Page 9 - DMGT401Business Environment
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Business Environment




                    Notes          Introduction

                                   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." Davis, K, The Challenge of
                                   Business, (New York: McGraw Hill, 1975), p. 43.
                                   Environment refers to all external forces which have a bearing on the functioning of business.
                                   Jauch and Gluecke has defined environment as "The environment includes factors outside the
                                   firm which can lead to opportunities or a threat to the firm. Although there are many factors the
                                   most important of the sectors are socio-economic, technological, supplier, competitor and govt."
                                   The recent changes in tariff rates have changed the toy industry of India with the market now
                                   being dominated by Chinese products. A slight change in the Reserve Bank of India's monetary
                                   policy can increase or decrease interest rates in the market. A slight shift in the government's
                                   fiscal policy can shift the whole demand curve towards the right or the left.


                                          Example: Hindustan Lever Limited (HLL)  took advantage  of the new takeover and
                                   merger codes and acquired brands like Kissan from the UB  group, TOMCO (Tata Oil Mills
                                   Company) and Lakme from Tata and Modern Foods from the government, besides many other
                                   small takeovers and mergers.

                                   The new moguls of the Indian business are those who predicted the changes in the environment
                                   and reacted accordingly. Azim Premji of Wipro, Narayana Murthy of Infosys, Subhash Goyal of
                                   ZEE, the Ambanis of Reliance, L.N. Mittal of Mittal Steel, Sunil Mittal of Bharti Telecom are
                                   some of them.
                                   Even a small businessman who plans to open a small shop as a general merchant in his town
                                   needs to study the environment before deciding where he wants to open his shop, the products
                                   he intend to sell and what brands he wants to stock.

                                   The relation between a business and an environment is not a one way affair. The business also
                                   equally influences the external environment and can bring about changes in it. Powerful business
                                   lobbies for instance, actively work towards changing government policies.

                                   The business environment is not all about the economic environment but also about the social
                                   and political  environment. Politically, after the Congress government came to  power at the
                                   center with the support of the CPI in May 2004, the whole process of disinvestments took a
                                   U-turn. Similarly, a new sociological order in India today has created a market for fast foods,
                                   packaged foods, multiplexes, designer names, Valentine day gifts and presents, and gymnasiums
                                   and clubs etc.
                                   So it is quite obvious  that success  in a business depends  upon better understanding of the
                                   environment. A successful organization doesn't look at the environment on an ad hoc basis but
                                   develops  a system to study  the  environment  on a continuous basis to try  and protect the
                                   organization from every possible threat and to take the advantage of every opportunity. Some
                                   times better and timely  understanding  of  the environment can  even  turn a  threat into  an
                                   opportunity.














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