DEFINITIONS OF BUSINESS ENVIRONMENT Business Environment has been defined by Bayard O.

Wheeler as the total of all things external to firms and industries which affect their organization and operation. According to Arthur M. Weimer, business environment encompasses the climate or set of conditions, economic, social, political or institutional in which business operations are conducted. Concept of Business Environment A business firm is an open system. It gets resources from the environment and supplies its goods and services to the environment. There are different levels of environmental forces. Some are close and internal forces whereas others are external forces. External forces may be related to national level, regional level or international level. These environmental forces provide opportunities or threats to the business community. Every business organization tries to grasp the available opportunities and face the threats that emerge from the business environment. Business organizations cannot change the external

environment but they just react. They change their internal business components (internal environment) to grasp the external opportunities and face the external environmental threats. It is, therefore, very important to analyze business environment to survive and to get success for a business in its industry. It is, therefore, a vital role of managers to analyze business environment so that they could pursue effective business strategy. A business firm gets human resources, capital, technology, information, energy, and raw materials from society. It follows government rules and regulations, social norms and cultural values, regional treaty and global alignment, economic rules and tax policies of the government. Thus, a business organization is a dynamic entity because it operates in a dynamic business environment.

INTERNAL AND EXTERNAL ENVIRONMENT OF BUSINESS I. INTERNAL ENVIRONMENT FACTORS

1. Value system: The value systems of the founders and those at the helm of affairs have important bearing on the choice of business, the mission and objectives of the organization, business policies and practices. It is a widely acknowledged fact that the extent to which the value system is shared by all in organization is an important factor contributing to success. 2. Mission and Objectives: The business domain of the company, priorities, direction of the development, business philosophy business policy etc are guided by the mission and objective of the company. Example: Ranbaxys thrust in to the foreign markets and developments have been driven by its mission to become a researcher based international pharmaceutical company.

3. MANAGEMENT STRUCTURE AND NATURE The organizational structure, the composition of board of directors, extent of professionalization of management etc, are important factors influencing business decisions. Some management structures and styles delay decision making while some other facilitate quick decision making.

The Board of Directors being the highest decision making body which sets the direction for the development of the organization and which oversees the performance of organization, the quality of the Board is a very critical factor for the development and performance of company.

4. INTERNAL POWER RELATION Factors like the amount of support the top management enjoys from the different levels of employees, share holders, and Board of Directors have important influence on the decision and their implementation. The relationship between the members of the board and between chief executive and the Board are also critical factors. 5. HUMAN RESOURCES The characteristics of the human resources like skill, quality, morale, commitment, attitude etc., could contribute to the strength and weakness of the organization. 6. COMPANY IMAGE AND BRAND EQUITY The image of the company matters while raising finance, forming joint ventures or other alliances, soliciting marketing intermediaries, entering purchase on sale contracts, launching new products etc. Brand equity is also relevant in several of these cases.

7. OTHER FACTORS A) Research and development determine a companys ability to innovate and compete. B) Marketing quality of marketing men, brand equity, distribution network have direct effect on marketing. C) FINANCE 0 financial policies; financial position and capital structure are also affecting business performances. D) Physical Assets production capacity, technology, distribution logistics

EXTERNAL ENVIRONMENT FACTORS It consists of 2 types. 1. Micro environment 2. Macro environment

I. Micro Environment The micro environment is also known as the task environment and operating environment became the micro environment forces have a direct bearing on the operations of the firm. These include the factors like

1. SUPPLIERS An important force in the micro environment of a company is the suppliers, i.e. those who supply the inputs like raw materials and

components to the company. The importance of reliable source of supply is for the smooth functioning of business. It is very risky to depend on a single supplier became of skills, lock out or any other production problem with that supplier may seriously affect the company. Hence multisource of supply often helps reduce risks. 2. CUSTOMERS A business exist only became and its customers. A company may have different categories of customers like individuals, households, industries and other commercial establishment and govt. and other institution. 3. COMPETITORS A firms competitors include not only other firms which market the same products but also all those who compete for the discretionary income of the consumers.

4. MARKETING INTERMEDIARIES The immediate environment of the company may consist of number of marketing intermediaries which are firms that aid the company in promoting, selling and distributing its goods to final buyers. The marketing intermediaries includes middlemen such as agents and merchants who help the company find customers or close sales with them.

5. FINANCIERS Another important micro environmental factor is the financier of the company. Besides the financing capabilities, their policies and strategies, attitudes, ability to provide non financial assistance etc are very important. 6. PUBLICS

A public is any group that has an actual or potential interest in an impact on an organizations ability to achieve its interests. Media publics, citizen action publics and local publics are some examples.

MACRO ENVIRONMENT It is also called as general environment and remote environment. The macro environment is generally uncontrollable than micro environment, the success of the company depends on its adaptability to the environment. The important macro environment factors as follows: I. TECHNOLOGICAL ENVIRONMENT Technology is one of the important determinants of success of a firm as well as economic and social development of nation. It includes both hardware and software to solve problems and promote progress.

