The key for business achievement or success requires two elements - the individual and the environment. Lack of either value makes the target unachievable. All components of a business environment have a direct or indirect relation on business. The exterior factors, forces that can't be controlled by an individual business enterprise and their management and also have the capability to influence the business enterprise enterprise is termed as 'Business Environment'. It includes every exterior forces within which a business organizations functions. Working of the business process is influenced by these forces and factors. Thus these forces and factors which stay beyond your business, that are uncontrollable by single business entity but have an effect on business is called Business Environment. These factors or forces are customer, competitors, government, creditors, socio-cultural organizations, national and international organizations, political parties etc. These factors affect the business enterprise directly and indirectly according to its nature
- Remote or General environment
- Industry environment
- Competitive environment
Fig: Environmental Analysis
REMOTE OR GENERAL ENVIRONMENT:
Remote environment can be called as General environment and macro environment. Macro factors are usually more uncontrollable whereas micro environment factors are controllable when compared with macro factors. When macro factors become unmanageable the success of the business enterprise relies on the versatility of the business enterprise to the changing environment. According to Hill and Jones, (2009), Macro-environmental factors sometimes influence the nation all together. Explained here are a few of the macro environment factors.
Economic Environment: The total of the nature of financial system of the country, business cycles, the socio-economic infrastructure etc is referred as Economic environment. Success of a business man is determined by visualizing the exterior factors influencing business, foreseeing changes that may occur in market conditions and making maximum return on minimum investment considering these outside or external factors.
Social Environment: The value system of the society, which includes an influence on the running of the business enterprise, is determined by the social dimension or environment of that Nation. Sociological elements which have an extensive effect on the business enterprise are costs structure, customs and conventions, mobility of labour etc. Work culture and mobility of labour, work groups etc are dependant on the above mentioned factors.
Political Environment: Political organizations including philosophy of political parties, ideology of government or party in power, character and degree of bureaucracy influence of primary groups etc are influenced by the political environment of your country. The business, to a great extent, is influenced by the political environment of an Nation
Legal Environment: Legal environment comprises overall flexibility and malleability of law and other legal rules governing the business. The precise rulings and decision of the courts might be included. These concern the business enterprise and its administrators to a great extent.
Technical Environment: Development of technology in country has a great influence on the business enterprise. The variety and quality of goods and services to be produced and the type, quality etc of plant and machinery to be used are determined by the technology opted by the industry. Following are also influenced by technical environment, the business in terms of investment in technology, constant application of technology and the consequences of technology on markets.
Customer analysis at the business enterprise entity level involves creating a complete knowledge of customers, their needs and wants, and exactly how these changes within a given market (market segmentation). Moreover, importance must be given to these changing needs, how is it occurring and what a business should do to generate change to industry. Growth comes not by duplicating the rivals but by introducing creative and ground breaking strategy with flexibility, remember the changes that may occur in future to advertise conditions. Like any analysis, it is also done to identify the progressive strategies or plans that will create value for the business enterprise.
This analysis is undertaken at the business-unit level. With specific competitors, we assume that the machine in question is engaged in oligopolistic competition where the market is dominated by small number of sellers. Within a perfect competition there is no reason for this analysis. While conducting competitor analysis, we have to follow certain defined procedure.
RELATIONSHIP BETWEEN GENERAL AND COMPETITIVE ENVIRONMENTS
Firms acquire information to take decisions regarding current running of business and for future decision making via a combined calculation of internal and external Environments.
Elements that compose general environment in a wider society influence the industry and the businesses for the reason that industry. These are classified into six environmental segments: demographic, economic, political/legal, socio-cultural, technological, and global. A company does not have a direct control over the overall environment's segments and elements. To make appropriate decisions and plans, successful companies collects amounts of data and information in order to identify or understand each segment and implications to be achieved.
Competitor analysis refers to just how or method in which how companies acquire and interpret information about their competitors. Understanding the firm's competitor environment complements the insights provided by studying the general environment helps identifying in the firm's competitor environment.
Strategic intent, strategic mission, and strategic actions of a firm are developed as a result of the three analysis that are done to recognize the exterior environment. General environment analysis is targeted on the near future on the other hand analyses of competitors are centered on forecasting the dynamics of competitors' actions, responses, and plans. Although we discuss each analysis separately, if we integrate the info gained from both the two analysis, performance of the firm is improved to a great extent.
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