of the society.”
    K.R. Andrews
    “Social responsibility is the personal obligation of every one as he acts for
    his own interests to assure that the rights and legitimate interests of all other
    are not impinged.”
    Koontz and O’Donnel
    There are four dimensions of Corporate Responsibilities:
31. Economic: Responsibility to earn profit for
    owners
32. Legal: Responsibility to comply with
    laws
33. Ethical: Doing what is right, just and fair
34. Voluntary and Philanthropic: Promoting human welfare and
    goodwill. Being a good corporate citizen contributing to
    community and quality of life.
    RESPON SIBILITY O F BUSI N ESS TOWARDS VA R I O U S
    STAKEHOLDERS
    PHILANTHROPIC
    RESPONSIBILITY
    ETHICAL RESPONSIBILITY
    LEGAL
    RESPONSIBILITY
    ECONOMIC RESPONSIBILITY
    SHARE-

• HOLDERS
  COMMUNITY
  EMPLOYE
  ES
  GOVERN-
  -MENT
  SOCIAL
  RESPONSIBILITY
  OF BUSINESS
  CUSTOME
  RS
  CREDITO
  RS
  SUPPLIER
  S
  IMPORTANCE OF SOCIAL RESPONSIBILITY OF BUSINESS
  Social Responsibility of Business is important for organization and its
  stakeholders due to following reasons:

BUSINESS ENVIRONMENT
UNIT-1
CONTENT

• Concept
• Significance
• Components of Business environment
• Factor affecting Business Environment
• Social Responsibilities of Business
  WHAT IS BUSINESS
  Business is an economic activity which is related with continuous production
  of good and services for satisfying human wants.

1. Exchange of goods/services
2. Deals in numerous transactions.
3. Profit is main objective.
4. Risk and uncertainties.
5. Buyer and seller.
6. Marketing and distribution of goods/services.
7. To satisfy human wants.
8. Social obligation
   Business does not function in isolation or in vacuum. It is affected by internal
   and external factors. These internal and external factors collectively
   constitute business environment. Internal environmental factors are within
   the control of business, whereas external factors are beyond the control of
   business.
   ‘Environment’ refers to the system in which human beings live and they have
   to adjust themselves according to it. So it is surroundings, external agents,
   influences or circumstances under which something exists.
   *Business Environment can be defined as the aggregate of all those
   forces, factors and institutions which directly affect the working of a
   business organization.
   Some of these constituents may be static, while others may be changing.
   “Business Environment is the aggregate of all conditions, events and
   influences that surround and affect the business.”
   Keith Davis“Business Environment encompasses the climate or set of
   conditions-economic, social, political or
   institutional in which business operations are conducted.”
   Prof. Weimer
   “The term Business Environment of a company is defined as the pattern of
   all external influences that
   affect its life and development.”
   Andrews
   “The total of all things external to firms and industries that affect the function
   of the organization is called business environment.”
   Wheeler
   *CHARACTERISTICS/NATURE OF BUSINESS ENVIRONMENT
   Business Environment is very complicated, dynamic and multi-dimensional
   and affects different business institutions in different ways. It exhibits many
   characteristics like:
9. Complex
   Environment comprises of many factors. All these factors are related to each
   other. Therefore, their individual effect on the business cannot be recognised.
   This is perhaps the reason which makes it difficult for the business to face
   them.
10. Dynamic
    As is clear that environment is a mixture of many factors and changes in
    some or the other factors continue to take place. Therefore, it is said that
    business environment is dynamic.
11. Uncertain
    Nothing can be said with any amount of certainty about the factors of the
    business environment because they continue to change quickly. The
    professional people who determine the business strategy take into
    consideration the likely changes beforehand.
12. *Multi-dimensional
    Business environment is related to the local conditions and this is the reason
    as to why the business environment happens to be different in different
    countries and different even in the same country at different places.
13. Interdependent components
    The different factors of business environment are co-related. For example,
    change in the import-export policy with the coming of a new government.
    In this case, the coming of new government to power and change in the
    import-export policy are political and economic changes respectively. Thus, a
    change in one factor affects the other factor.
    *IMPORTANCE/SIGNIFICANCE OF BUSINESS ENVIRONMENT:
    Business and its environment are closely inter-related and mutually
    interdependent. Environment has its bearing on business and business has its
    bearing on environment. The success of business lies in understanding the
    environmental changes and adapting its business policies accordingly.
    The surroundings of business enterprise which are constantly changing, carry
    with them both opportunities and risks or uncertainties which can make or
    mar the future of business. Significance of the study of environment in
    business sector may be explained as follows:
14. Early identification of opportunities helps a business organization to be the
    first to exploit them.
15. A business organization should make its policies keeping in view the
    demands of environment.
16. The study of business environment is important to ensure optimum
    utilization of resources like, financial resources, human resource and
    physical resource etc.
17. Environment analysis helps the business organizations to identify strengths
    and weaknesses.
18. Environment analysis helps the business organizations to identify
    threats and explore opportunities available to business.
19. Environment analysis helps in adapting latest technological
    development which results in improved efficiency.
20. Scanning the business environment helps to understand Political Situation
    and its effect on business.
21. Scanning the business environment helps to understand economic
    policies of Government and their impact on business.
22. Because of globalization, the impact of international events on business
    is increasing. To understand global events and their impact on business,
    study of international environment is must.
23. By environmental analysis, business organizations come to know about
    the strategies of competitors to formulate counter plans.
24. Environment analysis helps in understanding the market conditions
    i.e. change in demand/supply, change in fashion, taste, boom or
    depression etc.
    SCANNING BUSINESS ENVIRONMENT
    There is a close and continuous interaction between business and its
    environment. So it is essential to understand and scan the environment to
    ensure effective utilization of resources. SWOT analysis is an analysis
    undertaken by business firms to understand their external and internal
    environment.
    SWOT analysis is applied to formulate effective organizational strategies.
    Through SWOT analysis, the business firms can match Strengths and
    Weaknesses existing with an organization with the Opportunities and Threats
    existing in the external environment.
    COMPONENTS/TYPES/CONSTITUENTS/FACTORS OF BUSINESS
    ENVIRONMENT
    Every business faces two types of environments simultaneously i.e. Internal
    Environment and External Environment.
25. INTERNALENVIRONMENT
    All those factors within an organization which impart strengths or cause
    weaknesses constitute the internal environment. These factors can be
    controlled by business but they are quite important in shaping the behavior of
    people working in it. Hence, managers have to take internal factors into
    account while taking actions.
26. EXTERNALENVIRONMENT
    All those factors outside the organization which provide opportunities or pose
    a threat to the organization make up the external environment. These factors
    are those over which the business organization has no control.
    According to William Glueck and Jauck
    “In environment there are external factors, which constantly bring
    opportunities and threats to the business firm. In includes Economic, Social,
    Technological and Political conditions.”
    Examples of situations that may cause change in the external environment
    include:
    (i) Improvement in production techniques
    (ii) Fluctuations in the levels of demand
    (iii) Fluctuations in interest rates
    (iv) Changes in laws and regulations
    (v) Changes in taxation
    (vi) New social trends, fashions or life styles
    (vii) International influences
    TYPES OFEXTERNAL ENVIRONMENT

MICRO ENVIRONMENT
Micro environment consists of factors in the company’s immediate
environment that affect the performance of the company. These include the
suppliers, marketing intermediaries, competitors, customers and the public.
According to Philip Kotler
“The micro environment consists of factors in the company’s immediate
environment which affect the performance of the business unit. These include
suppliers, marketing intermediaries, competitors, customers and the public.”
According to Hill and Jones
“The micro environment of a company consists of elements that directly
affect the company such as
competitors, customers and suppliers.”
MICRO ENVIRONMENT

1. Suppliers
   Suppliers are important for any business unit. Suppliers are those who
   supply the inputs like raw material and components to the company.
   Organizations should keep two things in mind regarding suppliers:
   Reliability
   Multiple suppliers.
2. Customers or clients
   A business exist only because of its customers. Hence, a major task of a
   business is to create and sustain customers. Monitoring the customer’s
   sensitivity is a pre-requisite for business success.
   A company may have different types of customers
   (i) Individual and household customers
   (ii) Government bodies
   (iii) Foreign customers
   (iv) Retail customers
   (v) Wholesale customers
   To succeed in capturing and sustaining customers, following points must be
   kept in mind:
   (i) Buyer’s behaviour data can be used in constructing a customer profile.
   (ii) Geographical factors should also be analyzed to know the opportunities
   and threats.
   (iii) In the era of free trade, foreign customers can be attracted by
   making such products which can compete with foreign products.
   (iv) Single customer of a company is full of risks as it places the company
   in a poor bargaining position.
   (v) The business firm should make separate products for separate
   segments. Following can be the basis of segmentation:
   (a) Income level of customers
   (b) Age of customer
   (c) Personality and life style of customers
   (d) Tastes and preferences of customers
   (e) Quantity to be purchased by customers
   (f) Education level of customers
3. Competitors
   Competitor means other business units which are making similar products or
   a very close substitute of our product. Competitors play a vital role in running
   the business enterprise. Business has to adjust its various activities according
   to the behaviour of the competitors.
4. Market Intermediaries
   Every business enterprise may be assisted by market intermediaries which
   include agents, brokers who help the company find customers. It is a link
   between company and final consumer. Market intermediaries help the
   company to promote, sell and distribute its goods to final buyers.
   Examples:
   Wholesalers, retailers, advertising agencies, consultancy firms, banks,
   insurance companies, warehouse, transport agencies etc.
5. Public
   Public is any group that has actual or potential interest in the business. To
   achieve this interest, it has its impact on the business. Public includes users
   and non-users of the product like Environmentalists, NGOs, Local
   Community, Media.
   EXTERNAL ENVIRONMENT
   A company and the forces operate in a larger Macro environment that shape
   opportunities and pose threats to the company. These factors are generally
   more uncontrollable than the micro forces.
   According to Philip Kotler
   “Macro environment includes forces that create opportunities and pose threat
   to the business unit. It includes economic, demographic, natural,
   technological, political and cultural environments.”
   According to Hill and Jones
   “The macro environment consists of the broader economic, social, political,
   legal, demographic and technological setting within which the industry and
   the business units are placed.”
6. ECONOMIC ENVIRONMENT
   Economic environment consists of economic factors that influence the
   business in a country. It is very complex and dynamic in nature that keeps on
   changing with the change in policies or political situations.
   Key components of economic environment are:
   (A)Economic Conditions of Public
   (B)Economic Policies
   (C) Economic System
7. POLITICAL-LEGALENVIRONMENT
   Political environment affects different business units significantly. A stable
   and dynamic political environment is essential for business growth.
   Whenever there is a change in the Government in a democratic country, it is a
   sign of change in economic policies. The Political environment of business
   depends on:
8. Ideology of the Government
9. Political Establishment
10. Political Stability in the country
11. Relations with other countries
12. Defense and Military Policy
13. Centre State Relationship
14. Approach of Opposition parties towards business
    LEGAL ENVIRONMENT
    Legal environment constitutes the laws framed by the Government
    and various legislations passed in the parliament. The businessman
    cannot overlook the legislations because he has to perform his
    business transactions with in the framework of legal environment.
    Every aspect for business is regulated by law in India. Government
    has also framed legislations which regulate and control the business.
    Some of the main legislations regulating the business are as follows:
15. Industrial Dispute Act, 1947
16. Factories Act, 1948
17. Consumer Protection Act, 1986
18. Companies Act, 1956
19. Foreign Exchange Management Act 1999
20. Securities and Exchange Board of India Guidelines, 2000
21. SOCIAL & CULTURAL ENVIRONMENT
    Business is an integral part of society and both influence each other.
    Influence exercised by social and cultural factors is known as socio-cultural
    environment. These factors include: attitude of people, family system, caste
    system, religion, education, marriage, habits and preferences, languages,
    urbanization, customs and traditions, ethics etc.
22. TECHNOLOGICAL ENVIRONMENT
    A systematic application of scientific knowledge is known as technology.
    Everyday there are vast changes in products, services, lifestyles and living
    conditions, these changes must be analyzed by every business unit and should
    adapt these changes.