1. Innovative drive of company The term innovation means introduction of new product, the use of new method of production. The technical, industrial and commercial steps which leads to marketing of new products and to commercial use of new technical process and equipment.

2. Customers Needs / Expectation Technological orientation and R&D effects of a company may also be influenced by the customer needs and expectation. In several cases the customer and the supplier have a collaborative relationship to develop the product or solutions. If the customers are highly demanding, companies would be compelled to be innovative.

3. Demand conditions The size of demand influences the choice of the technology . The size of demand influences the choice of the technological scale. Fast growing trend of demand would encourage development of technology of large scale.

4. Suppliers offering Many times technological changes are encouraged by the suppliers of a company, like a capital goods supplier etc.

5. Competitive dynamics Competition compels the adoption of the best technology and constant endeavor to innovate. 6. Substitutes Emergence of new substitutes or technological improvements or substitutes which alter technological change.

7. Social forces Certain social forces like pretext against environment pollution or other ecological problems demand for eco-friendly products.

8. Research organization The technological environment of business is enriched by researched organizations which develops new technologies and provide other technical inputs.

9. Govt. policy The govt. contributes to the development to the technology by its own direct involvement by establishing research organization and funding R & D. The govt. may encourage private R & D by various incentives.

FUNCTIONAL BUSINESS AREAS Finance Fundamentally, finance is a social science discipline.[35] The discipline borders behavioral economics, sociology,[36] economics, accounting and management. It concerns technical issues such as the mix of debt and equity, dividend policy, the evaluation of alternative investment projects, options, futures, swaps, and

other derivatives, portfolio diversification and many others. It is often mistaken[who?] to be a discipline free from ethical burdens.[35] The 2008 financial crisis caused critics to challenge the ethics of the executives in charge of U.S. and European financial institutions and financial regulatory bodies.[37] Finance ethics is overlooked for another reason issues in finance are often addressed as matters of law rather than ethics. Finance paradigm Aristotle said, "the end and purpose of the polis is the good life".[39] Adam Smith characterized the good life in terms of material goods and intellectual and moral excellences of character.[40] Smith in

his The Wealth of Nations commented, "All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind."[41] However, a section of economists influenced by the ideology of neoliberalism, interpreted the objective of economics to be maximization of economic growth through and

acceleratedconsumption and production of goods

services. Neoliberal ideology promoted finance from its position as a component of economics to its core.[citation
needed]

Proponents of the

ideology hold that unrestricted financial flows, if redeemed from the shackles of "financial repressions",[43] best help impoverished nations to grow. The theory holds that open financial systems accelerate economic growth by encouraging foreign capital inows, thereby enabling higher levels of savings, investment, employment, productivity and

"welfare",along

with

containing

corruption.[48] Neoliberals

recommended that governments open their financial systems to the global market with minimal regulation over capital flows. The

recommendations however, met with criticisms from various schools of ethical philosophy. Somepragmatic ethicists, found these claims to unfalsifiable and a priori, although neither of these makes the recommendations false or unethical per se.[54][55][56] Raising economic growth to the highest value necessarily means that welfare is subordinate, although advocates dispute this saying that economic growth provides more welfare than known alternatives. Since history shows that neither regulated nor unregulated firms always behave ethically, neither regime offers an ethical panacea.[58][59][60] Neoliberal recommendations to developing countries to unconditionally open up their economies to transnational finance corporations was fiercely contested by some ethicists. The claim that deregulation and the opening up of economies would reduce corruption was also contested. Dobson observes, "a rational agent is simply one who pursues personal material advantage ad infinitum. In essence, to be rational in finance is to be individualistic, materialistic, and competitive. Business is a game played by individuals, as with all games the object is to win, and

winning is measured in terms solely of material wealth. Within the discipline this rationality concept is never questioned, and has indeed become the theory-of-the-firm's sine qua non".[69][70] Financial ethics is in this view a mathematical function of shareholder wealth. Such simplifying assumptions were once necessary for the construction of mathematically robust models. Howeversignalling theory and agency theory extended the paradigm to greater realism. Other issues Fairness in trading practices, trading conditions, financial contracting, sales practices, consultancy services, tax payments, internal audit, external audit and executive compensation also fall under the umbrella of finance and accounting.[38][73] Particular corporate ethical/legal abuses include: creative accounting, earnings management, misleading financial analysis insider trading, securities fraud,bribery/kickbacks and facilitation payments. Outside of corporations, bucket shops and forex scams are criminal manipulations of financial markets. Cases include accounting scandals, Enron, WorldCom and Satyam

Considerations Although environmental accounting has many benefits and is a good idea in theory, it can be difficult to put into practice. When instituting environmental and social accounting practices, it is necessary to remember that many of the costs calculated in environmental accounting are intangible and difficult to measure. The company must make sure it applies the same standards and assigns the same values to resources across the organization. Some values are subjective and vary with individuals, so it can be difficult to come to a consensus on what to measure and how. Social accounting can also be challenging, as social values sometimes change quickly.

