Introduction to Business

Environment
Unit – 1
Prof. Nimble Vivek
Introduction to Business Environment
• What Is Business?
A business can be described as an organization or
enterprising entity that engages in professional,
commercial or industrial activities.

• There can be different types of businesses depending on

various factors. Some are for-profit, while some are non-
profit.
• Ownership also makes them different from each other.

• For instance, there are sole proprietorships, partnerships,

corporations, and more.

• Business is also the efforts and activities of a person who is

producing goods or offering services with the intent to sell
them for profit.
Types of Businesses
• Sole Proprietorship:

• In this kind of business, a single person owns and operates

the business.

• There isn’t any kind of legal separation between the owner

and business.

• Thus, the onus of legal plus tax liability is on the owner.

• Partnership:
• It is a business where two or more people run it
together.

• The partners bring in resources and money, and then

the shares in the profit or loss are divided amongst
them.
• Corporation:

• A group of individuals act together as a single entity.

• The owners in this business are called shareholders.

• They discuss their views on the common stock of the corporation.

• A corporation comes with unfavorable taxation rules for the owners of the business.
• Limited Liability Company (LLC):

• It is not as old as the other business structures.

• It merges a partnership’s pass-through taxation benefits

and a corporation’s limited liability benefits.
Different Sizes of Business
• Small Business:

• Small businesses are companies where small owners (an

individual or a small group) operate.

• For instance, family restaurants, clothing companies, home-based

companies, and publishing companies.

• In this type of business, the profits are not that high but just
enough to continue the business operations.
• Mid-sized Business:
• These businesses rake in millions of dollars in revenue.

• Usually, it ranges from $50 million to $1 billion.

• They are established better than a small business. The employee

base of these businesses ranges from 100 to 999 people.

• Colorbar Cosmetics is a mid-sized business.

• Large Business:
• This kind of business usually operates as a corporation.
• It has an employee base of 1000+ people, and its revenue
production is more than $1 billion.

• Usually, these businesses issue corporate stock to finance their

operations.
• As a result, it must report on certain things and operate
restrictions.

• This is the opposite of a small business, where operations are

independent of regulators.

• Amazon and Walmart are examples of large businesses.

Business Industries
• There are different industries in which businesses operate.

• A certain company can define its business by the particular

industry.

• For instance, there are industries of real estate, agriculture,

advertising, banking, and more in which businesses exist.
Examples of Businesses
• Amazon:
• The largest online retailer, Amazon sells a wide variety of
products on its ecommerce platform.

• It began as an online bookseller and captured almost every

category of retail.

• It also offers cloud computing services, movie and show

streaming platforms and subscription products.
• Apple:
• It is a renowned company famous for its innovative
electronic products.

• They sell personal computers, smartphones, earphones,

watches, and laptops.

• Similarly, they also provide various services like music and

video streaming and production services.
• Walmart:
• Being of the most successful retailers globally, Walmart
is a multinational corporation that runs a chain of
hypermarkets offering a huge variety of products
ranging from family apparel to housewares.

• It is present in 24+ countries and has millions of

employees worldwide.
What to do before starting a
business?
• Conduct market research first and then develop a
business plan.

• The next step must be to seek capital or other funding

and select a location and business structure.
• It is also important to pick the right name, complete the
registration process, and get the tax documents and
essential permits.
• A bank account is a must before starting a business.
Market research example
• https://www.youtube.com/watch?v=jMeW876qpqc
What is business plan?
• Business plans help run your business and secure the fund needed
to start the operations.

There are two ways- traditional business plan or lean business

plan.

• The former is full of details like the company’s summary, plan for
success, product information, sales projections, etc.

• The latter one is not that detailed but has necessary information
like details of the partnership, cost structure, revenue stream, and
more.
• A business is defined as an organization or enterprising entity engaged in
commercial, industrial, or professional activities.

• Businesses can be for-profit entities or non-profit organizations.

• Business types range from limited liability companies to sole proprietorships,

corporations, and partnerships.

• Some businesses run as small operations in a single industry while others are
large operations that spread across many industries around the world.

• Apple and Walmart are two examples of well-known, successful businesses.

Business goal
• A business goal is an endpoint, accomplishment or target an organization wants to
achieve in the short term or long term.

• Business goals can take many different forms and be aspirational or motivational, such as
driving an organization toward a certain objective like improved customer service.

