BUSINESS ENVIRONMENT

UNIT – I: Introduction: The Concept of Business Environment - its Nature and

Significance -Components of Business Environment - Impact of environment on business
and strategic decisions.

INTRODUCTION
Business is an organization or enterprise engaged in producing goods and services for profit motive. It
is a collective effort where a firm is engaged in commercial, industrial or professional activities. The main
aim of business is to satisfy the needs of customers. The success of every business depends on adapting
itself to the environment within which it functions. For example, with changes in the government policies,
the business needs to adapt itself with the new policies. Similarly, any technological advancement may
render the existing products obsolete, such as the introduction of smartphones has replaced the
telephone to a greater extent. Therefore, it is very important to have a clear understanding of the basic
concept of business environment and the nature of its various components.
Business environment includes those external factors and institutions over which it does not have
any direct control. These factors affect the functioning of an organisation directly or indirectly. These
include customers, competitors, suppliers, government, and the social, political, legal and technological
factors, etc.
The set of external factors, such as economic factors, social factors, political and legal factors,
demographic factors, and technical factors, etc., which are uncontrollable in nature and affect the
business decisions of a firm, is called business environment.

The relationship between business and its environment can be explained by following points:
 Business is affected by its environment and, in turn, to some extent, it will also influence the
external factors. Similarly, economic environment influences socio- cultural environment and
vice versa. Other environmental factors also have same relationship with each other.
 The environmental factors are constantly changing. Similarly, business is also dynamic.
 One business firm, by itself, may not be able to change its environment. But together with other
businesses, it will be in a position to mould the environment in its favour.

CONCEPT OF BUSINESS ENVIRONMENT

In general sense, all businesses aim to achieve multiple objectives. A business manager identifies and
sets some important objectives like survival, stability, growth, profitability and efficiency. Enterprise
needs to balance these objectives. Profit is the biggest stimulus for the survival of the business and its
future development. There is always a risk involved in business and profit is the reward for taking
the risk. Business can be established, but it is difficult to survive in this competitive world where whole
world is one market. So, it is important for business to scan the environment.
Environment refers to all external forces which affect the functioning of business. Environment factors are
largely, if not totally, external and beyond the control of individual industrial enterprises and their
managements. The surrounding in which business operates is called business environment.
The word ‘Business Environment’ has been defined by various authors as follows:
According to Keith Davis, Business environment is the aggregate of all conditions, events and influences
that surround and affect it.
According to Reinecke and Schoell, the environment of business consists of all those external things to
which it is exposed and by which it may be influenced directly or indirectly.
 These definitions give a clear understanding of the business environment. We can say that business
environment is a combination or mixture of complex, dynamic and uncontrollable external factors within
which a business is to be operated.
The change in tastes and preferences of customers, introduction of new technologies, innovations,
government policies, etc., all are parts of the business environment. Business needs to accept and adapt
these changes promptly to survive in the market. So, it is necessary for the business to analyse the
business environment.

NATURE OF BUSINESS ENVIRONMENT

The business environment of an organisation usually poses threats as well as opportunities. To grasp the
opportunities and reduce the threat, it is important to know the nature of business environment.
Following are some points which describe nature of business environment:
 Internal and external environment: Every business is surrounded by internal and external
environment. Internal environment can be controlled by an organisation, like men, money, material,
machine and method, whereas external environment is uncontrollable like political conditions,
technologies, legal regulations, etc.
 Dynamic and ever-changing: Business environment keeps on changing frequently in terms of
technologies, government rules and regulations, socio-economic conditions, etc., which make
business dynamic.
 Complexity of the environment: Business environment cannot be easily analysed because of too
much complexity involved. Environment consists of a number of factors, events, conditions and
influences, generating from different sources which impact business, thus, making the business
complex.
 Inter-relatedness: Factors of business environment are related to each other. For example,
change in political parties will result in changing the government rules, fiscal policies, market
conditions, technology, etc. So, all the factors need to be scanned properly because these factors
are inter-related to each other.
 Uncertainty: It is difficult to predict the changes going to take place in future because
environment keeps on changing. These changes are uncontrollable. So, business can only try to
combat from these challenges. For example, in case of fashion industries, changes take place so
frequently, economy could collapse any time.
 Impact: Impact means the effect of environment on business. Business environment has both
long-term and short-term impacts on business. For example, different firms may get influenced
differently from change in monetary policy.
 Inter-dependence: A business firm and its environment are mutually interdependent. The
economic status of a country affects the development of technology or it may change the lifestyle
of people.

