Business, now-a-days is vitally affected by the economic, social, legal, technological and political factors. These factors collectively form business environment. Business environment, as such, is the total of all external forces, which affect the organization and operations of business. The environment of an organization has got internal, operational and general lives managers must be aware of these three environmental levels and their relationship and importance. The term, 'business environment' implies those external forces, factors and institutions that are beyond the control of individual business organizations and their management and affect the business enterprise. It implies all external forces within which a business enterprise operates. Business environment influence the functioning of the business system. Thus, business environment may be defined as all those conditions and forces which are external to the business and are beyond the individual business unit, but it operates within it. These forces are customer, creditors, competitors, government, socio-cultural organizations, political parties national and international organizations etc. some of those forces affect the business directly which some others have indirect effect on the business.(09/29/2010). Abhinav Sharma.)
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The Economic Environment
Economic environment refers to the aggregate of the nature of economic system of the country, the structural anatomy of the economy to economic policies of the government the organization of the capital market, the nature of factor endowment, business cycles, the socio-economic infrastructure etc. The successful businessman visualizes the external factors affecting the business, anticipating the prospective market situations and makes suitable to get the maximum with minimize cost
Economic factors that affect the business environments are as under:
Government economic policies.
Rate of interest set by the central bank of any country per capital Income which has a huge impact on business environment by changing their consumption behavior.
Privatization policy by the government.
Instability in the economy due to bad political conditions in the county affects the business environment.
Customs duty structure
Airline air freight charges.
Foreign investment in the country.
Generally speaking an environment includes the air we breathe, the water we drink, the available business, social and educational infrastructure in the locality, state and country etc. In the context of business the environment refers to the sum of internal and external forces operating on an organization. The managers must perforce recognize the elements, severity and impact of these forces on the organization. They must identify, evaluate and react to the forces triggered by the external environment. More often than not, these forces are beyond the control of an organization and its managers.
Accordingly, the factors of the environment will need to be considered as inputs in the planning and forecasting models developed by an organization. It is quite possible that some large organizations themselves constitute a greater part of the business environment e.g. Public Sector Oil Companies in India.
An organization operates within the larger framework of the external environment that shapes opportunities and poses threats to the organization. The external environment is a set of complex, rapidly changing and significant interacting institutions and forces that affect the organization's ability to serve its customers. External forces are not controlled by an organization, but they may be influenced or affected by that organization. It is necessary for organizations to understand the environmental conditions because they interact with strategy decisions. The external environment has a major impact on the determination of marketing decisions. Successful organizations scan their external environment so that they can respond profitably to unmet needs and trends in the targeted markets. The Organization as a System Internally, an organization can be viewed as a resource conversion machine that takes inputs (labor, money, materials and equipment) from the external environment (i.e., the world outside the boundaries of the organization), converts them into useful products, goods, and services, and makes them available to customers as outputs. The organization must continuously monitor and adapt to the environment if it is to survive and prosper.
Disturbances in the environment may spell profound threats or new opportunities. The successful organization will identify, appraise, and respond to the various opportunities and threats in its environment.
The economic environment consists of factors that affect consumer purchasing power and spending patterns. Economic factors include business cycles, inflation, unemployment, interest rates, and income.
Always on Time
Marked to Standard
Changes in major economic variables have a significant impact on the marketplace.
For example, income affects consumer spending which affects sales for organizations.
According to Engel's Laws, as income rises, the percentage of income spent on food decreases, while the percentage spent on housing remains constant.(09/29/2010). Abhinav Sharma.)
The technological environment refers to new technologies, which create new product and market opportunities. Technological developments are the most manageable uncontrollable force faced by marketers. Organizations need to be aware of new technologies in order to turn these advances into opportunities and a competitive edge. Technology has a tremendous effect on life-styles, consumption patterns, and the economy.
