Business Organizations

Introduction: Business Organizations

  • Business decisions are shaped by the business environment.
  • The business environment includes internal and external forces that impact a business's development, performance, and outcomes. Understanding it is crucial for decision-making.

Meaning of Business

  • Business is an economic activity involving exchange, purchase, sale, or production of goods/services.
  • The goal is to earn profits and satisfy customer needs.

Scope of Business

  • Includes extraction, manufacturing, buying/selling goods across locations, construction, and providing services (ticketing, warehousing, etc.).

  • Activities involve production/processing and distribution of goods/services.

  • Business Activities:

    • Primary: Extractive, Genetic.
    • Secondary: Manufacturing, Construction.
    • Tertiary (Service).
    • Trade: Home, Foreign (Import, Export, Entrepot).
    • Commerce: Auxiliaries to trade (Transport, Communication, Warehousing, Insurance, Banking & Finance, Advertising).

Objectives/Goals of Business

  • Profit: Excess of income over expense; incentivizes productivity, growth, and survival.
  • Growth: Expansion in profit, revenue, capacity, employees, and employee prosperity.
  • Power: Economic and political power derived from resources.
  • Employee Satisfaction and Development: Contentment through welfare measures, safety, training, and development.
  • Quality Products & Services: Ensures survival in competition and earns brand loyalty.
  • Market Leadership: Achieved through quality, cost, innovation, supply, and after-sale services.
  • Joy of Creation: Converting innovative ideas into useful products and services.
  • Service to Society: Providing safe goods at reasonable prices, employment, and protecting ecology.
  • Good Corporate Citizenship: Compliance with laws, tax payment, care for employees and customers.

Definition of Business Environment

  • All external forces impacting business functions (or) factors influencing business development, performance, and outcome.
  • Keith Davis: Aggregate of all conditions, events, and influences that surround and affect business.
  • Bayord O.Wheeler: Total of all things external to firms and industries which affect their organisation and operation.
  • ArthurM. Weimer: Climate or set of conditions (economic, social, political, or institutional) in which business operations are conducted.

Internal and External Business Environment

  • Internal Environment: Factors within the company's control, grouped into strengths and weaknesses.

    • These are the internal environment factors:
      • Plans & Policies
      • Value Proposition
      • Vision, mission and objectives
      • Human Resource
      • Financial and Marketing Resources
      • Corporate Image and brand equity
      • Plant/Machinery/Equipment(or you can say Physical assets)
      • Labour Management
      • Inter-personal Relationship with employees
      • Internal Technology Resources & Dependencies
      • Organizational structure
      • Quality and size of infrastructure
      • Task Executions or Operations
      • Financial Forecast
      • The founder's relationship and their decision-making power.

  • External Environment: Factors outside the company that affect its ability to function; can be micro or macro.

    • Micro Environment: Immediate factors affecting business strategy and performance (suppliers, intermediaries, competitors, customers, public).
    • Macro Environment: Larger societal forces affecting all actors in the micro-environment.

  • Micro Environment Factors:

    • Suppliers: Provide inputs; reliable sources are crucial. Multiple sources minimize risks.
    • Customers: Various categories (industrial, retailers, etc.); understanding their needs is essential.
    • Labour: Trade unions negotiate for wages and working conditions and may strike.
    • Competitors: Businesses adjust activities based on competitor behavior.
    • Market Intermediaries: Assist in promoting, selling, and distributing goods; vital links to customers.
    • Public: Groups with potential interest or impact on the organization.
    • Employees: Skilled employees help achieve organizational goals.
    • Shareholders: Influence through investment decisions.
    • Media and Social Media: Positive or negative coverage impacts business; manage relationships.

  • Macro Environment: External, uncontrollable factors influencing decision-making.

    • The Macro Environment consists of 6 different forces or factors:
      • Political forces
      • Ecological forces
      • Demographic forces
      • Technological forces
      • Economic forces
      • Socio-Cultural forces

  • Macro Environment Factors (DESTEP):

    • Demographic: Relates to population size, age, gender, income, education, etc.
    • Economic: Affects consumer purchasing power and spending patterns (GDP, unemployment, inflation).
    • Socio-Cultural: Impacts society’s values, preferences, and behavior.
    • Technological: Creates new technologies, products, and market opportunities; requires adaptation.
    • Ecological: Concerns natural resources and environmental issues; promotes sustainability.
    • Political: Involves laws, government agencies, and pressure groups; affects marketing decisions.

Environment Analysis

  • Process of identifying relevant variables and analyzing their impact on the organization.
  • Involves scanning, monitoring, forecasting, and assessment.

Techniques of Environment Analysis

  • SWOT Analysis: Strengths, Weaknesses (internal), Opportunities, Threats (external).
  • PESTLE Analysis: Political, Economic, Social, Technological, Legal, Ecological factors.