23. DEMOGRAPHIC ENVIRONMENT
    Demographic environment refers to the study of the features of population
    i.e. size of population, growth rate, gender ratio, age composition, income
    level, education level, family size, family structure etc. All these factors
    affect size of demand, tastes, fashion, liking, preferences of consumer etc.
24. NATURAL OR ECOLOGICAL ENVIRONMENT
    It includes geographical and ecological factors such as natural resources,
    weather and climatic conditions, port facilities, topographical factors such as
    soil, rivers, rainfall, pollution etc. Every business unit must look for these
    factors before choosing the location for their business.
25. INTERNATIONAL/ GLOBAL ENVIRONMENT
    International environment is important for industries directly depending on
    import and export. A recession in foreign market or protection policy by
    foreign nations may create difficulties for industries depending on exports.
    Liberalization of import may help some industries but may adversely affect
    other industries. Following factors of International environment affect
    business:
26. Globalization
27. Liberalization
28. International agreements and declarations
29. International terrorism
30. Cultural exchange
    SOCIAL RESPONSIBILITY OF BUSINESS
    Social Responsibility of Business can be defined as the obligation an
    organization’s management team has towards the interests and welfare of the
    society or community that provides it with resources and environment to not
    only survive but flourish.
    In other words, Social Responsibility is the way your company gives back to
    and takes care of the community it is located in and the greater society we are
    all a part of.
    “Conceptually social responsibility may be taken up to mean intelligent and
    objective concern for the welfare of the society.”
    K.R. Andrews
    “Social responsibility is the personal obligation of every one as he acts for
    his own interests to assure that the rights and legitimate interests of all other
    are not impinged.”
    Koontz and O’Donnel
    There are four dimensions of Corporate Responsibilities:
31. Economic: Responsibility to earn profit for
    owners
32. Legal: Responsibility to comply with
    laws
33. Ethical: Doing what is right, just and fair
34. Voluntary and Philanthropic: Promoting human welfare and
    goodwill. Being a good corporate citizen contributing to
    community and quality of life.
    RESPON SIBILITY O F BUSI N ESS TOWARDS VA R I O U S
    STAKEHOLDERS
    PHILANTHROPIC
    RESPONSIBILITY
    ETHICAL RESPONSIBILITY
    LEGAL
    RESPONSIBILITY
    ECONOMIC RESPONSIBILITY
    SHARE-

• HOLDERS
  COMMUNITY
  EMPLOYE
  ES
  GOVERN-
  -MENT
  SOCIAL
  RESPONSIBILITY
  OF BUSINESS
  CUSTOME
  RS
  CREDITO
  RS
  SUPPLIER
  S
  IMPORTANCE OF SOCIAL RESPONSIBILITY OF BUSINESS
  Social Responsibility of Business is important for organization and its
  stakeholders due to following reasons:

BUSINESS ENVIRONMENT
UNIT-1
CONTENT

• Concept
• Significance
• Components of Business environment
• Factor affecting Business Environment
• Social Responsibilities of Business
  WHAT IS BUSINESS
  Business is an economic activity which is related with continuous production
  of good and services for satisfying human wants.

1. Exchange of goods/services
2. Deals in numerous transactions.
3. Profit is main objective.
4. Risk and uncertainties.
5. Buyer and seller.
6. Marketing and distribution of goods/services.
7. To satisfy human wants.
8. Social obligation
   Business does not function in isolation or in vacuum. It is affected by internal
   and external factors. These internal and external factors collectively
   constitute business environment. Internal environmental factors are within
   the control of business, whereas external factors are beyond the control of
   business.
   ‘Environment’ refers to the system in which human beings live and they have
   to adjust themselves according to it. So it is surroundings, external agents,
   influences or circumstances under which something exists.
   *Business Environment can be defined as the aggregate of all those
   forces, factors and institutions which directly affect the working of a
   business organization.
   Some of these constituents may be static, while others may be changing.
   “Business Environment is the aggregate of all conditions, events and
   influences that surround and affect the business.”
   Keith Davis“Business Environment encompasses the climate or set of
   conditions-economic, social, political or
   institutional in which business operations are conducted.”
   Prof. Weimer
   “The term Business Environment of a company is defined as the pattern of
   all external influences that
   affect its life and development.”
   Andrews
   “The total of all things external to firms and industries that affect the function
   of the organization is called business environment.”
   Wheeler
   *CHARACTERISTICS/NATURE OF BUSINESS ENVIRONMENT
   Business Environment is very complicated, dynamic and multi-dimensional
   and affects different business institutions in different ways. It exhibits many
   characteristics like:
9. Complex
   Environment comprises of many factors. All these factors are related to each
   other. Therefore, their individual effect on the business cannot be recognised.
   This is perhaps the reason which makes it difficult for the business to face
   them.
10. Dynamic
    As is clear that environment is a mixture of many factors and changes in
    some or the other factors continue to take place. Therefore, it is said that
    business environment is dynamic.
11. Uncertain
    Nothing can be said with any amount of certainty about the factors of the
    business environment because they continue to change quickly. The
    professional people who determine the business strategy take into
    consideration the likely changes beforehand.
12. *Multi-dimensional
    Business environment is related to the local conditions and this is the reason
    as to why the business environment happens to be different in different
    countries and different even in the same country at different places.
13. Interdependent components
    The different factors of business environment are co-related. For example,
    change in the import-export policy with the coming of a new government.
    In this case, the coming of new government to power and change in the
    import-export policy are political and economic changes respectively. Thus, a
    change in one factor affects the other factor.
    *IMPORTANCE/SIGNIFICANCE OF BUSINESS ENVIRONMENT:
    Business and its environment are closely inter-related and mutually
    interdependent. Environment has its bearing on business and business has its
    bearing on environment. The success of business lies in understanding the
    environmental changes and adapting its business policies accordingly.
    The surroundings of business enterprise which are constantly changing, carry
    with them both opportunities and risks or uncertainties which can make or
    mar the future of business. Significance of the study of environment in
    business sector may be explained as follows:
14. Early identification of opportunities helps a business organization to be the
    first to exploit them.
15. A business organization should make its policies keeping in view the
    demands of environment.
16. The study of business environment is important to ensure optimum
    utilization of resources like, financial resources, human resource and
    physical resource etc.
17. Environment analysis helps the business organizations to identify strengths
    and weaknesses.
18. Environment analysis helps the business organizations to identify
    threats and explore opportunities available to business.
19. Environment analysis helps in adapting latest technological
    development which results in improved efficiency.
20. Scanning the business environment helps to understand Political Situation
    and its effect on business.
21. Scanning the business environment helps to understand economic
    policies of Government and their impact on business.
22. Because of globalization, the impact of international events on business
    is increasing. To understand global events and their impact on business,
    study of international environment is must.
23. By environmental analysis, business organizations come to know about
    the strategies of competitors to formulate counter plans.
24. Environment analysis helps in understanding the market conditions
    i.e. change in demand/supply, change in fashion, taste, boom or
    depression etc.
    SCANNING BUSINESS ENVIRONMENT
    There is a close and continuous interaction between business and its
    environment. So it is essential to understand and scan the environment to
    ensure effective utilization of resources. SWOT analysis is an analysis
    undertaken by business firms to understand their external and internal
    environment.
    SWOT analysis is applied to formulate effective organizational strategies.
    Through SWOT analysis, the business firms can match Strengths and
    Weaknesses existing with an organization with the Opportunities and Threats
    existing in the external environment.
    COMPONENTS/TYPES/CONSTITUENTS/FACTORS OF BUSINESS
    ENVIRONMENT
    Every business faces two types of environments simultaneously i.e. Internal
    Environment and External Environment.
25. INTERNALENVIRONMENT
    All those factors within an organization which impart strengths or cause
    weaknesses constitute the internal environment. These factors can be
    controlled by business but they are quite important in shaping the behavior of
    people working in it. Hence, managers have to take internal factors into
    account while taking actions.
26. EXTERNALENVIRONMENT
    All those factors outside the organization which provide opportunities or pose
    a threat to the organization make up the external environment. These factors
    are those over which the business organization has no control.
    According to William Glueck and Jauck
    “In environment there are external factors, which constantly bring
    opportunities and threats to the business firm. In includes Economic, Social,
    Technological and Political conditions.”
    Examples of situations that may cause change in the external environment
    include:
    (i) Improvement in production techniques
    (ii) Fluctuations in the levels of demand
    (iii) Fluctuations in interest rates
    (iv) Changes in laws and regulations
    (v) Changes in taxation
    (vi) New social trends, fashions or life styles
    (vii) International influences
    TYPES OFEXTERNAL ENVIRONMENT

MICRO ENVIRONMENT
Micro environment consists of factors in the company’s immediate
environment that affect the performance of the company. These include the
suppliers, marketing intermediaries, competitors, customers and the public.
According to Philip Kotler
“The micro environment consists of factors in the company’s immediate
environment which affect the performance of the business unit. These include
suppliers, marketing intermediaries, competitors, customers and the public.”
According to Hill and Jones
“The micro environment of a company consists of elements that directly
affect the company such as
competitors, customers and suppliers.”
MICRO ENVIRONMENT

1. Suppliers
   Suppliers are important for any business unit. Suppliers are those who
   supply the inputs like raw material and components to the company.
   Organizations should keep two things in mind regarding suppliers:
   Reliability
   Multiple suppliers.
2. Customers or clients
   A business exist only because of its customers. Hence, a major task of a
   business is to create and sustain customers. Monitoring the customer’s
   sensitivity is a pre-requisite for business success.
   A company may have different types of customers
   (i) Individual and household customers
   (ii) Government bodies
   (iii) Foreign customers
   (iv) Retail customers
   (v) Wholesale customers
   To succeed in capturing and sustaining customers, following points must be
   kept in mind:
   (i) Buyer’s behaviour data can be used in constructing a customer profile.
   (ii) Geographical factors should also be analyzed to know the opportunities
   and threats.
   (iii) In the era of free trade, foreign customers can be attracted by
   making such products which can compete with foreign products.
   (iv) Single customer of a company is full of risks as it places the company
   in a poor bargaining position.
   (v) The business firm should make separate products for separate
   segments. Following can be the basis of segmentation:
   (a) Income level of customers
   (b) Age of customer
   (c) Personality and life style of customers
   (d) Tastes and preferences of customers
   (e) Quantity to be purchased by customers
   (f) Education level of customers
3. Competitors
   Competitor means other business units which are making similar products or
   a very close substitute of our product. Competitors play a vital role in running
   the business enterprise. Business has to adjust its various activities according
   to the behaviour of the competitors.
4. Market Intermediaries
   Every business enterprise may be assisted by market intermediaries which
   include agents, brokers who help the company find customers. It is a link
   between company and final consumer. Market intermediaries help the
   company to promote, sell and distribute its goods to final buyers.
   Examples:
   Wholesalers, retailers, advertising agencies, consultancy firms, banks,
   insurance companies, warehouse, transport agencies etc.
5. Public
   Public is any group that has actual or potential interest in the business. To
   achieve this interest, it has its impact on the business. Public includes users
   and non-users of the product like Environmentalists, NGOs, Local
   Community, Media.
   EXTERNAL ENVIRONMENT
   A company and the forces operate in a larger Macro environment that shape
   opportunities and pose threats to the company. These factors are generally
   more uncontrollable than the micro forces.
   According to Philip Kotler
   “Macro environment includes forces that create opportunities and pose threat
   to the business unit. It includes economic, demographic, natural,
   technological, political and cultural environments.”
   According to Hill and Jones
   “The macro environment consists of the broader economic, social, political,
   legal, demographic and technological setting within which the industry and
   the business units are placed.”
6. ECONOMIC ENVIRONMENT
   Economic environment consists of economic factors that influence the
   business in a country. It is very complex and dynamic in nature that keeps on
   changing with the change in policies or political situations.
   Key components of economic environment are:
   (A)Economic Conditions of Public
   (B)Economic Policies
   (C) Economic System
7. POLITICAL-LEGALENVIRONMENT
   Political environment affects different business units significantly. A stable
   and dynamic political environment is essential for business growth.