• They can also have very specific objectives, such as reaching a

particular revenue target, net income, profit margin, profit goal or other financial
milestone.
Mission & Vision

• A mission statement is often seen as the definition of an

organization's purpose and reason to exist, which is a form of a
business goal.

• A vision statement is another common way for an organization

to articulate its goals by providing an outlook on where it wants
to go.
Why are business goals important?
• Business goals help measure progress
• Business goals set the direction of a company
• Business goals establish accountability
• Business goals improve decision-making
Business goals vs. business objectives

• Business goals represent the direction in which a company

intends to go and define what the organization wants to
achieve.

• A business objective specifies the methods and paths that can

help a business achieve that goal.
Elements of a business goal
• A business goal comprises multiple components to be effective.

• At the most basic level, all business goals define what an

organization wants to achieve within a given time frame.
 The acronym SMART is commonly used to help ensure that the
right elements are present in a business goal.

• Specific. The business goal should be identified.

• Measureable. There should be some metric -- such as a percentage --
to measure progress.
• Achievable. There should be some expectation that the goal is
achievable, even if it is a difficult task.
• Realistic. A goal should be realistic to the company's operations and
align with its business plan.
• Time-bound. The goal should be achieved in a certain amount of time.
Different types of business goals
• Financial goals. These goals are often specific financial targets
a company wants to achieve to increase revenue or profitability.
• A business aiming for an initial public offering is a good example
of a financial goal.
• Growth goals. This type of goal aims to expand or grow part of
the business by a certain percentage.

• For example, the growth could be in terms of new products,

customers or locations. Another example would be planning to
expand operations to multiple countries.
• Employee goals. Helping employees to achieve their own
objectives in terms of career advancement, life-work balance or
career advancement is an important category of business goals.

• This is especially true in the era of the Great Resignation where

employees are looking for fulfilment.
• Process goals. Every organization has its own processes for
various activities.

• Setting goals to improve those processes and workflows can

help to optimize business efficiency.

• For example, increasing the number of software releases with

improved DevOps processes would be a process goal.
• Social goals. Social goals, such as promoting diversity or
setting sustainability targets for environmental concerns, are an
and important category in the goal-setting process.

• Cutting greenhouse gas emissions by a certain percentage or

reducing the organization's carbon footprint would fit in this
category.
• Time-based goals. Time should be an attribute of each of the goals
outlined above.

• Time-based goals include short-term, as well as long-term goals and

objectives.

• Short-term goals can be completed in days, weeks or a few months,

while long-term goals have a completion date of many months to
years.
Short-term and long-term business goals
• Goals can be set arbitrarily by management, though it's not the ideal approach.

• A common approach to help set both short-term and long-term goals is to use the
Objectives and Key Results (OKRs) framework.

• OKRs enable a business to outline its objectives and the results it wants to
achieve.

• By setting a series of OKRs, an organization can define its business goals in a

measurable way.
• The goal-setting process can also benefit from the SMART framework approach.
• While business goals set the direction for the company, it is
equally important to track each goal to help ensure progress.

• One way to do this is to use key performance indicators (KPIs)

that analyze factors crucial to measuring progress for each
goal.
Business Environment
• The term “Business environment " is the sum of all
conditions, events, and influences that surround and affect
business activities and growth.
• For example….

• Increase in taxes by the government makes everything

expensive in the market
• Technology changes may make the existing product obsolete
• Political uncertainty creates fear in the mind of investors
• Increase in competition in the market due to competitors
may affect business profit
• Changing in demand and preferences may increase the need
for a new product
Features of Business Environment
• The business environment is the sum of all factors that affect its growth.

• The business environment is dynamic.

• The business environment is highly uncertain.

• The business environment is a relative concept as it differs from country to country and even

region to region.
• The business environment includes both general and
specific forces.
• Specific forces include investors, customers, competitors,
and suppliers.

• These factors affect individual enterprises directly and

immediately in their day-to-day working.

• General forces include social, political, legal, and

technological conditions.
Components of Business Environment

Internal - It combines the factors that exist within the company. These
are –
• Human resources
• Value system
• Vision and mission
• Labour union
• Corporate culture
External - An external Environment includes those outside factors that
exercise an influence on a business’s operations. It is further classified
into two segments.

• Macro - Socio-cultural, political, legal, and global factors fall into this
category.
• Micro - This environment has a direct and immediate impact on a
business. It consists of customers, investors, suppliers, etc.