Advances in technology can start new industries, radically alter or destroy existing industries, and stimulate entirely separate markets. The rapid rate at which technology changes has forced organizations to quickly adapt in terms of how they develop, price, distribute, and promote their products.(09/29/2010). Abhinav Sharma.)
Political and Legal Environment
Organizations must operate within a framework of governmental regulation and legislation.
Government relationships with organizations encompass subsidies, tariffs, import quotas, and deregulation of industries. The political environment includes governmental and special interest groups that influence and limit various organizations and individuals in a given society. Organizations hire lobbyists to influence legislation and run advocacy ads that state their point of view on public issues. Special interest groups have grown in number and power over the last three decades, putting more constraints on marketers. The public expects organizations to be ethical and responsible.(09/29/2010). Abhinav Sharma.)
An example of response by marketers to special interests is green marketing, the use of recyclable or biodegradable packing materials as part of marketing strategy. The major purposes of business legislation include protection of companies from unfair competition, protection of consumers from unfair business practices and protection of the interests of society from unbridled business behavior. The legal environment becomes more complicated as organizations expand globally and face governmental structures quite different from those within the United States.(09/29/2010). Abhinav Sharma.)
Demographics tell marketers who current and potential customers are; where they are; and how many are likely to buy what the marketer is selling.
Demography is the study of human populations in terms of size, density, location, age, sex, race, occupation, and other statistics.
Changes in the demographic environment can result in significant opportunities and threats presenting themselves to the organization. Major trends for marketers in the demographic environment include worldwide explosive population growth; a changing age, ethnic and educational mix; new types of households; and geographical shifts in population.(09/29/2010). Abhinav Sharma.)
Social /Cultural Environment
Social/cultural forces are the most difficult uncontrollable variables to predict. It is important for marketers to understand and appreciate the cultural values of the environment in which they operate. The cultural environment is made up of forces that affect society's basic values, perceptions, preferences, and behaviors. U.S. values and beliefs include equality, achievement, youthfulness, efficiency, practicality, self-actualization, freedom, and humanitarianism, mastery over the environment, patriotism, individualism, religious and moral orientation, progress, materialism, social interaction, conformity, courage, and acceptance of responsibility.
Changes in social/cultural environment affect customer behavior, which affects sales of products. Trends in the cultural environment include individuals changing their views of themselves, others, and the world around them and movement toward self-fulfillment, immediate gratification, and secularism.(09/29/2010). Abhinav Sharma.)
The ecosystem refers to natural systems and its resources that are needed as inputs by marketers or that are affected by marketing activities.
Green marketing or environmental concern about the physical environment has intensified in recent years. To avoid shortages in raw materials, organizations can use renewable resources (such as forests) and alternatives (such as solar and wind energy) for nonrenewable resources (such as oil and coal). Organizations can limit their energy usage by increasing efficiency.
Good will can be built by voluntarily engaging in pollution prevention activities and natural resource.(09/29/2010). Abhinav Sharma.)
Political environment can affect a business either positively or negatively depending on the prevailing situation in a country. It mainly forms the external factors which are part of the macro-environment and whose control is beyond the ability of human beings.
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These factors touch on the way politics are conducted in a country, which directly reflects on what is happening within the government. This means that a democratic country will accord freedom to its people to vote in a government that has their interests at heart thus business will thrive owing to the good policies implemented.
On the other hand, a dictatorial government will not earn the respect of its citizens leading to economic as well as political instability and uncertainty. Even though such a government will go, businesses suffer a lot since they are not sure of their future underlining the importance of a democratic government to a country and business.
It is needless to say, that once a country is stable, more investment opportunities will be realized thus attracting more and more investors. This will reflect positively and directly to the local businesses, as even the citizens will have full confidence with them.
In the politics of the day, business success depends on politics by a great percentage and in many ways. Politicians are usually the people controlling the operations of a government and will decide which countries to trade with as well as the trading conditions.
