Page 43 - DMGT401Business Environment

Business Environment

Notes programmes was also a cause of concern as advertisers deserted due to its low viewer
ratings. Analysts felt that DD would need a budgetary support of 5 bn during the fiscal
2000-01 to sustain itself as its revenues would not be enough to meet its expenditure.
Analysts questioned the capacity of the Government to own DD and many felt that
privatization would be the only solution.
Questions
1. Was DD unable to assess the changing business environment?
2. Do a SWOT analysis for DD?

Source: icmrindia.org

1.6 Summary

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 or an
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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