BUSINESS, SOCIETY AND LAW Assistant Professor. Neha Bhatia
UNIT 1: BUSINESS ENVIRONMENT - BASICS
LETS START THE Introduction JOURNEY Business – Concept 3 Types of environment- Internal and External
INTRODUCTION • A business firm has to interact and transact with the environment. • A business organization is a microeconomic unit influenced by its environment— 4
CONTD… • the laws enacted by the government—both federal and local; • economic policies that include monetary, fiscal and commercial policies • the effectiveness of the interaction of an enterprise - determine its success or failure. 5
BUSINESS • According to F. C. Hooper: “Business means the whole complex field of commerce and industry”. 6
Insert Image CHARACTERISTICS OF BUSINESS Economic activities Element of Element of Profit related to continuity of enterprise: motive production transactions and : distribution: Dealings in exchange of Element of Element of risk and creation of goods and services uncertainty utilities: 7
BUSINESS HAS CERTAIN CHARACTERISTICS INCLUDING, INTER ALIA: 1.Element of enterprise: The entrepreneur anticipates and visualizes business, organizes factors of production 2.Dealings in exchange of goods and services: Business deals with either producers' goods - Business also deals in services 8
CONTD… 3. Profit motive: All business activities are directed towards reaping more than what has been invested. 9
CONTD… 4. Element of risk and uncertainty: Risk arises out of uncertainty in business. Only successful management of risks will result in profit. 10
CONTD… Risks may arise due to change in consumer tastes and preferences, changes in technology, mismanagement increased competition 11
CONTD… 5. Economic activities related to production and distribution: The production and distribution of goods and services alone can fetch businessmen good prices and profit; 6. Element of creation of utilities: Business is engaged in creation of utilities. When a carpenter converts a log of wood into furniture, he creates a form or shape utility; 12
CONTD… When food grains available in large quantities – stored and sold at the time of scarcity-- time utility is created. Service utility -- doctor or an engineer. Business creates such utilities 13
CONTD… 7.Element of continuity of transactions: Transactions become business only if they are regular and continuous. 14
BUSINESS ENVIRONMENT • “Environment” literally means the surroundings, external objects, influences, or circumstances • “the aggregate of all conditions, events, and influences that surround and affect it” 15
CONTD… • There are two sets of factors—internal and external— • The internal factors are known as controllable factors • The external factors are known as uncontrollable 16
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Insert Image EXCHANGE OF INFORMATION •It refers to information or data that is exchanged with business enterprise and its internal and external environment. • Business organization structure and functions are adjusted • A business project look for current and future information 18
Insert Image o An organization’s information is available in the form of annual reports, occasional advertisements and media reports etc. 19
Insert Image o A business organization is legally bound to supply valuable information to its stakeholders 20
Insert Image EXCHANGE OF RESOURCE Business enterprise receives inputs from the external and internal environment in the form of material, money, manpower, etc. 21
Insert Image Conversion of these inputs (raw material) into products and services employees plays very important and crucial role in it. 22
Insert Image For uninterrupted supply of inputs, Organization always maintains good relation with the suppliers. An organization generally collaborates with few other organizations to ensure a consistent supply. 23
Insert Image An organization supply its output i.e. products and services For perceiving needs -- requires interaction with the external environment. 24
Insert Image Also, in a way it is very important to meet the expectations and demands of stakeholders and customers. These stakeholder pressurizes the organization 25
Insert Image EXCHANGE OF INFLUENCE AND POWER: Organizations always try to strategize their operations and functions to survive in the dynamic environment. 26
Insert Image The stakeholder has various expectations - dividend and increased profitability Organizations need to maintain cordial relationship with the stakeholders and society. 27
Insert Image Employees expect good working conditions, challenging career path, and so on. Employees use their power of Labour union to fulfil their demands. 28
Insert Image Influences employees by creating attractive rewards and recognition programs Influences society by creating and maintaining good brand and impressive CSR (corporate social responsibility) activities. 29
Insert Image TYPES OF ENVIRONMENT: Business Internal Micro- Environment External environment Macroenviron 30 ment
“INTERNAL ENVIRONMEN T”
Insert Image INTERNAL ENVIRONMENT: • The internal environment deals with the management of resources like human resources, physical resources, technology, monetary resources and others • Internal environment also includes intangible aspects like culture, teamwork, coordination, and so on. It includes conditions, entities, events, and factors within an organization that influences its operational activities . 32