   Whenever there is a change in the Government in a democratic country, it is a
   sign of change in economic policies. The Political environment of business
   depends on:
8. Ideology of the Government
9. Political Establishment
10. Political Stability in the country
11. Relations with other countries
12. Defense and Military Policy
13. Centre State Relationship
14. Approach of Opposition parties towards business
    LEGAL ENVIRONMENT
    Legal environment constitutes the laws framed by the Government
    and various legislations passed in the parliament. The businessman
    cannot overlook the legislations because he has to perform his
    business transactions with in the framework of legal environment.
    Every aspect for business is regulated by law in India. Government
    has also framed legislations which regulate and control the business.
    Some of the main legislations regulating the business are as follows:
15. Industrial Dispute Act, 1947
16. Factories Act, 1948
17. Consumer Protection Act, 1986
18. Companies Act, 1956
19. Foreign Exchange Management Act 1999
20. Securities and Exchange Board of India Guidelines, 2000
21. SOCIAL & CULTURAL ENVIRONMENT
    Business is an integral part of society and both influence each other.
    Influence exercised by social and cultural factors is known as socio-cultural
    environment. These factors include: attitude of people, family system, caste
    system, religion, education, marriage, habits and preferences, languages,
    urbanization, customs and traditions, ethics etc.
22. TECHNOLOGICAL ENVIRONMENT
    A systematic application of scientific knowledge is known as technology.
    Everyday there are vast changes in products, services, lifestyles and living
    conditions, these changes must be analyzed by every business unit and should
    adapt these changes.
23. DEMOGRAPHIC ENVIRONMENT
    Demographic environment refers to the study of the features of population
    i.e. size of population, growth rate, gender ratio, age composition, income
    level, education level, family size, family structure etc. All these factors
    affect size of demand, tastes, fashion, liking, preferences of consumer etc.
24. NATURAL OR ECOLOGICAL ENVIRONMENT
    It includes geographical and ecological factors such as natural resources,
    weather and climatic conditions, port facilities, topographical factors such as
    soil, rivers, rainfall, pollution etc. Every business unit must look for these
    factors before choosing the location for their business.
25. INTERNATIONAL/ GLOBAL ENVIRONMENT
    International environment is important for industries directly depending on
    import and export. A recession in foreign market or protection policy by
    foreign nations may create difficulties for industries depending on exports.
    Liberalization of import may help some industries but may adversely affect
    other industries. Following factors of International environment affect
    business:
26. Globalization
27. Liberalization
28. International agreements and declarations
29. International terrorism
30. Cultural exchange
    SOCIAL RESPONSIBILITY OF BUSINESS
    Social Responsibility of Business can be defined as the obligation an
    organization’s management team has towards the interests and welfare of the
    society or community that provides it with resources and environment to not
    only survive but flourish.
    In other words, Social Responsibility is the way your company gives back to
    and takes care of the community it is located in and the greater society we are
    all a part of.
    “Conceptually social responsibility may be taken up to mean intelligent and
    objective concern for the welfare of the society.”
    K.R. Andrews
    “Social responsibility is the personal obligation of every one as he acts for
    his own interests to assure that the rights and legitimate interests of all other
    are not impinged.”
    Koontz and O’Donnel
    There are four dimensions of Corporate Responsibilities:
31. Economic: Responsibility to earn profit for
    owners
32. Legal: Responsibility to comply with
    laws
33. Ethical: Doing what is right, just and fair
34. Voluntary and Philanthropic: Promoting human welfare and
    goodwill. Being a good corporate citizen contributing to
    community and quality of life.
    RESPON SIBILITY O F BUSI N ESS TOWARDS VA R I O U S
    STAKEHOLDERS
    PHILANTHROPIC
    RESPONSIBILITY
    ETHICAL RESPONSIBILITY
    LEGAL
    RESPONSIBILITY
    ECONOMIC RESPONSIBILITY
    SHARE-

• HOLDERS
  COMMUNITY
  EMPLOYE
  ES
  GOVERN-
  -MENT
  SOCIAL
  RESPONSIBILITY
  OF BUSINESS
  CUSTOME
  RS
  CREDITO
  RS
  SUPPLIER
  S
  IMPORTANCE OF SOCIAL RESPONSIBILITY OF BUSINESS
  Social Responsibility of Business is important for organization and its
  stakeholders due to following reasons:

1. Increased productivity and quality
2. Reducing operating cost
3. Increased sales and customer loyalty
4. Reduced in corruption
5. Improved financial performance
6. Improved transparency and reporting
7. Reduced regulatory oversight
   Responsibility towards Shareholders
8. Shareholders are source of funds for the company. They expect
   maximization of the value of their investment in the company.
9. It is the duty of management to see that the financial position of
   the company is sound and the company always looks for
   growth.
10. The management should keep the shareholders well informed
    about the progress and financial position of the company.
11. The assets of the company are purchased with the funds
    provided by the shareholders. The management is
    responsible to safeguard these assets.
    Responsibility towards Workers
12. Every business should pay reasonable wages and salaries to its
    employees so that they may satisfy their needs and lead a good life.
13. Good working conditions are necessary to maintain the health of the
    workers. Since workers spend about 8 hours at work place, they
    must be provided with good working conditions.
14. Workers should be provided with adequate benefits such as
    housing and medical facilities, insurance cover and
    retirement benefits.
15. The management should recognize the workers’right to fair wages, to
    participate in decision
    affecting their working life, to form trade unions etc.
16. The workers should be helped by training and other means to improve
    their skills.
    Responsibility towards Customers
17. The management should produce goods which meet the needs of the
    consumers of different classes, tastes and with different purchasing
    power.
18. The management should make goods of right quality available to
    right peBUSINESS ENVIRONMENT
19. UNIT-1
20. CONTENT
21. Concept
22. Significance
23. Components of Business environment
24. Factor affecting Business Environment
25. Social Responsibilities of Business
    WHAT IS BUSINESS
    Business is an economic activity which is related with continuous production
    of good and services for satisfying human wants.
26. Exchange of goods/services
27. Deals in numerous transactions.
28. Profit is main objective.
29. Risk and uncertainties.
30. Buyer and seller.
31. Marketing and distribution of goods/services.
32. To satisfy human wants.
33. Social obligation
    Business does not function in isolation or in vacuum. It is affected by internal
    and external factors. These internal and external factors collectively
    constitute business environment. Internal environmental factors are within
    the control of business, whereas external factors are beyond the control of
    business.
    ‘Environment’ refers to the system in which human beings live and they have
    to adjust themselves according to it. So it is surroundings, external agents,
    influences or circumstances under which something exists.
    *Business Environment can be defined as the aggregate of all those
    forces, factors and institutions which directly affect the working of a
    business organization.
    Some of these constituents may be static, while others may be changing.
    “Business Environment is the aggregate of all conditions, events and
    influences that surround and affect the business.”
    Keith Davis“Business Environment encompasses the climate or set of
    conditions-economic, social, political or
    institutional in which business operations are conducted.”
    Prof. Weimer
    “The term Business Environment of a company is defined as the pattern of
    all external influences that
    affect its life and development.”
    Andrews
    “The total of all things external to firms and industries that affect the function
    of the organization is called business environment.”
    Wheeler
    *CHARACTERISTICS/NATURE OF BUSINESS ENVIRONMENT
    Business Environment is very complicated, dynamic and multi-dimensional
    and affects different business institutions in different ways. It exhibits many
    characteristics like:
34. Complex
    Environment comprises of many factors. All these factors are related to each
    other. Therefore, their individual effect on the business cannot be recognised.
    This is perhaps the reason which makes it difficult for the business to face
    them.
35. Dynamic
    As is clear that environment is a mixture of many factors and changes in
    some or the other factors continue to take place. Therefore, it is said that
    business environment is dynamic.
36. Uncertain
    Nothing can be said with any amount of certainty about the factors of the
    business environment because they continue to change quickly. The
    professional people who determine the business strategy take into
    consideration the likely changes beforehand.
37. *Multi-dimensional
    Business environment is related to the local conditions and this is the reason
    as to why the business environment happens to be different in different
    countries and different even in the same country at different places.
38. Interdependent components
    The different factors of business environment are co-related. For example,
    change in the import-export policy with the coming of a new government.
    In this case, the coming of new government to power and change in the
    import-export policy are political and economic changes respectively. Thus, a
    change in one factor affects the other factor.
    *IMPORTANCE/SIGNIFICANCE OF BUSINESS ENVIRONMENT:
    Business and its environment are closely inter-related and mutually
    interdependent. Environment has its bearing on business and business has its
    bearing on environment. The success of business lies in understanding the
    environmental changes and adapting its business policies accordingly.
    The surroundings of business enterprise which are constantly changing, carry
    with them both opportunities and risks or uncertainties which can make or
    mar the future of business. Significance of the study of environment in
    business sector may be explained as follows:
39. Early identification of opportunities helps a business organization to be the
    first to exploit them.
40. A business organization should make its policies keeping in view the
    demands of environment.
41. The study of business environment is important to ensure optimum
    utilization of resources like, financial resources, human resource and
    physical resource etc.
42. Environment analysis helps the business organizations to identify strengths
    and weaknesses.
43. Environment analysis helps the business organizations to identify
    threats and explore opportunities available to business.
44. Environment analysis helps in adapting latest technological
    development which results in improved efficiency.
45. Scanning the business environment helps to understand Political Situation
    and its effect on business.
46. Scanning the business environment helps to understand economic
    policies of Government and their impact on business.
47. Because of globalization, the impact of international events on business
    is increasing. To understand global events and their impact on business,
    study of international environment is must.
48. By environmental analysis, business organizations come to know about
    the strategies of competitors to formulate counter plans.
49. Environment analysis helps in understanding the market conditions
    i.e. change in demand/supply, change in fashion, taste, boom or
    depression etc.
    SCANNING BUSINESS ENVIRONMENT
    There is a close and continuous interaction between business and its
    environment. So it is essential to understand and scan the environment to
    ensure effective utilization of resources. SWOT analysis is an analysis
    undertaken by business firms to understand their external and internal
    environment.
    SWOT analysis is applied to formulate effective organizational strategies.
    Through SWOT analysis, the business firms can match Strengths and
    Weaknesses existing with an organization with the Opportunities and Threats
    existing in the external environment.
    COMPONENTS/TYPES/CONSTITUENTS/FACTORS OF BUSINESS
    ENVIRONMENT
    Every business faces two types of environments simultaneously i.e. Internal
    Environment and External Environment.
50. INTERNALENVIRONMENT
    All those factors within an organization which impart strengths or cause
    weaknesses constitute the internal environment. These factors can be
    controlled by business but they are quite important in shaping the behavior of
    people working in it. Hence, managers have to take internal factors into
    account while taking actions.
51. EXTERNALENVIRONMENT
    All those factors outside the organization which provide opportunities or pose
    a threat to the organization make up the external environment. These factors
    are those over which the business organization has no control.
    According to William Glueck and Jauck
    “In environment there are external factors, which constantly bring
    opportunities and threats to the business firm. In includes Economic, Social,
    Technological and Political conditions.”
    Examples of situations that may cause change in the external environment
    include:
    (i) Improvement in production techniques
    (ii) Fluctuations in the levels of demand
    (iii) Fluctuations in interest rates
    (iv) Changes in laws and regulations
    (v) Changes in taxation
    (vi) New social trends, fashions or life styles
    (vii) International influences
    TYPES OFEXTERNAL ENVIRONMENT
52. MICRO ENVIRONMENT
53. Micro environment consists of factors in the company’s immediate
54. environment that affect the performance of the company. These include the
55. suppliers, marketing intermediaries, competitors, customers and the public.
56. According to Philip Kotler
57. “The micro environment consists of factors in the company’s immediate
58. environment which affect the performance of the business unit. These include
59. suppliers, marketing intermediaries, competitors, customers and the public.”
60. According to Hill and Jones
61. “The micro environment of a company consists of elements that directly
62. affect the company such as
63. competitors, customers and suppliers.”
64. MICRO ENVIRONMENT
65. Suppliers
    Suppliers are important for any business unit. Suppliers are those who
    supply the inputs like raw material and components to the company.
    Organizations should keep two things in mind regarding suppliers:
    Reliability
    Multiple suppliers.