This means that if a certain business or its owners are not in good terms with the politicians then they will have to suffer. Furthermore, the rules that govern and regulate the manner in which trade is conducted are enacted by the politicians thus it will call for good relations between stakeholders in the business sector and politicians even if it's impossible just for success. (Joseph insight news slatter)
Political Environment is one of the most important factors effecting the operations of a business. Political forces are said to be part of the Macro-environment. All the factors of the Macro-environment are external to an organization and completely beyond its control.
Political factors are concerned with the overall situation of politics in a country. Which in turn can be associated with the situation of government. If a country is democratic by nature, people will have full voting authority and they would be able to choose a government that would work for the betterment of the people and the country. In such a situation, businesses will thrive because of the good policies of the government.
On the other hand, if there is no democracy, there is no respect for the chosen government. There will be instability and uncertainty in the country. Governments will come and go and so will their respective decisions and policies. Businesses will suffer in such a case as they will not know what will be their future.
That is why it is said that a stable and democratic government and its political decisions are important for a country and overall business. A stable political situation will also attract more and more investors from other nations. (Joseph insight news slatter)
Changes in technology can cause instant impact upon a business.
Technology affects businesses on many levels. The more efficient an employee is, the more productive he is to the company. In addition, the more a business stays in touch with its customer base, the better the chance of building customer loyalty. Advances in technology make that possible, as well as allowing employees from around the world to work via video conferencing and telecommuting to work. (Morgan)
The impact of technology on a business isn't restricted to business use. A business is also affected when consumers use technology. At one time, the only way some people had to file their tax returns was through going to either a certified public accountant or a professional tax preparer, or doing taxes themselves. The tax code is complex and some people might not have felt secure in preparing their taxes on their own. However, accounting software evolved to the point where many people simply had to answer a series of questions and the computer would do the rest, including filing the information electronically. (Morgan)
Social networking affects the business environment. Employees are connected to social networks. This can be a double-edged sword, however. An employee might post something about the business publicly which should not be shared. In addition, employees need to understand what gets posted for the public to see can have an impact on the work environment, especially if the employee is posting negative comments about the work environment or other employees. On the flip side, businesses can use social networks to monitor customer satisfaction. For example, if a customer is not happy with a product and he posts his feelings online, the company can contact the customer and try to resolve any problems. Since social networks have links to friends and family, seeing the company work hard to make things right with the customer might turn the potential loss of a customer into the chance to gain new customers.
Technology has had a large impact on the business environment in terms of telecommuting. With broadband access and computers today, as well as Smartphone's, employees can work out of their homes, saving the company money by not needing as physically large a space to operate. With video conferencing, business meetings no longer need to be face-to-face, saving on air fare and hotel reservations. (Morgan)
Some markets are highly competitive, while others are a lot less so.
A good example of a competitive market in which there are many buyers and sellers is that of Internet booksellers. Because there are so many firms selling identical products then the price of these books will be highly similar. This competition helps to drive down the profit that such firms can make.
Competition occurs when two or more organisations act independently to supply their products to the same group of consumers.
Direct and indirect competition
Direct competition exists where organisations produce similar products that appeal to the same group of consumers. For example when two supermarkets offer the same range of chocolate bars for sale.
Indirect competition exists when different firms make or sell items which although not in head to head competition still compete for the same £ in the customers pocket. For example, a High Street shop selling CD's may be competing with a cinema that is also trying to entice young shoppers to spend money on leisure activities.
Businesses are strongly affected by competition:
a. the price they charge is limited by the extent of the competition.
b. the range of services and the nature of the product they sell is influenced by the level of competition. For example, a business selling an inferior product to that of a rival will struggle to make sales unless they cut their prices. (marketing)
Business Plan for JAM Magazines
Your Mission is to make your customers the foundation of our business by developing a profitable and lasting relationship, giving them there value for their money and doing what we do best.
Objectives of JAM Magazines
Put more effort in marketing the magazine since it is what is running the business.
Selling atleast 30% more units of magazines than the previous year.