SCOPE OF BUSINESS ENVIRONMENT

The aspects which fall under business environment are as follows:
 Internal and external environment: Internal environment includes all those factors that are
within an organisation and impart strength or cause weakness in business. For example, inefficient
human resource, superior raw material, etc.
 External environment includes those factors which are beyond the control of business and are
outside the organisation. They provide opportunities and pose threat to business. For example,
change in political conditions, technological change, etc.

 Specific and general environment: Specific environment includes external forces that directly
 impact or influence organisations’ decisions and actions and are directly relevant to the
achievement of organisations’ goals. The main forces that make up the specific environment are
customers, suppliers, competitors and pressure groups.
 General environment includes the economic, political/legal, socio-cultural, demographic,
technological and global conditions that affect organisations. External forces do not affect
organisations to a great extent, but organisations must plan, organise, lead and control their
activities taking into account these factors.
 Micro environment and macro environment: Micro environment impacts the working of a
particular business. It has direct impact on business activities. It includes customers, suppliers,
market intermediaries, competitors, etc. These factors are controllable to some extent.
Macro environment is general environment that impacts the working of all businesses. It is
uncontrollable and influences indirectly. Political conditions, economy, technology, etc., come
under macro environment.
 Controllable and uncontrollable environment: All those factors which are governed by business
come under controllable environment. Internal factors are treated as controllable factors, like men,
material, machine, money, etc.
Uncontrollable factors are external and are beyond the control of business like technological
change and law related change.

IMPORTANCE OF BUSINESS ENVIRONMENT

Following points describe the importance of business environment:
 Identification of business opportunities: Many opportunities are provided by business
environment to the organisation. Scanning business environment would help business get the first
mover advantage. If changes are analysed carefully, then they can be the reason for business
success.
 Optimum utilisation of resources: Resources like raw material, machine, money, labour, etc., are
input for business. All these inputs are provided by environment to the business firms for carrying
out their activities and also expect something in return.
 Identification of threat and early warning signal: Business can recognise the threat by analysing
the change taking place in the environment. For example, if any new multinational company is
entering the Indian market, the manager of an Indian firm dealing with same product as that of the
multinational company should take it as a warning signal. Before the MNC launches its product,
the manager should implement measures, such as improving the quality of his product and heavy
advertisement.
 Coping with the rapid changes: To efficiently cope with these changes, managers must
understand the environment and should adopt appropriate courses of action at the right time. It
helps management become more sensitive to ever-changing needs of customers. As a result, they
are able to respond to such changes effectively.
 Meeting competition: This helps firms to analyse competitors’ strategies and formulate their
strategies accordingly.
 Identifying firm’s strength and weakness: Business environment helps identify the individual
strength and weakness in view of the technological and global developments.
 Assisting in planning and policy formulation: Business environment brings both threats and
opportunities to a business. Having a good understanding of the business environment can
immensely help an organisation’s management in their future planning and decision-making
endeavours. For example, competition increases with the entry of new firms in the market.
The management has to draft new plans and policies to deal with new competitors. Environmental
awareness provides intellectual stimulation to planners in their decision making. They can make
 Macro (General/Remote) Environment
changes in their plans efficiently and effectively
Political/Govt. environment Legal environment
COMPONENTS OF BUSINESS ENVIRONMENT
The performance of an organisation
Micro is affected by theEnvironment
(Task/Operating) business environment. It has a far-reaching impact
on its survival, profit and growth. There are certain forces inside and outside the organisation. These
forces affect the business both in positive and negative ways.
Financiers