66. Customers or clients
    A business exist only because of its customers. Hence, a major task of a
    business is to create and sustain customers. Monitoring the customer’s
    sensitivity is a pre-requisite for business success.
    A company may have different types of customers
    (i) Individual and household customers
    (ii) Government bodies
    (iii) Foreign customers
    (iv) Retail customers
    (v) Wholesale customers
    To succeed in capturing and sustaining customers, following points must be
    kept in mind:
    (i) Buyer’s behaviour data can be used in constructing a customer profile.
    (ii) Geographical factors should also be analyzed to know the opportunities
    and threats.
    (iii) In the era of free trade, foreign customers can be attracted by
    making such products which can compete with foreign products.
    (iv) Single customer of a company is full of risks as it places the company
    in a poor bargaining position.
    (v) The business firm should make separate products for separate
    segments. Following can be the basis of segmentation:
    (a) Income level of customers
    (b) Age of customer
    (c) Personality and life style of customers
    (d) Tastes and preferences of customers
    (e) Quantity to be purchased by customers
    (f) Education level of customers
67. Competitors
    Competitor means other business units which are making similar products or
    a very close substitute of our product. Competitors play a vital role in running
    the business enterprise. Business has to adjust its various activities according
    to the behaviour of the competitors.
68. Market Intermediaries
    Every business enterprise may be assisted by market intermediaries which
    include agents, brokers who help the company find customers. It is a link
    between company and final consumer. Market intermediaries help the
    company to promote, sell and distribute its goods to final buyers.
    Examples:
    Wholesalers, retailers, advertising agencies, consultancy firms, banks,
    insurance companies, warehouse, transport agencies etc.
69. Public
    Public is any group that has actual or potential interest in the business. To
    achieve this interest, it has its impact on the business. Public includes users
    and non-users of the product like Environmentalists, NGOs, Local
    Community, Media.
    EXTERNAL ENVIRONMENT
    A company and the forces operate in a larger Macro environment that shape
    opportunities and pose threats to the company. These factors are generally
    more uncontrollable than the micro forces.
    According to Philip Kotler
    “Macro environment includes forces that create opportunities and pose threat
    to the business unit. It includes economic, demographic, natural,
    technological, political and cultural environments.”
    According to Hill and Jones
    “The macro environment consists of the broader economic, social, political,
    legal, demographic and technological setting within which the industry and
    the business units are placed.”
70. ECONOMIC ENVIRONMENT
    Economic environment consists of economic factors that influence the
    business in a country. It is very complex and dynamic in nature that keeps on
    changing with the change in policies or political situations.
    Key components of economic environment are:
    (A)Economic Conditions of Public
    (B)Economic Policies
    (C) Economic System
71. POLITICAL-LEGALENVIRONMENT
    Political environment affects different business units significantly. A stable
    and dynamic political environment is essential for business growth.
    Whenever there is a change in the Government in a democratic country, it is a
    sign of change in economic policies. The Political environment of business
    depends on:
72. Ideology of the Government
73. Political Establishment
74. Political Stability in the country
75. Relations with other countries
76. Defense and Military Policy
77. Centre State Relationship
78. Approach of Opposition parties towards business
    LEGAL ENVIRONMENT
    Legal environment constitutes the laws framed by the Government
    and various legislations passed in the parliament. The businessman
    cannot overlook the legislations because he has to perform his
    business transactions with in the framework of legal environment.
    Every aspect for business is regulated by law in India. Government
    has also framed legislations which regulate and control the business.
    Some of the main legislations regulating the business are as follows:
79. Industrial Dispute Act, 1947
80. Factories Act, 1948
81. Consumer Protection Act, 1986
82. Companies Act, 1956
83. Foreign Exchange Management Act 1999
84. Securities and Exchange Board of India Guidelines, 2000
85. SOCIAL & CULTURAL ENVIRONMENT
    Business is an integral part of society and both influence each other.
    Influence exercised by social and cultural factors is known as socio-cultural
    environment. These factors include: attitude of people, family system, caste
    system, religion, education, marriage, habits and preferences, languages,
    urbanization, customs and traditions, ethics etc.
86. TECHNOLOGICAL ENVIRONMENT
    A systematic application of scientific knowledge is known as technology.
    Everyday there are vast changes in products, services, lifestyles and living
    conditions, these changes must be analyzed by every business unit and should
    adapt these changes.
87. DEMOGRAPHIC ENVIRONMENT
    Demographic environment refers to the study of the features of population
    i.e. size of population, growth rate, gender ratio, age composition, income
    level, education level, family size, family structure etc. All these factors
    affect size of demand, tastes, fashion, liking, preferences of consumer etc.
88. NATURAL OR ECOLOGICAL ENVIRONMENT
    It includes geographical and ecological factors such as natural resources,
    weather and climatic conditions, port facilities, topographical factors such as
    soil, rivers, rainfall, pollution etc. Every business unit must look for these
    factors before choosing the location for their business.
89. INTERNATIONAL/ GLOBAL ENVIRONMENT
    International environment is important for industries directly depending on
    import and export. A recession in foreign market or protection policy by
    foreign nations may create difficulties for industries depending on exports.
    Liberalization of import may help some industries but may adversely affect
    other industries. Following factors of International environment affect
    business:
90. Globalization
91. Liberalization
92. International agreements and declarations
93. International terrorism
94. Cultural exchange
    SOCIAL RESPONSIBILITY OF BUSINESS
    Social Responsibility of Business can be defined as the obligation an
    organization’s management team has towards the interests and welfare of the
    society or community that provides it with resources and environment to not
    only survive but flourish.
    In other words, Social Responsibility is the way your company gives back to
    and takes care of the community it is located in and the greater society we are
    all a part of.
    “Conceptually social responsibility may be taken up to mean intelligent and
    objective concern for the welfare of the society.”
    K.R. Andrews
    “Social responsibility is the personal obligation of every one as he acts for
    his own interests to assure that the rights and legitimate interests of all other
    are not impinged.”
    Koontz and O’Donnel
    There are four dimensions of Corporate Responsibilities:
95. Economic: Responsibility to earn profit for
    owners
96. Legal: Responsibility to comply with
    laws
97. Ethical: Doing what is right, just and fair
98. Voluntary and Philanthropic: Promoting human welfare and
    goodwill. Being a good corporate citizen contributing to
    community and quality of life.
    RESPON SIBILITY O F BUSI N ESS TOWARDS VA R I O U S
    STAKEHOLDERS
    PHILANTHROPIC
    RESPONSIBILITY
    ETHICAL RESPONSIBILITY
    LEGAL
    RESPONSIBILITY
    ECONOMIC RESPONSIBILITY
    SHARE-
99. HOLDERS
    COMMUNITY
    EMPLOYE
    ES
    GOVERN-
    -MENT
    SOCIAL
    RESPONSIBILITY
    OF BUSINESS
    CUSTOME
    RS
    CREDITO
    RS
    SUPPLIER
    S
    IMPORTANCE OF SOCIAL RESPONSIBILITY OF BUSINESS
    Social Responsibility of Business is important for organization and its
    stakeholders due to following reasons:
100. Increased productivity and quality
101. Reducing operating cost
102. Increased sales and customer loyalty
103. Reduced in corruption
104. Improved financial performance
105. Improved transparency and reporting
106. Reduced regulatory oversight
     Responsibility towards Shareholders
107. Shareholders are source of funds for the company. They expect
     maximization of the value of their investment in the company.
108. It is the duty of management to see that the financial position of
     the company is sound and the company always looks for
     growth.
109. The management should keep the shareholders well informed
     about the progress and financial position of the company.
110. The assets of the company are purchased with the funds
     provided by the shareholders. The management is
     responsible to safeguard these assets.
     Responsibility towards Workers
111. Every business should pay reasonable wages and salaries to its
     employees so that they may satisfy their needs and lead a good life.
112. Good working conditions are necessary to maintain the health of the
     workers. Since workers spend about 8 hours at work place, they
     must be provided with good working conditions.
113. Workers should be provided with adequate benefits such as
     housing and medical facilities, insurance cover and
     retirement benefits.
114. The management should recognize the workers’right to fair wages, to
     participate in decision
     affecting their working life, to form trade unions etc.
115. The workers should be helped by training and other means to improve
     their skills.
     Responsibility towards Customers
116. The management should produce goods which meet the needs of the
     consumers of different classes, tastes and with different purchasing
     power.
117. The management should make goods of right quality available to
     right people at the right time and place at reasonable price.The
     management should provide a prompt, adequate and courteous
     service to customers and handle their grievances carefully.
118. The management should ensure that advertisement and statement
     issued by the business are true and fair.
119. The management should not indulge into unfair and unethical
     practice such as black marketing, hoarding, adulteration etc.
     Responsibility towards Suppliers
120. Giving regular orders for purchase of goods.
121. Dealing on fair terms and conditions.
122. Availing reasonable credit period.
123. Informing about the taste of consumers.
124. Timely payment of dues
125. Informing the suppliers for future development plans.
     Responsibility towards Creditors
126. Provide accurate information regarding financial health of the
     organization.
127. Fairness in transactions
128. Promote a healthy atmosphere where creditors, suppliers and
     other interest groups are treated as patterns in a co-operative
     endeavor.
     Responsibility towards Government
129. To abide by the laws of the nation
130. To pay government taxes honestly
131. To avoid corrupting government employees
132. To encourage fair trade practices.
     Responsibility towards Community
133. The management should not indulge in any practice which is not
     fair from social point of view. Society expects that the business
     uses the factors of production effectively and efficiently.
134. The management can develop the surrounding area for the well
     being of workers and general public. It should take preventive
     measures against water and air pollution and should contribute to
     community development activities.
135. It is the responsibility of management to help increase direct and
     indirect employment in the area where it is functioning.
136. The management should make best possible use of capital,
     raw material, machine, technical knowledge and other
     resources for the well-being of the society.BUSINESS ENVIRONMENT
137. UNIT-1
138. CONTENT
139. Concept
140. Significance
141. Components of Business environment
142. Factor affecting Business Environment
143. Social Responsibilities of Business
     WHAT IS BUSINESS
     Business is an economic activity which is related with continuous production
     of good and services for satisfying human wants.
144. Exchange of goods/services
145. Deals in numerous transactions.
146. Profit is main objective.
147. Risk and uncertainties.
148. Buyer and seller.
149. Marketing and distribution of goods/services.
150. To satisfy human wants.
151. Social obligation
     Business does not function in isolation or in vacuum. It is affected by internal
     and external factors. These internal and external factors collectively
     constitute business environment. Internal environmental factors are within
     the control of business, whereas external factors are beyond the control of
     business.
     ‘Environment’ refers to the system in which human beings live and they have
     to adjust themselves according to it. So it is surroundings, external agents,
     influences or circumstances under which something exists.
     *Business Environment can be defined as the aggregate of all those
     forces, factors and institutions which directly affect the working of a
     business organization.
     Some of these constituents may be static, while others may be changing.
     “Business Environment is the aggregate of all conditions, events and
     influences that surround and affect the business.”
     Keith Davis“Business Environment encompasses the climate or set of
     conditions-economic, social, political or
     institutional in which business operations are conducted.”
     Prof. Weimer
     “The term Business Environment of a company is defined as the pattern of
     all external influences that
     affect its life and development.”
     Andrews
     “The total of all things external to firms and industries that affect the function
     of the organization is called business environment.”
     Wheeler
     *CHARACTERISTICS/NATURE OF BUSINESS ENVIRONMENT
     Business Environment is very complicated, dynamic and multi-dimensional
     and affects different business institutions in different ways. It exhibits many
     characteristics like:
152. Complex
     Environment comprises of many factors. All these factors are related to each
     other. Therefore, their individual effect on the business cannot be recognised.
     This is perhaps the reason which makes it difficult for the business to face
     them.
153. Dynamic
     As is clear that environment is a mixture of many factors and changes in
     some or the other factors continue to take place. Therefore, it is said that
     business environment is dynamic.
154. Uncertain
     Nothing can be said with any amount of certainty about the factors of the
     business environment because they continue to change quickly. The
     professional people who determine the business strategy take into
     consideration the likely changes beforehand.
