BUSINESS ENVIRONMENT

MEANING : Business environment encompasses all those factors that affect a company's operations, and includes customers, competitors, stakeholders, suppliers, industry trends, regulations, other government activities, social and economic factors and technological developments.

 TYPES OF ENVIRONMENT On the basis of extent of intimacy with the firm, the environmental factors may be classified into different types of levels. 1. Internal environment 2. External environment Internal environment The factors in internal environment are generally regarded as the controllable factors b/c the company has control over these factors i.e. it can alter or modify these factors as these are internal in the organization.

 External Environment The external factors are beyond the control of the company i.e. they are uncontrollable. However in few cases company can possibly change the external factors. The external environment is further divided into two parts :-

Macro environment The are external factors which have no direct contact with the business but have a great impact on business.
Microenvironment These are external factors which have a direct contact and intimate impact on the firm. Microenvironment is also k/n as task environment & operating environment.

 Internal Environment Mission & Objectives For e.g. Ranbaxy mission is to become a research based international pharmaceutical company. Management Structure & Nature In Wipro majority of the share is held by promoters whereas the promoters positions is vulnerable in TATA. Internal Power Relationship Human Resources Characteristics of human resource like skill, quality, morale, commitment, attitude.

 Company Image & Brand Equity

The image of the company matters while raising finance, forming joint ventures or others alliances, soliciting marketing intermediaries, entering purchase or sale contracts, launching new products etc.

 MACROENVIRONMENT - Major external and uncontrollable factors that influence an organization's decision making, and affect its performance and strategies. These factors include the economic, demographics, legal, political, and social conditions, technological changes, and natural forces. MICROENVIRONMENT Factors in an organization's immediate area of operations that affect its performance and decision making freedom. These factors include competitor, customers, distribution channels, supplier, and the general public.

 NATURE OF BUSINESS ENVIRONMENT 1. Totality of external forces: Business environment is the sum total of all things external to business firms and, as such, is aggregative in nature. 2. Dynamic nature: Business environment is dynamic in that it keeps on changing whether in terms of technological improvement, shifts in consumer preferences or entry of new competition in the market. 3. Uncertainty: Business environment is largely uncertain as it is very difficult to predict future happenings, especially when environment changes are taking place too frequently as in the case of information technology or fashion industries

 4. Relativity: Business environment is a relative concept since it differs from country to country and even region to region

SIGNIFICANCE
1. It helps firm to identify opportunities and getting the first mover advantage. 2. It helps firm to identify threats and early warning signals

3. It helps in Coping with rapid changes.

4. It helps in Improving performance

 BASIC INDICATORS OF ECONOMIC DEVELOPMENT 1. GDP - The gross domestic product (GDP) or gross domestic income (GDI) is a measure of a country's overall economic output. It is the market value of all final goods and services made within the borders of a country in a year. It is often positively correlated with the standard of living though its use as a stand-in for measuring the standard of living has come under increasing criticism and many countries are actively exploring alternative measures to GDP for that purpose

 Determining GDP GDP can be determined in three ways, all of which should in principle give the same result. 1. Product (or output) approach It is the market value of all final goods and services made within the borders of a country in a year 2. Income approach This method measures GDP by adding the incomes that firms pay households for the factors of production they hire- wages for labor, interest for capital, rent for land and profits for entrepreneurship

 3. Expenditure approach. Measuring the total expenditure of money used to buy things is a way of measuring production GDP = C + I + G + (X - M) where: C = household consumption expenditures / personal consumption expenditures I = gross private domestic investment G = government consumption and gross investment expenditures X = gross exports of goods and services M = gross imports of goods and services

2. GNP - It stands for Gross National Product, which is the combined value of all the final goods and services produced in a country during an accounting year, including net factor income from foreign countries. Calculation of GNP
GNP= GDP + Net factor income from abroad where,
GDP = Gross Domestic Product

Net factor income from abroad = difference between income earned in foreign countries by residents of a country and income earned by non-residents in that country.

 GNP versus GDP While GDP is the combined value of all goods and services produced in a country, GNP is a broader concept. It includes the final value of goods and services produced by the residents of a country, irrespective of their geographical location. For example, if the total value of goods and services produced in a country during a year was $300 million. This includes $25 million produced by foreigners working in that country. Besides, the normal residents of the country settled abroad produced goods and services worth $50 million. In this case, GDP is $300 million, while GNP is $325 million (300-25+50).

 IMPORTANCE OF GNP GNP helps to measure the contribution of residents of a country to the flow of goods and services within and outside the national territory. Hence, GNP is the core concept of national income accounting. 3. HDI - The Human Development Index (HDI) is a composite statistic used to rank countries by level of "human development" and separate developed (high development), developing (middle development), and underdeveloped (low development) countries.

 Cont. The statistic is composed from data on life expectancy, education and per-capita GDP (as an indicator of standard of living collected at the national level. Life expectancy is the expected (in the statistical sense) number of years of life remaining at a given age. It is denoted by ex, which means the average number of subsequent years of life for someone now aged x, according to a particular mortality experience. HDI India Rank - 134

4. Gender-related Development Index The Gender-related Development Index (GDI) is an indication of the standard of living in a country, developed by the United Nations (UN). It is one of the five indicators used by the United Nations Development Programme in its annual Human Development Report. It aims to show the inequalities between men and women in the following areas: long and healthy life, knowledge, and a decent standard of living.

 THE GENDER EMPOWERMENT MEASURE (GEM) The Gender Empowerment Measure (GEM) is a measure of inequalities between men's and women's opportunities in a country. It combines inequalities in three areas: political participation and decision making, economic participation and decision making, and power over economic resources. It is one of the five indicators used by the United Nations Development Programme in its annual Human Development Report. India Statistics (GEM) Rank - 128 Ratio of estimated female to male - 0.31