Doubling this years profit
Making a total sales revenue of 44,000 or more.
Achieving a bigger market.
Manufacturing goods to the demand of the customers.
Get sales staff to sell no less than 65% of manufactured goods.
Project sales staff and sales growth into regions not covered by the distribution network.
Manufacture magazines on time
Distribute goods to sales staffs 24 hours before sales day.
Have time to plan the overall finance of the business
JAM Magazine Strategic Plan
Name of the company: JAM Magazine
Name of Director: Swayze Smith
Name of Project: The maketing of JAM magazinez
Name of employee in charge of the project: Michele Brown
Name of person planning the strategies: Swayze Smith
Project overview: to market the sporting business using it objectives and mission statement as a guide.
Mission statement: Your Mission is to make your customers the foundation of our business by developing a profitable and lasting relationship, giving them there value for their money and doing what we do best.
Visions of the business: to reach out to a bigger market, make a profit, get the business back on track and have the stakeholders playing there part to help the business to be profitable.
Strategies:work with other magazine companies, get ministers involve, buy out my bistributers and be inpartnership with my horizontal competitors.
JAM Magazine tatics
To work with other magazine companies, group meeting will be held occasionally and contracts will be signed.
To get the ministers involve, the minister of sports will be engaged in the marketing
After the funds have being raised the business will buy out the distributors in order to spend less on purchasing.
The business will be in partnership with my horizontal competitors so the marketing of the business will increase.
JAM Magazine Milestones
4 March, Women's golf reached new heights as the inaugural World Ladies Championship hit a successful close, with 108 players from around the world gathered at Mission Hills
On 2 March, guests and celebrities gathered at Mission Hills
On 12 April, Mission Hills announced that it would invest US$800 million to build a new leisure and commercial landmark, Mission Hills Centreville. Mission Hills Centreville will be the area's only H.O.P.S.C.A. (hotel, offices, parks, shopping malls, clubs and apartments) development -- a one-stop shopping, entertainment, leisure and business hub. The project is expected to open by the end of 2013.
On 1st May, 9th "Mission Hills Golfathon" is opened
On 24 May, Three major players from China's leisure and entertainment industries came together recently to announce a new, ground-breaking film-themed commercial venture - The fifth-annual Mission Hills Jack Nicklaus Junior Championship was held on May 25
June, The season finale of the Mission Hills Junior Series was held on June 9 at the World Cup Course in Shenzhen.
On June 15, Mission Hills Shenzhen and Dongguan announced an onsite inspection and appraisal had been performed to rate levels of eco-friendliness according to the grading system of China Low Carbon Tourist Demonstration Destination.
July, The Mission Hills Clubhouse and Hotel reopened on 1 July after months of renovation.
JAM Magazine Duties and responsibilities
JAM Magazine Monitorinng and Evaluation Techniques
Marketing Objectives and strategies
work with other magazine companies.
get ministers involve.
buy out my distributors.
be in partnership with my horizontal competitors.
Finance and Budgeting
As at the 31 of October 2012
Revenues 20000 100
Landscape fee 2000 00
Finance Charge income 3000 400
Total Revenue 25000 500
Total cost of sales 25000 500
Gross profit 25000 25000
Total expenses 23000 2000
Net income 23000 23000
The Jamaican environments have impacts that affects the business environment in different ways. However the business cannot avoid all the impacts of the environment and so they plan their business around it by creating PEST and SWOT analysis to know where they stands in the business environment.
They develop strategies missions and odjectives to plan there gain in interest.
They also develop was to deal with there conflicts.
They also make income statements to see where they are financially.
It has being recommended that the business don't only sell locally but also internationally. In this why they will gain a bigger market and achieve more hence be more productive than they tend to be. It has also being recommended that the business be aware of the market to stick to the mission statement and organizations objectives.
It has being concluded that the business can be a very productive one once the requirements are met. They have great fun raising events that can bring them a far way with the help of the staleholders.