155. *Multi-dimensional
     Business environment is related to the local conditions and this is the reason
     as to why the business environment happens to be different in different
     countries and different even in the same country at different places.
156. Interdependent components
     The different factors of business environment are co-related. For example,
     change in the import-export policy with the coming of a new government.
     In this case, the coming of new government to power and change in the
     import-export policy are political and economic changes respectively. Thus, a
     change in one factor affects the other factor.
     *IMPORTANCE/SIGNIFICANCE OF BUSINESS ENVIRONMENT:
     Business and its environment are closely inter-related and mutually
     interdependent. Environment has its bearing on business and business has its
     bearing on environment. The success of business lies in understanding the
     environmental changes and adapting its business policies accordingly.
     The surroundings of business enterprise which are constantly changing, carry
     with them both opportunities and risks or uncertainties which can make or
     mar the future of business. Significance of the study of environment in
     business sector may be explained as follows:
157. Early identification of opportunities helps a business organization to be the
     first to exploit them.
158. A business organization should make its policies keeping in view the
     demands of environment.
159. The study of business environment is important to ensure optimum
     utilization of resources like, financial resources, human resource and
     physical resource etc.
160. Environment analysis helps the business organizations to identify strengths
     and weaknesses.
161. Environment analysis helps the business organizations to identify
     threats and explore opportunities available to business.
162. Environment analysis helps in adapting latest technological
     development which results in improved efficiency.
163. Scanning the business environment helps to understand Political Situation
     and its effect on business.
164. Scanning the business environment helps to understand economic
     policies of Government and their impact on business.
165. Because of globalization, the impact of international events on business
     is increasing. To understand global events and their impact on business,
     study of international environment is must.
166. By environmental analysis, business organizations come to know about
     the strategies of competitors to formulate counter plans.
167. Environment analysis helps in understanding the market conditions
     i.e. change in demand/supply, change in fashion, taste, boom or
     depression etc.
     SCANNING BUSINESS ENVIRONMENT
     There is a close and continuous interaction between business and its
     environment. So it is essential to understand and scan the environment to
     ensure effective utilization of resources. SWOT analysis is an analysis
     undertaken by business firms to understand their external and internal
     environment.
     SWOT analysis is applied to formulate effective organizational strategies.
     Through SWOT analysis, the business firms can match Strengths and
     Weaknesses existing with an organization with the Opportunities and Threats
     existing in the external environment.
     COMPONENTS/TYPES/CONSTITUENTS/FACTORS OF BUSINESS
     ENVIRONMENT
     Every business faces two types of environments simultaneously i.e. Internal
     Environment and External Environment.
168. INTERNALENVIRONMENT
     All those factors within an organization which impart strengths or cause
     weaknesses constitute the internal environment. These factors can be
     controlled by business but they are quite important in shaping the behavior of
     people working in it. Hence, managers have to take internal factors into
     account while taking actions.
169. EXTERNALENVIRONMENT
     All those factors outside the organization which provide opportunities or pose
     a threat to the organization make up the external environment. These factors
     are those over which the business organization has no control.
     According to William Glueck and Jauck
     “In environment there are external factors, which constantly bring
     opportunities and threats to the business firm. In includes Economic, Social,
     Technological and Political conditions.”
     Examples of situations that may cause change in the external environment
     include:
     (i) Improvement in production techniques
     (ii) Fluctuations in the levels of demand
     (iii) Fluctuations in interest rates
     (iv) Changes in laws and regulations
     (v) Changes in taxation
     (vi) New social trends, fashions or life styles
     (vii) International influences
     TYPES OFEXTERNAL ENVIRONMENT
170. MICRO ENVIRONMENT
171. Micro environment consists of factors in the company’s immediate
172. environment that affect the performance of the company. These include the
173. suppliers, marketing intermediaries, competitors, customers and the public.
174. According to Philip Kotler
175. “The micro environment consists of factors in the company’s immediate
176. environment which affect the performance of the business unit. These include
177. suppliers, marketing intermediaries, competitors, customers and the public.”
178. According to Hill and Jones
179. “The micro environment of a company consists of elements that directly
180. affect the company such as
181. competitors, customers and suppliers.”
182. MICRO ENVIRONMENT
183. Suppliers
     Suppliers are important for any business unit. Suppliers are those who
     supply the inputs like raw material and components to the company.
     Organizations should keep two things in mind regarding suppliers:
     Reliability
     Multiple suppliers.
184. Customers or clients
     A business exist only because of its customers. Hence, a major task of a
     business is to create and sustain customers. Monitoring the customer’s
     sensitivity is a pre-requisite for business success.
     A company may have different types of customers
     (i) Individual and household customers
     (ii) Government bodies
     (iii) Foreign customers
     (iv) Retail customers
     (v) Wholesale customers
     To succeed in capturing and sustaining customers, following points must be
     kept in mind:
     (i) Buyer’s behaviour data can be used in constructing a customer profile.
     (ii) Geographical factors should also be analyzed to know the opportunities
     and threats.
     (iii) In the era of free trade, foreign customers can be attracted by
     making such products which can compete with foreign products.
     (iv) Single customer of a company is full of risks as it places the company
     in a poor bargaining position.
     (v) The business firm should make separate products for separate
     segments. Following can be the basis of segmentation:
     (a) Income level of customers
     (b) Age of customer
     (c) Personality and life style of customers
     (d) Tastes and preferences of customers
     (e) Quantity to be purchased by customers
     (f) Education level of customers
185. Competitors
     Competitor means other business units which are making similar products or
     a very close substitute of our product. Competitors play a vital role in running
     the business enterprise. Business has to adjust its various activities according
     to the behaviour of the competitors.
186. Market Intermediaries
     Every business enterprise may be assisted by market intermediaries which
     include agents, brokers who help the company find customers. It is a link
     between company and final consumer. Market intermediaries help the
     company to promote, sell and distribute its goods to final buyers.
     Examples:
     Wholesalers, retailers, advertising agencies, consultancy firms, banks,
     insurance companies, warehouse, transport agencies etc.
187. Public
     Public is any group that has actual or potential interest in the business. To
     achieve this interest, it has its impact on the business. Public includes users
     and non-users of the product like Environmentalists, NGOs, Local
     Community, Media.
     EXTERNAL ENVIRONMENT
     A company and the forces operate in a larger Macro environment that shape
     opportunities and pose threats to the company. These factors are generally
     more uncontrollable than the micro forces.
     According to Philip Kotler
     “Macro environment includes forces that create opportunities and pose threat
     to the business unit. It includes economic, demographic, natural,
     technological, political and cultural environments.”
     According to Hill and Jones
     “The macro environment consists of the broader economic, social, political,
     legal, demographic and technological setting within which the industry and
     the business units are placed.”
188. ECONOMIC ENVIRONMENT
     Economic environment consists of economic factors that influence the
     business in a country. It is very complex and dynamic in nature that keeps on
     changing with the change in policies or political situations.
     Key components of economic environment are:
     (A)Economic Conditions of Public
     (B)Economic Policies
     (C) Economic System
189. POLITICAL-LEGALENVIRONMENT
     Political environment affects different business units significantly. A stable
     and dynamic political environment is essential for business growth.
     Whenever there is a change in the Government in a democratic country, it is a
     sign of change in economic policies. The Political environment of business
     depends on:
190. Ideology of the Government
191. Political Establishment
192. Political Stability in the country
193. Relations with other countries
194. Defense and Military Policy
195. Centre State Relationship
196. Approach of Opposition parties towards business
     LEGAL ENVIRONMENT
     Legal environment constitutes the laws framed by the Government
     and various legislations passed in the parliament. The businessman
     cannot overlook the legislations because he has to perform his
     business transactions with in the framework of legal environment.
     Every aspect for business is regulated by law in India. Government
     has also framed legislations which regulate and control the business.
     Some of the main legislations regulating the business are as follows:
197. Industrial Dispute Act, 1947
198. Factories Act, 1948
199. Consumer Protection Act, 1986
200. Companies Act, 1956
201. Foreign Exchange Management Act 1999
202. Securities and Exchange Board of India Guidelines, 2000
203. SOCIAL & CULTURAL ENVIRONMENT
     Business is an integral part of society and both influence each other.
     Influence exercised by social and cultural factors is known as socio-cultural
     environment. These factors include: attitude of people, family system, caste
     system, religion, education, marriage, habits and preferences, languages,
     urbanization, customs and traditions, ethics etc.
204. TECHNOLOGICAL ENVIRONMENT
     A systematic application of scientific knowledge is known as technology.
     Everyday there are vast changes in products, services, lifestyles and living
     conditions, these changes must be analyzed by every business unit and should
     adapt these changes.
205. DEMOGRAPHIC ENVIRONMENT
     Demographic environment refers to the study of the features of population
     i.e. size of population, growth rate, gender ratio, age composition, income
     level, education level, family size, family structure etc. All these factors
     affect size of demand, tastes, fashion, liking, preferences of consumer etc.
206. NATURAL OR ECOLOGICAL ENVIRONMENT
     It includes geographical and ecological factors such as natural resources,
     weather and climatic conditions, port facilities, topographical factors such as
     soil, rivers, rainfall, pollution etc. Every business unit must look for these
     factors before choosing the location for their business.
207. INTERNATIONAL/ GLOBAL ENVIRONMENT
     International environment is important for industries directly depending on
     import and export. A recession in foreign market or protection policy by
     foreign nations may create difficulties for industries depending on exports.
     Liberalization of import may help some industries but may adversely affect
     other industries. Following factors of International environment affect
     business:
208. Globalization
209. Liberalization
210. International agreements and declarations
211. International terrorism
212. Cultural exchange
     SOCIAL RESPONSIBILITY OF BUSINESS
     Social Responsibility of Business can be defined as the obligation an
     organization’s management team has towards the interests and welfare of the
     society or community that provides it with resources and environment to not
     only survive but flourish.
     In other words, Social Responsibility is the way your company gives back to
     and takes care of the community it is located in and the greater society we are
     all a part of.
     “Conceptually social responsibility may be taken up to mean intelligent and
     objective concern for the welfare of the society.”
     K.R. Andrews
     “Social responsibility is the personal obligation of every one as he acts for
     his own interests to assure that the rights and legitimate interests of all other
     are not impinged.”
     Koontz and O’Donnel
     There are four dimensions of Corporate Responsibilities:
213. Economic: Responsibility to earn profit for
     owners
214. Legal: Responsibility to comply with
     laws
215. Ethical: Doing what is right, just and fair
216. Voluntary and Philanthropic: Promoting human welfare and
     goodwill. Being a good corporate citizen contributing to
     community and quality of life.
     RESPON SIBILITY O F BUSI N ESS TOWARDS VA R I O U S
     STAKEHOLDERS
     PHILANTHROPIC
     RESPONSIBILITY
     ETHICAL RESPONSIBILITY
     LEGAL
     RESPONSIBILITY
     ECONOMIC RESPONSIBILITY
     SHARE-
217. HOLDERS
     COMMUNITY
     EMPLOYE
     ES
     GOVERN-
     -MENT
     SOCIAL
     RESPONSIBILITY
     OF BUSINESS
     CUSTOME
     RS
     CREDITO
     RS
     SUPPLIER
     S
     IMPORTANCE OF SOCIAL RESPONSIBILITY OF BUSINESS
     Social Responsibility of Business is important for organization and its
     stakeholders due to following reasons:
218. Increased productivity and quality
219. Reducing operating cost
220. Increased sales and customer loyalty
221. Reduced in corruption
222. Improved financial performance
223. Improved transparency and reporting
224. Reduced regulatory oversight
     Responsibility towards Shareholders
225. Shareholders are source of funds for the company. They expect
     maximization of the value of their investment in the company.
226. It is the duty of management to see that the financial position of
     the company is sound and the company always looks for
     growth.
227. The management should keep the shareholders well informed
     about the progress and financial position of the company.
228. The assets of the company are purchased with the funds
     provided by the shareholders. The management is
     responsible to safeguard these assets.
     Responsibility towards Workers
229. Every business should pay reasonable wages and salaries to its
     employees so that they may satisfy their needs and lead a good life.