Insert Image •Internal environment also includes leadership style, culture and other intangible aspects like teamwork, coordination, efficiency level of employees, employee’s salaries and monitoring costs. 33
Insert Image • VALUE SYSTEM (Organizational Culture) • The value system of an organization distinguishes it from others and shapes the actions of its members. Components of Value system or Organizational Culture are as: o Values o Heroes o Rites and rituals o Social network 34
Insert Image VALUES •Values are the basic beliefs that define employees' successes in an organization. •For example, many universities place high values on professors being published. 35
Insert Image HEROES • A hero is an exemplary person who reflects the attitudes, image or values of the organization • Sometimes the founder of the organization (think Steve Job of Apple and JRD of Tata). • It can be an everyday worker, such as hard‐working paralegal Erin Brockovich, who had a tremendous impact on the organization. 36
Insert Image RITES AND RITUALS, •routines or ceremonies that the company uses to recognize high‐performing employees. •Awards banquets, company gatherings, and quarterly meetings 37
Insert Image SOCIAL NETWORK •is the informal means of communication within an organization. •Referred to as the company grapevine, carries the stories of both heroes and those who have failed. •Value system or culture of an organisation is the collective behaviour of humans that are part of an organisation. 38
Insert Image • For example when the Murugappa group has taken over the EID parry group, one of the most profitable business of Parry group i.e. of liquor was sold off as it was against the value system of Murugappa group. 39
“GOOD BUSINESS —Jack Welch, former CEO of LEADERS CREATE A General Electric VISION, ARTICUL ATE THE VISION , PAS S I ON AT E LY OWN THE VISION, AND RE L E N TL E SS LY D R I V E I T TO COMPLETION. ”
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Insert Image VISION • A vision is a Big Picture of “What” the organization wants to achieve in Future. • It should inspire people in the organization. • Example: “A Vibrant Economy is driven by value-added agriculture”. • A good vision statement inspires to create a movement. It describes the desired outcome to invoke a mental image of the organization. • Ikea (retail) – \"To create a better everyday life for the many people.\" 42
Insert Image MISSION: • A Mission is about what the organization does to achieve the vision. • A mission is an action statement to achieve the vision. • It provides a clear focus • Example • “To create and facilitate the development of value-added agriculture” 43
Insert Image • Here “Create and facilitate” are two clear focus areas. • A mission statement is simple, direct and operative. • Short: The mission statement should be easy to remember. • Each person in organizations should be aware of the mission statement to use in context with the work he/she does. 44
Insert Image • Simple: Mission statement language should be of everyday life. • Operative: A mission statement should provide a clear direction. It should focus on what an organization does. It also gives a clear route about initiative and resource allocation. • Nike (athletics) – \"To bring inspiration and innovation to every athlete in the world.\" 45
Insert Image • 3. Goals & Objectives: • Goals are statements of mileposts to achieve the vision. Goals describe – what you want to achieve through your efforts. • And, an objective is a time-sensitive statement and measurable . • Goals for the above-mentioned vision of agriculture business can be defined as, but not limited to: • Improve profitability • Increase volume • Provide stability 46
Insert Image • A goal is defined in general and broad terms. • Objectives - are quite specific and further define the goal. 47
Insert Image TOP MANAGEMENT STRUCTURE: • The formal structure of an organization is the hierarchical arrangement of people and tasks. • This structure determines how information flows within the organization, • Top management structure is the composition of the board of directors, the organizational structure, and the quality of the board. 48
Insert Image • Board Members are the highest decision making authority of an organization so its quality is considered as a critical factor. • This organizational chart is a pictorial display of the official lines of authority and communication within an organization. • There are very large companies where majority of the share is held by the promoters (like Wipro) and there are large firms where the promoter’s position is very vulnerable (like Tata group of companies). • 49
Insert Image INTERNAL POWER RELATIONSHIP: •The internal power relationship between the board of directors and senior executive officers highly affect the decision making process of the organisation. •The quality of human resources depends on competence, commitment, attitude and motivation which plays an important role in the success of an organisation. 50
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