Potential Environmental and social accounting have the potential to raise awareness about public concerns. This can help us substantially reduce pollution, protect wildlife habitats and save farmland from development. Environmental and social costing can also help companies to set product and service prices at levels that take into account the true costs. This means that consumers will have to pay more for a product whose production results in a lot of air pollution or whose manufacture required the development of manufacturing plant facilities on farm land. If prices are set in this manner, environmental accounting could possibly help make environmentally costly products more expensive to purchase and green products less so. The goal is to make damaging the environment more costly and thereby less profitable while increasing awareness about the environmental and social impacts of the products we produce and consume.

AS A TOOL FOR ENVIRONMENTAL MANAGEMENT With a view to promoting environmental management, Toshiba Group is working to introduce an environmental accounting approach aimed at collecting accurate data on investments and costs required for its environmental conservation initiatives and analyzing the collected data in order to reflect investment effects and cost-efficiency in managerial decision making. The figure below shows an outline of the environmental accounting of Toshiba Group. Our environmental accounting assumes four basic concepts: prevention of potential environmental risks, competitive advantages, internal benefits and external benefits. We classify benefits into four categories based on combinations of these concepts to develop a comprehensive approach to environmental accounting: customer benefits due to reduced power consumption of products, assumed economic benefits estimated to result from reductions in air pollutant emissions, benefits resulting from preventing potential risks, and actual economic benefits resulting from reductions in the amount of waste and

energy consumed. These categories provide useful indices of environmental management. Environmental accounting as a tool for environmental management

Environmental costs and benefits The environmental accounting for FY2010 covers Toshiba and 498 consolidated subsidiaries. Environmental costs are categorized and calculated in accordance with the Environmental Accounting Guidelines 2005 of the Ministry of the Environment. Meanwhile, environmental impact reduction benefits are calculated in terms of both physical quantities and monetary values. Total environmental costs increased by 1.7% from FY2009 to 55.2 billion yen. While costs required for climate change mitigation decreased in general, those for the restoration of environmental damage increased substantially because Toshiba Corp.s Himeji Operations and group companies reported costs for restoring contaminated soil. Environmental research and development costs account for 5.4% of the total R&D costs during the fiscal year (5.8% in FY2009). Of different business sections, the electronic device section, which manufactures semiconductors and liquid crystal devices, accounts for the largest

percentage (42%) of total environmental costs, followed by the social infrastructure section, which accounts for 27% of the total. Total investments increased by 27% from FY2009 to 10.2 billion yen, with environmental investments accounting for 4.4% of total investments (3.8% in FY2009). The total amount of environmental benefits decreased greatly, by 163%, from the previous fiscal year to -58.1 billion yen. The largest reason for this decrease is that emissions of environmental pollutants increased upon Sigma Power Ariakes expansion of its thermal power generation business, rendering the assumed economic benefits negative. Since thermal power generation emits an extremely large amount of pollutants compared to other business segments, we also chose to show the assumed economic benefits excluding the effects of the power generation business in the lower part of the chart below. Those benefits decreased by 10% compared to the previous year, to 31.1 billion yen, while actual benefits were down by 38%, to 9.5 billion yen. The reason these decreases for FY2010 are less compared to FY2009 is due to the

increase in the amount of pollutants emitted due to the expansion of production. On the other hand, customer benefits grew by 37% to 54.5 billion yen. Growth in sales of products, including energysaving home appliances such as air conditioning systems and LED lamps, which greatly reduce power consumption, contributed to the increase in customer benefits. We will continue to develop environmental conservation strategies aimed at increasing environmental benefits based on a careful analysis of environmental costs.

Environmental costs and benefits (FY2006-FY2010)

Breakdown of environmental costs by business segment (FY2010)

Cost benefits of environmental management measures The figure on the right shows the changes in the cost benefits of measures for climate change mitigation and waste disposal over the past three years. We compared the costs incurred in taking measures to mitigate climate change and dispose waste against the total amount of reductions in payments related to energy consumption and waste disposal compared to the previous year as well as sales of valuables during the current year. In the table, costs are expressed as business area costs and benefits as actual benefits. The cost benefits for FY2008 were negative partly due to an increase in energy payments of 1.3 billion yen compared to the previous year. On the other hand, this figure indicates that in FY2009 and FY2010, the sum of cost reduction effects and sales of valuables exceeded the costs incurred. The major issue to be addressed going forward is how to overcome two conflicting problems: an increase in emissions of environmental pollutants as a result of business expansion and the need for cost

reductions. Toshiba Group will also analyze the cost benefits and other financial aspects of environmental management measures in more detail. Cost benefits of measures for climate change mitigation and waste disposal

INDEX
Definitions Of Business Environment Internal And External Environment Of Business External Environment Factors Macro Environment Functional Business Areas Considerations Potential As A Tool For Environmental Management Environmental Costs And Benefits