DD: Business Environment

Crossposted from Ditzy Derivatives here.

Business: An organized activity to achieve certain predetermined goals.

Predetermined goals of business can include:

1.  Making profit
2. Important position in society
3. Supply of goods and services
4. Creation of job opportunities
5. Offering better quality of life
6. Contributing to the economic growth of society

Change is an important part of business, and the success of every business depends on adaptation.

Specific and general forces affect enterprises - the former (investors, customers, competitors) affect the day to day functioning of enterprises, whereas the latter (sociopolitical conditions, laws) are common to all enterprises and are probably indirect in nature.

First mover advantage: early recognition of opportunities 

Threat identification: corrective and improvement measures to survive competition.

Adaptability: coping with rapid changes caused by the dynamic nature of business.

Vision statement: describes the desired future position of the company.

Mission statement: defines the company’s business, its objectives and its approach to reach those objectives. (How to attain vision statement.)

Business Environment: The aggregate of all forces, factors and institutions which are internally affecting the business through management structure and policies as well as which are external to and beyond the control of individual business enterprises, but which influence their functioning. It’s divided into internal and external but is mostly external.

Internal Business Environment: Factors within the control of the business - 6 Ms:

1. Money
2. Man
3. Marketing
4. Machinery (physical assets)
5. Management (structure and nature of)
6. Miscellaneous (E.g.: R&D, company image and brand equity, value system)

External business environment: Divided into micro and macro - factors not controlled by the business.

• Micro: Factors that have a direct bearing on the co. (E.g.: Consumers, Shareholders, Suppliers etc)
• Macro: Remote and uncontrollable factors - STEEP
• Sociocultural and demographics
• Technology
• Economic Conditions
• Ecology and Physical Env.
• Political and Legal 

Global Integration:

• Liberalisation: The process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprises. (Easy foreign entry; availability of goods at competitive rates etc.)
• Privatisation: Transfer of ownership and/or management of an enterprise from the public to the private sector. (Improve PSU performance and reduce taxpayer burden.)
• Divestiture: privatization of ownership – through sales of equity.
• De-nationalization or re-privatization
• Contracting
• Franchising
• Liquidation
• Globalization: The growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows, and also through the more widespread and rapid diffusion of technology.
• Micro: concerning globalization of business and firm.
• Macro: concerning globalization of the world economy, achieved by globalization of national economies.