Saturday, 26 October 2019

Business Environment

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                                               Business Environment

Environment literally means the surroundings, external objects, influences or circumstances under which someone or something exists.

The environment of any organization is the aggregate of all conditions, events and influences that surround and affect it.

The framework of business environment can be divided into three broad dimensions: Internal Environment, Macro Environment (External Environment), and Micro Environment (Relevant Environment, Competitive Environment).
Internal environment is internal to the organization and it is controllable.

The important internal factors are as follows: culture and value system, Human resource, mission and objectives, and nature and structure of management.

External or Macro or General Environment consists of factors external to the industry that may have significant impact on the firm's strategies.

It consists of six broad dimensions: Demographic, Socio-cultural, political/legal, technological, economic and global.

Globalization has also enabled India to become the software superpower of the world.

All global organizations now have a new and vast market, as well as cheap manufacturing hub, which has compelled them to change their global marketing and manufacturing strategies.

The environment is constantly changing in nature.

Due to many and varied influences operating there is dynamism in the environment causing it to change its shape and character continuously.

Micro Environment or the competitive environment refers to the environment, which an organization faces in its specific arena.

This arena may be an industry, or it may be what  is referred to as a strategic group.

Professor Michael Porter of the Harvard Business School has demonstrated the state of competition in an industry as a composite of five competitive forces.

According to him, five forces are: threat of competition, threat of new entrants, threat of substitutes, bargaining power of suppliers and bargaining power of buyers.

According to Andrew Grove, the former CEO of Intel: "Porter's five forces model ignores a sixth force: the power, vigor and competence of complementors".

Complementary products are those products that add value to some other product.

A strategic group is to identify a more defined set of organizations so that each grouping represents those with similar strategic characteristics.

They are not a formal group Oran association; in fact they are conceptual clusters in the sense that they are grouped together for the purpose of improving analysis and understanding of competition within their industry.

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