230. Good working conditions are necessary to maintain the health of the
     workers. Since workers spend about 8 hours at work place, they
     must be provided with good working conditions.
231. Workers should be provided with adequate benefits such as
     housing and medical facilities, insurance cover and
     retirement benefits.
232. The management should recognize the workers’right to fair wages, to
     participate in decision
     affecting their working life, to form trade unions etc.
233. The workers should be helped by training and other means to improve
     their skills.
     Responsibility towards Customers
234. The management should produce goods which meet the needs of the
     consumers of different classes, tastes and with different purchasing
     power.
235. The management should make goods of right quality available to
     right people at the right time and place at reasonable price.The
     management should provide a prompt, adequate and courteous
     service to customers and handle their grievances carefully.
236. The management should ensure that advertisement and statement
     issued by the business are true and fair.
237. The management should not indulge into unfair and unethical
     practice such as black marketing, hoarding, adulteration etc.
     Responsibility towards Suppliers
238. Giving regular orders for purchase of goods.
239. Dealing on fair terms and conditions.
240. Availing reasonable credit period.
241. Informing about the taste of consumers.
242. Timely payment of dues
243. Informing the suppliers for future development plans.
     Responsibility towards Creditors
244. Provide accurate information regarding financial health of the
     organization.
245. Fairness in transactions
246. Promote a healthy atmosphere where creditors, suppliers and
     other interest groups are treated as patterns in a co-operative
     endeavor.
     Responsibility towards Government
247. To abide by the laws of the nation
248. To pay government taxes honestly
249. To avoid corrupting government employees
250. To encourage fair trade practices.
     Responsibility towards Community
251. The management should not indulge in any practice which is not
     fair from social point of view. Society expects that the business
     uses the factors of production effectively and efficiently.
252. The management can develop the surrounding area for the well
     being of workers and general public. It should take preventive
     measures against water and air pollution and should contribute to
     community development activities.
253. It is the responsibility of management to help increase direct and
     indirect employment in the area where it is functioning.
254. The management should make best possible use of capital,
     raw material, machine, technical knowledge and other
     resources for the well-being of the society.BUSINESS ENVIRONMENT
255. UNIT-1
256. CONTENT
257. Concept
258. Significance
259. Components of Business environment
260. Factor affecting Business Environment
261. Social Responsibilities of Business
     WHAT IS BUSINESS
     Business is an economic activity which is related with continuous production
     of good and services for satisfying human wants.
262. Exchange of goods/services
263. Deals in numerous transactions.
264. Profit is main objective.
265. Risk and uncertainties.
266. Buyer and seller.
267. Marketing and distribution of goods/services.
268. To satisfy human wants.
269. Social obligation
     Business does not function in isolation or in vacuum. It is affected by internal
     and external factors. These internal and external factors collectively
     constitute business environment. Internal environmental factors are within
     the control of business, whereas external factors are beyond the control of
     business.
     ‘Environment’ refers to the system in which human beings live and they have
     to adjust themselves according to it. So it is surroundings, external agents,
     influences or circumstances under which something exists.
     *Business Environment can be defined as the aggregate of all those
     forces, factors and institutions which directly affect the working of a
     business organization.
     Some of these constituents may be static, while others may be changing.
     “Business Environment is the aggregate of all conditions, events and
     influences that surround and affect the business.”
     Keith Davis“Business Environment encompasses the climate or set of
     conditions-economic, social, political or
     institutional in which business operations are conducted.”
     Prof. Weimer
     “The term Business Environment of a company is defined as the pattern of
     all external influences that
     affect its life and development.”
     Andrews
     “The total of all things external to firms and industries that affect the function
     of the organization is called business environment.”
     Wheeler
     *CHARACTERISTICS/NATURE OF BUSINESS ENVIRONMENT
     Business Environment is very complicated, dynamic and multi-dimensional
     and affects different business institutions in different ways. It exhibits many
     characteristics like:
270. Complex
     Environment comprises of many factors. All these factors are related to each
     other. Therefore, their individual effect on the business cannot be recognised.
     This is perhaps the reason which makes it difficult for the business to face
     them.
271. Dynamic
     As is clear that environment is a mixture of many factors and changes in
     some or the other factors continue to take place. Therefore, it is said that
     business environment is dynamic.
272. Uncertain
     Nothing can be said with any amount of certainty about the factors of the
     business environment because they continue to change quickly. The
     professional people who determine the business strategy take into
     consideration the likely changes beforehand.
273. *Multi-dimensional
     Business environment is related to the local conditions and this is the reason
     as to why the business environment happens to be different in different
     countries and different even in the same country at different places.
274. Interdependent components
     The different factors of business environment are co-related. For example,
     change in the import-export policy with the coming of a new government.
     In this case, the coming of new government to power and change in the
     import-export policy are political and economic changes respectively. Thus, a
     change in one factor affects the other factor.
     *IMPORTANCE/SIGNIFICANCE OF BUSINESS ENVIRONMENT:
     Business and its environment are closely inter-related and mutually
     interdependent. Environment has its bearing on business and business has its
     bearing on environment. The success of business lies in understanding the
     environmental changes and adapting its business policies accordingly.
     The surroundings of business enterprise which are constantly changing, carry
     with them both opportunities and risks or uncertainties which can make or
     mar the future of business. Significance of the study of environment in
     business sector may be explained as follows:
275. Early identification of opportunities helps a business organization to be the
     first to exploit them.
276. A business organization should make its policies keeping in view the
     demands of environment.
277. The study of business environment is important to ensure optimum
     utilization of resources like, financial resources, human resource and
     physical resource etc.
278. Environment analysis helps the business organizations to identify strengths
     and weaknesses.
279. Environment analysis helps the business organizations to identify
     threats and explore opportunities available to business.
280. Environment analysis helps in adapting latest technological
     development which results in improved efficiency.
281. Scanning the business environment helps to understand Political Situation
     and its effect on business.
282. Scanning the business environment helps to understand economic
     policies of Government and their impact on business.
283. Because of globalization, the impact of international events on business
     is increasing. To understand global events and their impact on business,
     study of international environment is must.
284. By environmental analysis, business organizations come to know about
     the strategies of competitors to formulate counter plans.
285. Environment analysis helps in understanding the market conditions
     i.e. change in demand/supply, change in fashion, taste, boom or
     depression etc.
     SCANNING BUSINESS ENVIRONMENT
     There is a close and continuous interaction between business and its
     environment. So it is essential to understand and scan the environment to
     ensure effective utilization of resources. SWOT analysis is an analysis
     undertaken by business firms to understand their external and internal
     environment.
     SWOT analysis is applied to formulate effective organizational strategies.
     Through SWOT analysis, the business firms can match Strengths and
     Weaknesses existing with an organization with the Opportunities and Threats
     existing in the external environment.
     COMPONENTS/TYPES/CONSTITUENTS/FACTORS OF BUSINESS
     ENVIRONMENT
     Every business faces two types of environments simultaneously i.e. Internal
     Environment and External Environment.
286. INTERNALENVIRONMENT
     All those factors within an organization which impart strengths or cause
     weaknesses constitute the internal environment. These factors can be
     controlled by business but they are quite important in shaping the behavior of
     people working in it. Hence, managers have to take internal factors into
     account while taking actions.
287. EXTERNALENVIRONMENT
     All those factors outside the organization which provide opportunities or pose
     a threat to the organization make up the external environment. These factors
     are those over which the business organization has no control.
     According to William Glueck and Jauck
     “In environment there are external factors, which constantly bring
     opportunities and threats to the business firm. In includes Economic, Social,
     Technological and Political conditions.”
     Examples of situations that may cause change in the external environment
     include:
     (i) Improvement in production techniques
     (ii) Fluctuations in the levels of demand
     (iii) Fluctuations in interest rates
     (iv) Changes in laws and regulations
     (v) Changes in taxation
     (vi) New social trends, fashions or life styles
     (vii) International influences
     TYPES OFEXTERNAL ENVIRONMENT
288. MICRO ENVIRONMENT
289. Micro environment consists of factors in the company’s immediate
290. environment that affect the performance of the company. These include the
291. suppliers, marketing intermediaries, competitors, customers and the public.
292. According to Philip Kotler
293. “The micro environment consists of factors in the company’s immediate
294. environment which affect the performance of the business unit. These include
295. suppliers, marketing intermediaries, competitors, customers and the public.”
296. According to Hill and Jones
297. “The micro environment of a company consists of elements that directly
298. affect the company such as
299. competitors, customers and suppliers.”
300. MICRO ENVIRONMENT
301. Suppliers
     Suppliers are important for any business unit. Suppliers are those who
     supply the inputs like raw material and components to the company.
     Organizations should keep two things in mind regarding suppliers:
     Reliability
     Multiple suppliers.
302. Customers or clients
     A business exist only because of its customers. Hence, a major task of a
     business is to create and sustain customers. Monitoring the customer’s
     sensitivity is a pre-requisite for business success.
     A company may have different types of customers
     (i) Individual and household customers
     (ii) Government bodies
     (iii) Foreign customers
     (iv) Retail customers
     (v) Wholesale customers
     To succeed in capturing and sustaining customers, following points must be
     kept in mind:
     (i) Buyer’s behaviour data can be used in constructing a customer profile.
     (ii) Geographical factors should also be analyzed to know the opportunities
     and threats.
     (iii) In the era of free trade, foreign customers can be attracted by
     making such products which can compete with foreign products.
     (iv) Single customer of a company is full of risks as it places the company
     in a poor bargaining position.
     (v) The business firm should make separate products for separate
     segments. Following can be the basis of segmentation:
     (a) Income level of customers
     (b) Age of customer
     (c) Personality and life style of customers
     (d) Tastes and preferences of customers
     (e) Quantity to be purchased by customers
     (f) Education level of customers
303. Competitors
     Competitor means other business units which are making similar products or
     a very close substitute of our product. Competitors play a vital role in running
     the business enterprise. Business has to adjust its various activities according
     to the behaviour of the competitors.
304. Market Intermediaries
     Every business enterprise may be assisted by market intermediaries which
     include agents, brokers who help the company find customers. It is a link
     between company and final consumer. Market intermediaries help the
     company to promote, sell and distribute its goods to final buyers.
     Examples:
     Wholesalers, retailers, advertising agencies, consultancy firms, banks,
     insurance companies, warehouse, transport agencies etc.
305. Public
     Public is any group that has actual or potential interest in the business. To
     achieve this interest, it has its impact on the business. Public includes users
     and non-users of the product like Environmentalists, NGOs, Local
     Community, Media.
     EXTERNAL ENVIRONMENT
     A company and the forces operate in a larger Macro environment that shape
     opportunities and pose threats to the company. These factors are generally
     more uncontrollable than the micro forces.
     According to Philip Kotler
     “Macro environment includes forces that create opportunities and pose threat
     to the business unit. It includes economic, demographic, natural,
     technological, political and cultural environments.”
     According to Hill and Jones
     “The macro environment consists of the broader economic, social, political,
     legal, demographic and technological setting within which the industry and
     the business units are placed.”
306. ECONOMIC ENVIRONMENT
     Economic environment consists of economic factors that influence the
     business in a country. It is very complex and dynamic in nature that keeps on
     changing with the change in policies or political situations.
     Key components of economic environment are:
     (A)Economic Conditions of Public
     (B)Economic Policies
     (C) Economic System
307. POLITICAL-LEGALENVIRONMENT
     Political environment affects different business units significantly. A stable
     and dynamic political environment is essential for business growth.
     Whenever there is a change in the Government in a democratic country, it is a
     sign of change in economic policies. The Political environment of business
     depends on:
308. Ideology of the Government
309. Political Establishment
310. Political Stability in the country
311. Relations with other countries
312. Defense and Military Policy
313. Centre State Relationship
314. Approach of Opposition parties towards business
     LEGAL ENVIRONMENT
     Legal environment constitutes the laws framed by the Government
     and various legislations passed in the parliament. The businessman
     cannot overlook the legislations because he has to perform his
     business transactions with in the framework of legal environment.
     Every aspect for business is regulated by law in India. Government
     has also framed legislations which regulate and control the business.
