dynamics of be

8/8/2019 Dynamics of BE

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DYNAMICS OFBUSINESS

ENVIRONMENT

Miss Priti Gera

(MBA Lecturer)


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Contents

Factors Changes in Government policies

Variations in Growth performance

Corrective policy actions

Changes in market structure and Competition Future Expectations and Business Speculation

Changes in Consumer Attitudes, Tastes and Preferences

Imports and Foreign Investment Changes

External Economic shocks

Non Economic Factors

Corporate Response and Adjustment

Role of the Business Economist


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Factor-Changes in Government policies

Govt. affects business in various roles-regulator,promoter, entrepreneur, planner and consumer.

Changes in Fiscal Policy-expenditure levels, burden of

taxation, which affect costs and price.

Monetary Policy- impacts the cost and availability of

credit

Public debt policy- affects supply of savings

Govt. policies - designed to impact specific sectorsaccording to national priorities


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Factor-Variations in Growth Performance

Variations in growth rate brings about changes in

Business Environment.

Along with this, sectoral contribution also changes

the Business environment.

As all sectors have forward and backward linkages-these linkages are complex and widely networked.

In public policy- govt. should provide incentives to

sectors having maximum linkages, creating Total

Linkage effect.


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Factor-Changes in Market Structure and

Competition

Market structure depends

no. of buyers and sellers

freedom of entry and exit interdependence between firms

mobility of factors of production

and availability of market information

Trade liberalisation and import competition are

further impacting the entry of multinationals.


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Factor-Future Expectations and

Business Speculation Both Individuals and business firms, anticipate

changes in certain variables like rate of

interest, rate of inflation, exchange rate, govt.

borrowings, advertisement expenditures etc-

these anticipations guide their current

economic behaviour -produces changes in

present Business Environment.


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Continued

Ex. When there are future expectations about

inflation, people will prepone their purchases

to save money. This will bring inflation from

future to present.

Current changes and future expectations lead

to the establishment of markets for futures

and forwards in respect of commodities and

financial investments, also called Derivative

Market.


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Factor-changes in consumer

attitudes, tastes and preferences Consumer Attitude and Tastes play a major

role in product designing, delivery and

accompanying services

The changes on the side of consumer induce

changes in product content and presentation

making the environment more competitive.

Main factors that bring changes are:

education, geographical mobility, fashion

trends, compulsion of seasonal factors etc.


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Factor-Imports and Foreign

Investment changes Exposure to foreign products and foreign

business firms can cause sea change in the

nature of business environment.

Differences in the prices of imported and

domestically produced goods pose challenges

to the domestic firms to become lean and

efficient so that they can stay in competition.


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Continued.

Similarly, foreign firms not only bring foreign

investment, but also new management

philosophies, cultures, work ethos and

performance standards.

MNCs either compete with domestic

enterprises both in home and foreign markets

and establish new benchmarks.

Domestic firms which are lazy, are driven out

of the market or taken over by these firms.


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Factor-External Economic shocks

The greater the degree of international

economic linkages of a country, the greater is

the vulnerability to external economic shocks.

Ex. September 11, 2001 terrorist attack on US

caused disruption in a number of countries.

Similarly, International wars effect

international trade, tourism, investment etc


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Factors- Non Economic

Social and cultural- social tensions, communal

violence, can trigger disturbances in laws, thus

affecting our businesses.

Similarly, political changes, have the potential

to disturb business

Natural calamities, also disturb our business.

Such factors are least predictable and wise

business firms seek insurance against it.


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Corporate Response and

AdjustmentAreas of Environmental Change Corporate Response

Technological environment R&D, Technological collaboration, choice

of technology, labour capital ratio

Labour Environment Employee Motivation, Labour Turnover

Rate, Labour relations, compensation etc

Competitive Environment Pricing, Merger, new product

development, integration-forward,

backward, realisation of economies of

scale

Monetary Environment Working capital financing

Social Environment Social Responsibility, welfare expenditure

Legal Environment Procedures and Documentation,

intellectual property protection


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Role of the Business economist

To provide the economic logic and perspective

for managerial decision making by integrating

theory with practice.

Monitor and scan the various components of

BE

To make long, short and medium term

projections to guide future planning and

strategy of business


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Thanks for Your

Patient Listening

dynamics of be

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