1. Definition of Business Environment
- Business
environment means all factors (inside and outside a business) which
affect its working.
- It includes internal factors (mission, employees, structure) and external factors (government, technology, economy, society).👉 Example: A sweet shop depends not only on its workers (internal) but also on sugar prices, customer taste, government tax (external).
2. Features of Business Environment
- Totality
→ It is the sum of all factors.
- Dynamic
→ Keeps changing (new tech, new policies).
- Complex
→ Many factors interact.
- Uncertainty
→ Hard to predict changes.
- Inter-related → One factor affects another.👉 Example: A change in fuel price (economic) may increase transport cost and affect delivery times (technological + social impact).
3. Economic Reforms in India
- Major
reforms came in 1991, known as LPG policy.
- Reforms aimed at removing controls and opening the economy.👉 Main changes:
- Liberalization
→ Reduced government control on industries.
- Privatization
→ Allowed private companies in many sectors.
- Globalization
→ Opened economy to foreign investment and trade.
4. PESTEL Analysis (Macro Environment study)
- P –
Political: Govt. policies, stability.
- E –
Economic: Inflation, GDP, income, interest rates.
- S –
Social: Demographics, lifestyle, culture.
- T –
Technological: Innovations, AI, automation.
- E –
Environmental: Climate, pollution laws.
- L – Legal: Labour laws, company laws.👉 Example: Swiggy depends on social lifestyle (ordering food), tech apps, and govt. rules (FSSAI).
5. SWOT Analysis
- A tool
for understanding business position.
- S –
Strengths: What a company is good at.
- W –
Weaknesses: Where it is lacking.
- O –
Opportunities: Chances to grow in market.
- T – Threats: Risks from outside.👉 Example: A local textile shop’s strength is low cost, weakness is no online store, opportunity is rising demand, threat is large online retailers.
6. Micro Environment Factors
- Directly
affect a company.
- Includes: Customers, Suppliers, Competitors, Market Intermediaries, Employees.👉 Example: A mobile store depends on suppliers (mobile companies), customers (buyers), competitors (other stores).
7. Macro Environment Factors
- Broad,
external factors.
- Includes: Political, Economic, Social, Technological, Environmental, Legal (PESTEL).👉 Example: Global oil price rise affects transport cost for all businesses in India.
8. LPG Policy (1991)
- Liberalization:
Freedom for industries from license and control.
- Privatization:
More role for private sector, disinvestment of PSUs.
- Globalization: Integration with world economy, FDI, WTO membership.👉 Example: Before 1991, telecom was government monopoly; after reforms, private operators like Airtel, Jio entered.
9. Role of RBI (Reserve Bank of India)
- RBI =
Central Bank of India.
- Controls
monetary policy (money supply, interest rates).
- Regulates banks, inflation, credit supply, and foreign exchange.👉 Example: If inflation rises, RBI may increase repo rate to reduce borrowing.
10. WTO (World Trade Organization)
- Established
in 1995.
- Regulates
trade between countries.
- Aims
at free, fair, and smooth trade.
- Provides rules, settles disputes, supports developing nations.👉 Example: India files cases in WTO when other countries put unfair restrictions on Indian exports.
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