     Some of the main legislations regulating the business are as follows:
315. Industrial Dispute Act, 1947
316. Factories Act, 1948
317. Consumer Protection Act, 1986
318. Companies Act, 1956
319. Foreign Exchange Management Act 1999
320. Securities and Exchange Board of India Guidelines, 2000
321. SOCIAL & CULTURAL ENVIRONMENT
     Business is an integral part of society and both influence each other.
     Influence exercised by social and cultural factors is known as socio-cultural
     environment. These factors include: attitude of people, family system, caste
     system, religion, education, marriage, habits and preferences, languages,
     urbanization, customs and traditions, ethics etc.
322. TECHNOLOGICAL ENVIRONMENT
     A systematic application of scientific knowledge is known as technology.
     Everyday there are vast changes in products, services, lifestyles and living
     conditions, these changes must be analyzed by every business unit and should
     adapt these changes.
323. DEMOGRAPHIC ENVIRONMENT
     Demographic environment refers to the study of the features of population
     i.e. size of population, growth rate, gender ratio, age composition, income
     level, education level, family size, family structure etc. All these factors
     affect size of demand, tastes, fashion, liking, preferences of consumer etc.
324. NATURAL OR ECOLOGICAL ENVIRONMENT
     It includes geographical and ecological factors such as natural resources,
     weather and climatic conditions, port facilities, topographical factors such as
     soil, rivers, rainfall, pollution etc. Every business unit must look for these
     factors before choosing the location for their business.
325. INTERNATIONAL/ GLOBAL ENVIRONMENT
     International environment is important for industries directly depending on
     import and export. A recession in foreign market or protection policy by
     foreign nations may create difficulties for industries depending on exports.
     Liberalization of import may help some industries but may adversely affect
     other industries. Following factors of International environment affect
     business:
326. Globalization
327. Liberalization
328. International agreements and declarations
329. International terrorism
330. Cultural exchange
     SOCIAL RESPONSIBILITY OF BUSINESS
     Social Responsibility of Business can be defined as the obligation an
     organization’s management team has towards the interests and welfare of the
     society or community that provides it with resources and environment to not
     only survive but flourish.
     In other words, Social Responsibility is the way your company gives back to
     and takes care of the community it is located in and the greater society we are
     all a part of.
     “Conceptually social responsibility may be taken up to mean intelligent and
     objective concern for the welfare of the society.”
     K.R. Andrews
     “Social responsibility is the personal obligation of every one as he acts for
     his own interests to assure that the rights and legitimate interests of all other
     are not impinged.”
     Koontz and O’Donnel
     There are four dimensions of Corporate Responsibilities:
331. Economic: Responsibility to earn profit for
     owners
332. Legal: Responsibility to comply with
     laws
333. Ethical: Doing what is right, just and fair
334. Voluntary and Philanthropic: Promoting human welfare and
     goodwill. Being a good corporate citizen contributing to
     community and quality of life.
     RESPON SIBILITY O F BUSI N ESS TOWARDS VA R I O U S
     STAKEHOLDERS
     PHILANTHROPIC
     RESPONSIBILITY
     ETHICAL RESPONSIBILITY
     LEGAL
     RESPONSIBILITY
     ECONOMIC RESPONSIBILITY
     SHARE-
335. HOLDERS
     COMMUNITY
     EMPLOYE
     ES
     GOVERN-
     -MENT
     SOCIAL
     RESPONSIBILITY
     OF BUSINESS
     CUSTOME
     RS
     CREDITO
     RS
     SUPPLIER
     S
     IMPORTANCE OF SOCIAL RESPONSIBILITY OF BUSINESS
     Social Responsibility of Business is important for organization and its
     stakeholders due to following reasons:
336. Increased productivity and quality
337. Reducing operating cost
338. Increased sales and customer loyalty
339. Reduced in corruption
340. Improved financial performance
341. Improved transparency and reporting
342. Reduced regulatory oversight
     Responsibility towards Shareholders
343. Shareholders are source of funds for the company. They expect
     maximization of the value of their investment in the company.
344. It is the duty of management to see that the financial position of
     the company is sound and the company always looks for
     growth.
345. The management should keep the shareholders well informed
     about the progress and financial position of the company.
346. The assets of the company are purchased with the funds
     provided by the shareholders. The management is
     responsible to safeguard these assets.
     Responsibility towards Workers
347. Every business should pay reasonable wages and salaries to its
     employees so that they may satisfy their needs and lead a good life.
348. Good working conditions are necessary to maintain the health of the
     workers. Since workers spend about 8 hours at work place, they
     must be provided with good working conditions.
349. Workers should be provided with adequate benefits such as
     housing and medical facilities, insurance cover and
     retirement benefits.
350. The management should recognize the workers’right to fair wages, to
     participate in decision
     affecting their working life, to form trade unions etc.
351. The workers should be helped by training and other means to improve
     their skills.
     Responsibility towards Customers
352. The management should produce goods which meet the needs of the
     consumers of different classes, tastes and with different purchasing
     power.
353. The management should make goods of right quality available to
     right people at the right time and place at reasonable price.The
     management should provide a prompt, adequate and courteous
     service to customers and handle their grievances carefully.
354. The management should ensure that advertisement and statement
     issued by the business are true and fair.
355. The management should not indulge into unfair and unethical
     practice such as black marketing, hoarding, adulteration etc.
     Responsibility towards Suppliers
356. Giving regular orders for purchase of goods.
357. Dealing on fair terms and conditions.
358. Availing reasonable credit period.
359. Informing about the taste of consumers.
360. Timely payment of dues
361. Informing the suppliers for future development plans.
     Responsibility towards Creditors
362. Provide accurate information regarding financial health of the
     organization.
363. Fairness in transactions
364. Promote a healthy atmosphere where creditors, suppliers and
     other interest groups are treated as patterns in a co-operative
     endeavor.
     Responsibility towards Government
365. To abide by the laws of the nation
366. To pay government taxes honestly
367. To avoid corrupting government employees
368. To encourage fair trade practices.
     Responsibility towards Community
369. The management should not indulge in any practice which is not
     fair from social point of view. Society expects that the business
     uses the factors of production effectively and efficiently.
370. The management can develop the surrounding area for the well
     being of workers and general public. It should take preventive
     measures against water and air pollution and should contribute to
     community development activities.
371. It is the responsibility of management to help increase direct and
     indirect employment in the area where it is functioning.
372. The management should make best possible use of capital,
     raw material, machine, technical knowledge and other
     resources for the well-being of the society.BUSINESS ENVIRONMENT
373. UNIT-1
374. CONTENT
375. Concept
376. Significance
377. Components of Business environment
378. Factor affecting Business Environment
379. Social Responsibilities of Business
     WHAT IS BUSINESS
     Business is an economic activity which is related with continuous production
     of good and services for satisfying human wants.
380. Exchange of goods/services
381. Deals in numerous transactions.
382. Profit is main objective.
383. Risk and uncertainties.
384. Buyer and seller.
385. Marketing and distribution of goods/services.
386. To satisfy human wants.
387. Social obligation
     Business does not function in isolation or in vacuum. It is affected by internal
     and external factors. These internal and external factors collectively
     constitute business environment. Internal environmental factors are within
     the control of business, whereas external factors are beyond the control of
     business.
     ‘Environment’ refers to the system in which human beings live and they have
     to adjust themselves according to it. So it is surroundings, external agents,
     influences or circumstances under which something exists.
     *Business Environment can be defined as the aggregate of all those
     forces, factors and institutions which directly affect the working of a
     business organization.
     Some of these constituents may be static, while others may be changing.
     “Business Environment is the aggregate of all conditions, events and
     influences that surround and affect the business.”
     Keith Davis“Business Environment encompasses the climate or set of
     conditions-economic, social, political or
     institutional in which business operations are conducted.”
     Prof. Weimer
     “The term Business Environment of a company is defined as the pattern of
     all external influences that
     affect its life and development.”
     Andrews
     “The total of all things external to firms and industries that affect the function
     of the organization is called business environment.”
     Wheeler
     *CHARACTERISTICS/NATURE OF BUSINESS ENVIRONMENT
     Business Environment is very complicated, dynamic and multi-dimensional
     and affects different business institutions in different ways. It exhibits many
     characteristics like:
388. Complex
     Environment comprises of many factors. All these factors are related to each
     other. Therefore, their individual effect on the business cannot be recognised.
     This is perhaps the reason which makes it difficult for the business to face
     them.
389. Dynamic
     As is clear that environment is a mixture of many factors and changes in
     some or the other factors continue to take place. Therefore, it is said that
     business environment is dynamic.
390. Uncertain
     Nothing can be said with any amount of certainty about the factors of the
     business environment because they continue to change quickly. The
     professional people who determine the business strategy take into
     consideration the likely changes beforehand.
391. *Multi-dimensional
     Business environment is related to the local conditions and this is the reason
     as to why the business environment happens to be different in different
     countries and different even in the same country at different places.
392. Interdependent components
     The different factors of business environment are co-related. For example,
     change in the import-export policy with the coming of a new government.
     In this case, the coming of new government to power and change in the
     import-export policy are political and economic changes respectively. Thus, a
     change in one factor affects the other factor.
     *IMPORTANCE/SIGNIFICANCE OF BUSINESS ENVIRONMENT:
     Business and its environment are closely inter-related and mutually
     interdependent. Environment has its bearing on business and business has its
     bearing on environment. The success of business lies in understanding the
     environmental changes and adapting its business policies accordingly.
     The surroundings of business enterprise which are constantly changing, carry
     with them both opportunities and risks or uncertainties which can make or
     mar the future of business. Significance of the study of environment in
     business sector may be explained as follows:
393. Early identification of opportunities helps a business organization to be the
     first to exploit them.
394. A business organization should make its policies keeping in view the
     demands of environment.
395. The study of business environment is important to ensure optimum
     utilization of resources like, financial resources, human resource and
     physical resource etc.
396. Environment analysis helps the business organizations to identify strengths
     and weaknesses.
397. Environment analysis helps the business organizations to identify
     threats and explore opportunities available to business.
398. Environment analysis helps in adapting latest technological
     development which results in improved efficiency.
399. Scanning the business environment helps to understand Political Situation
     and its effect on business.
400. Scanning the business environment helps to understand economic
     policies of Government and their impact on business.
401. Because of globalization, the impact of international events on business
     is increasing. To understand global events and their impact on business,
     study of international environment is must.
402. By environmental analysis, business organizations come to know about
     the strategies of competitors to formulate counter plans.
403. Environment analysis helps in understanding the market conditions
     i.e. change in demand/supply, change in fashion, taste, boom or
     depression etc.
     SCANNING BUSINESS ENVIRONMENT
     There is a close and continuous interaction between business and its
     environment. So it is essential to understand and scan the environment to
     ensure effective utilization of resources. SWOT analysis is an analysis
     undertaken by business firms to understand their external and internal
     environment.
     SWOT analysis is applied to formulate effective organizational strategies.
     Through SWOT analysis, the business firms can match Strengths and
     Weaknesses existing with an organization with the Opportunities and Threats
     existing in the external environment.
     COMPONENTS/TYPES/CONSTITUENTS/FACTORS OF BUSINESS
     ENVIRONMENT
     Every business faces two types of environments simultaneously i.e. Internal
     Environment and External Environment.
404. INTERNALENVIRONMENT
     All those factors within an organization which impart strengths or cause
     weaknesses constitute the internal environment. These factors can be
     controlled by business but they are quite important in shaping the behavior of
     people working in it. Hence, managers have to take internal factors into
     account while taking actions.
405. EXTERNALENVIRONMENT
     All those factors outside the organization which provide opportunities or pose
     a threat to the organization make up the external environment. These factors
     are those over which the business organization has no control.
     According to William Glueck and Jauck
     “In environment there are external factors, which constantly bring
     opportunities and threats to the business firm. In includes Economic, Social,
     Technological and Political conditions.”
     Examples of situations that may cause change in the external environment
     include:
     (i) Improvement in production techniques
     (ii) Fluctuations in the levels of demand
     (iii) Fluctuations in interest rates
     (iv) Changes in laws and regulations
     (v) Changes in taxation
     (vi) New social trends, fashions or life styles
     (vii) International influences
     TYPES OFEXTERNAL ENVIRONMENT
406. MICRO ENVIRONMENT
407. Micro environment consists of factors in the company’s immediate
408. environment that affect the performance of the company. These include the
409. suppliers, marketing intermediaries, competitors, customers and the public.
410. According to Philip Kotler
411. “The micro environment consists of factors in the company’s immediate
412. environment which affect the performance of the business unit. These include
413. suppliers, marketing intermediaries, competitors, customers and the public.”
414. According to Hill and Jones
415. “The micro environment of a company consists of elements that directly
416. affect the company such as
417. competitors, customers and suppliers.”
418. MICRO ENVIRONMENT
419. Suppliers
     Suppliers are important for any business unit. Suppliers are those who
     supply the inputs like raw material and components to the company.
     Organizations should keep two things in mind regarding suppliers:
     Reliability
     Multiple suppliers.
420. Customers or clients
     A business exist only because of its customers. Hence, a major task of a
     business is to create and sustain customers. Monitoring the customer’s
     sensitivity is a pre-requisite for business success.
     A company may have different types of customers
     (i) Individual and household customers
     (ii) Government bodies
     (iii) Foreign customers
     (iv) Retail customers
     (v) Wholesale customers
     To succeed in capturing and sustaining customers, following points must be
     kept in mind:
     (i) Buyer’s behaviour data can be used in constructing a customer profile.
     (ii) Geographical factors should also be analyzed to know the opportunities
     and threats.
     (iii) In the era of free trade, foreign customers can be attracted by
     making such products which can compete with foreign products.
     (iv) Single customer of a company is full of risks as it places the company
     in a poor bargaining position.
     (v) The business firm should make separate products for separate
     segments. Following can be the basis of segmentation:
     (a) Income level of customers
     (b) Age of customer
     (c) Personality and life style of customers
     (d) Tastes and preferences of customers
     (e) Quantity to be purchased by customers
     (f) Education level of customers
421. Competitors
     Competitor means other business units which are making similar products or
     a very close substitute of our product. Competitors play a vital role in running
     the business enterprise. Business has to adjust its various activities according
     to the behaviour of the competitors.
422. Market Intermediaries
     Every business enterprise may be assisted by market intermediaries which
     include agents, brokers who help the company find customers. It is a link
     between company and final consumer. Market intermediaries help the
     company to promote, sell and distribute its goods to final buyers.
     Examples:
     Wholesalers, retailers, advertising agencies, consultancy firms, banks,
     insurance companies, warehouse, transport agencies etc.
423. Public
     Public is any group that has actual or potential interest in the business. To
     achieve this interest, it has its impact on the business. Public includes users
     and non-users of the product like Environmentalists, NGOs, Local
     Community, Media.
     EXTERNAL ENVIRONMENT
     A company and the forces operate in a larger Macro environment that shape
     opportunities and pose threats to the company. These factors are generally
     more uncontrollable than the micro forces.
     According to Philip Kotler
     “Macro environment includes forces that create opportunities and pose threat
     to the business unit. It includes economic, demographic, natural,
     technological, political and cultural environments.”
     According to Hill and Jones
     “The macro environment consists of the broader economic, social, political,
     legal, demographic and technological setting within which the industry and
     the business units are placed.”
424. ECONOMIC ENVIRONMENT
     Economic environment consists of economic factors that influence the
     business in a country. It is very complex and dynamic in nature that keeps on
     changing with the change in policies or political situations.
     Key components of economic environment are:
     (A)Economic Conditions of Public
     (B)Economic Policies
     (C) Economic System
425. POLITICAL-LEGALENVIRONMENT
     Political environment affects different business units significantly. A stable
     and dynamic political environment is essential for business growth.
     Whenever there is a change in the Government in a democratic country, it is a
     sign of change in economic policies. The Political environment of business
     depends on:
426. Ideology of the Government
427. Political Establishment
428. Political Stability in the country
429. Relations with other countries
430. Defense and Military Policy
431. Centre State Relationship
432. Approach of Opposition parties towards business
     LEGAL ENVIRONMENT
     Legal environment constitutes the laws framed by the Government
     and various legislations passed in the parliament. The businessman
     cannot overlook the legislations because he has to perform his
     business transactions with in the framework of legal environment.
     Every aspect for business is regulated by law in India. Government
     has also framed legislations which regulate and control the business.
     Some of the main legislations regulating the business are as follows:
433. Industrial Dispute Act, 1947
434. Factories Act, 1948
435. Consumer Protection Act, 1986
436. Companies Act, 1956
437. Foreign Exchange Management Act 1999
438. Securities and Exchange Board of India Guidelines, 2000
439. SOCIAL & CULTURAL ENVIRONMENT
     Business is an integral part of society and both influence each other.
     Influence exercised by social and cultural factors is known as socio-cultural
     environment. These factors include: attitude of people, family system, caste
     system, religion, education, marriage, habits and preferences, languages,
     urbanization, customs and traditions, ethics etc.
440. TECHNOLOGICAL ENVIRONMENT
     A systematic application of scientific knowledge is known as technology.
     Everyday there are vast changes in products, services, lifestyles and living
     conditions, these changes must be analyzed by every business unit and should
     adapt these changes.
441. DEMOGRAPHIC ENVIRONMENT
     Demographic environment refers to the study of the features of population
     i.e. size of population, growth rate, gender ratio, age composition, income
     level, education level, family size, family structure etc. All these factors
     affect size of demand, tastes, fashion, liking, preferences of consumer etc.
442. NATURAL OR ECOLOGICAL ENVIRONMENT
     It includes geographical and ecological factors such as natural resources,
     weather and climatic conditions, port facilities, topographical factors such as
     soil, rivers, rainfall, pollution etc. Every business unit must look for these
     factors before choosing the location for their business.
443. INTERNATIONAL/ GLOBAL ENVIRONMENT
     International environment is important for industries directly depending on
     import and export. A recession in foreign market or protection policy by
     foreign nations may create difficulties for industries depending on exports.
     Liberalization of import may help some industries but may adversely affect
     other industries. Following factors of International environment affect
     business:
444. Globalization
445. Liberalization
446. International agreements and declarations
447. International terrorism
448. Cultural exchange
     SOCIAL RESPONSIBILITY OF BUSINESS
     Social Responsibility of Business can be defined as the obligation an
     organization’s management team has towards the interests and welfare of the
     society or community that provides it with resources and environment to not
     only survive but flourish.
     In other words, Social Responsibility is the way your company gives back to
     and takes care of the community it is located in and the greater society we are
     all a part of.
     “Conceptually social responsibility may be taken up to mean intelligent and
     objective concern for the welfare of the society.”
     K.R. Andrews
     “Social responsibility is the personal obligation of every one as he acts for
     his own interests to assure that the rights and legitimate interests of all other
     are not impinged.”
     Koontz and O’Donnel
     There are four dimensions of Corporate Responsibilities:
449. Economic: Responsibility to earn profit for
     owners
450. Legal: Responsibility to comply with
     laws
451. Ethical: Doing what is right, just and fair
452. Voluntary and Philanthropic: Promoting human welfare and
     goodwill. Being a good corporate citizen contributing to
     community and quality of life.
     RESPON SIBILITY O F BUSI N ESS TOWARDS VA R I O U S
     STAKEHOLDERS
     PHILANTHROPIC
     RESPONSIBILITY
     ETHICAL RESPONSIBILITY
     LEGAL
     RESPONSIBILITY
     ECONOMIC RESPONSIBILITY
     SHARE-
453. HOLDERS
     COMMUNITY
     EMPLOYE
     ES
     GOVERN-
     -MENT
     SOCIAL
     RESPONSIBILITY
     OF BUSINESS
     CUSTOME
     RS
     CREDITO
     RS
     SUPPLIER
     S
     IMPORTANCE OF SOCIAL RESPONSIBILITY OF BUSINESS
     Social Responsibility of Business is important for organization and its
     stakeholders due to following reasons:
454. Increased productivity and quality
455. Reducing operating cost
456. Increased sales and customer loyalty
457. Reduced in corruption
458. Improved financial performance
459. Improved transparency and reporting
460. Reduced regulatory oversight
     Responsibility towards Shareholders
461. Shareholders are source of funds for the company. They expect
     maximization of the value of their investment in the company.
462. It is the duty of management to see that the financial position of
     the company is sound and the company always looks for
     growth.
463. The management should keep the shareholders well informed
     about the progress and financial position of the company.
464. The assets of the company are purchased with the funds
     provided by the shareholders. The management is
     responsible to safeguard these assets.
     Responsibility towards Workers
465. Every business should pay reasonable wages and salaries to its
     employees so that they may satisfy their needs and lead a good life.
466. Good working conditions are necessary to maintain the health of the
     workers. Since workers spend about 8 hours at work place, they
     must be provided with good working conditions.
467. Workers should be provided with adequate benefits such as
     housing and medical facilities, insurance cover and
     retirement benefits.
468. The management should recognize the workers’right to fair wages, to
     participate in decision
     affecting their working life, to form trade unions etc.
469. The workers should be helped by training and other means to improve
     their skills.
     Responsibility towards Customers
470. The management should produce goods which meet the needs of the
     consumers of different classes, tastes and with different purchasing
     power.
471. The management should make goods of right quality available to
     right people at the right time and place at reasonable price.The
     management should provide a prompt, adequate and courteous
     service to customers and handle their grievances carefully.
472. The management should ensure that advertisement and statement
     issued by the business are true and fair.
473. The management should not indulge into unfair and unethical
     practice such as black marketing, hoarding, adulteration etc.
     Responsibility towards Suppliers
474. Giving regular orders for purchase of goods.
475. Dealing on fair terms and conditions.
476. Availing reasonable credit period.
477. Informing about the taste of consumers.
478. Timely payment of dues
479. Informing the suppliers for future development plans.
     Responsibility towards Creditors
480. Provide accurate information regarding financial health of the
     organization.
481. Fairness in transactions
482. Promote a healthy atmosphere where creditors, suppliers and
     other interest groups are treated as patterns in a co-operative
     endeavor.
     Responsibility towards Government
483. To abide by the laws of the nation
484. To pay government taxes honestly
485. To avoid corrupting government employees
486. To encourage fair trade practices.
     Responsibility towards Community
487. The management should not indulge in any practice which is not
     fair from social point of view. Society expects that the business
     uses the factors of production effectively and efficiently.
488. The management can develop the surrounding area for the well
     being of workers and general public. It should take preventive
     measures against water and air pollution and should contribute to
     community development activities.
489. It is the responsibility of management to help increase direct and
     indirect employment in the area where it is functioning.
490. The management should make best possible use of capital,
     raw material, machine, technical knowledge and other
     resources for the well-being of the society.ople at the right time and place at reasonable price.The
     management should provide a prompt, adequate and courteous
     service to customers and handle their grievances carefully.
491. The management should ensure that advertisement and statement
     issued by the business are true and fair.
492. The management should not indulge into unfair and unethical
     practice such as black marketing, hoarding, adulteration etc.
     Responsibility towards Suppliers
493. Giving regular orders for purchase of goods.
494. Dealing on fair terms and conditions.
495. Availing reasonable credit period.
496. Informing about the taste of consumers.
497. Timely payment of dues
498. Informing the suppliers for future development plans.
     Responsibility towards Creditors
499. Provide accurate information regarding financial health of the
     organization.
500. Fairness in transactions
501. Promote a healthy atmosphere where creditors, suppliers and
     other interest groups are treated as patterns in a co-operative
     endeavor.
     Responsibility towards Government
502. To abide by the laws of the nation
503. To pay government taxes honestly
504. To avoid corrupting government employees
505. To encourage fair trade practices.
     Responsibility towards Community
506. The management should not indulge in any practice which is not
     fair from social point of view. Society expects that the business
     uses the factors of production effectively and efficiently.
507. The management can develop the surrounding area for the well
     being of workers and general public. It should take preventive
     measures against water and air pollution and should contribute to
     community development activities.
508. It is the responsibility of management to help increase direct and
     indirect employment in the area where it is functioning.
509. The management should make best possible use of capital,
     raw material, machine, technical knowledge and other
     resources for the well-being of the society.