Internal Environment

Promoters’/shareholders’ values

Suppliers Mission/Objectives Management structure Internal power relationship

Customers
Physical assets and facilities

Demographic Global
environment environment

Business Decision

Company image/brand equity Human resources

Publics Financial capabilities Competitors
Technological capabilities Marketing capabilities

Marketing intermediaries

Social/Cultural environment Technological/Natural environment

Various components of business environment are as follows:

INTERNAL ENVIRONMENT
The important internal factors which have a bearing on the strategy and other decisions are outlined
below.

 Value System
The value system of the founders and those at the helm of affairs has important bearing on the choice of
business, the mission and objectives of the organisation, business policies and practices. It is a widely
acknowledged fact that the extent to which the value system is shared by all in the organisation is an
important factor contributing to success.

The value system of JRD Tata and the acceptance of it by others whose matter were responsible for the
voluntary incorporation in the Articles of Association of TISCO, its social and moral responsibilities to
consumers, employees, shareholders, society and the people.

 Vision, Mission and Objectives

The business domain of the company, priorities, direction of development, business philosophy,
business policy etc., are guided by the vision, mission and objectives of the company. Ranbaxy’s thrust
into the foreign markets and development were driven by its mission “to become a research-based
international pharmaceutical company”. Arvind Mills’ mission – “To achieve global dominance in
select businesses built around our core competencies through continuous product and technical
innovation, customer orientation and focus on cost effectiveness”, – has driven its future development
strategy including the portfolio strategy, and indicated the thrusts required in the functional areas to help
achieve the mission.

 Management Structure and Nature

The organisational structure, the composition of the Board of Directors, extent of professionalisation of
management etc., are important factors influencing business decisions.

The Board of Directors being the highest decision-making body which sets the direction for the
development of the organisation and which oversees the performance of the organisation, the quality of
the Board is a very critical factor for the development and performance of company. The private sector
in India presents extreme cases in this respect. At one end, there are companies with highly qualified
and responsible Board and at the other end there are companies which do not possess these qualities.

 Internal Power Relationship

Factors like the amount of support the top management enjoys from different levels of employees,
shareholders and Board of Directors have important influence on the decisions and their
implementation.
The relationship between the members of Board of Directors and between the chief executive and the Board
are also a critical factors.

 Human Resources
The characteristics of the human resources like skill, quality, morale, commitment, attitude etc., could
contribute to the strength and weakness of an organisation. Some organisations find it difficult to carry
out restructuring or modernisation because of resistance by employees whereas they are smoothly done in
some others.

 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 or sale contracts, launching new products etc. Brand
equity is also relevant in several of these cases.

Miscellaneous Factors
There are a number of other internal factors which contribute to the business success/failures or influence
the decision-making. They include the following.
1. Physical Assets and Facilities like the production capacity, technology and efficiency of the
productive apparatus, distribution logistics etc., are among the factors which influence the
competitiveness of a firm. For example, as quality is very important in the pharmaceutical
industry, particularly for a global player, in the case of Core Healthcare not only there is no
compromise on quality but also the company made the quality norms stricter than international
or other relevant standards and the quality mantra has been well imbibed throughout the
organisation.
1. R&D and Technological Capabilities, among other things, determine a company’s ability
to innovate and compete.
2. Marketing Resources like the organisation for marketing, quality of the marketing men, brand
equity and distribution network have direct bearing on marketing efficiency. They are
important also for brand extension, new product introduction etc.
3. Financial Factors like financial policies, financial position and capital structure are also
important internal environment affecting business performances, strategies and decisions.

EXTERNAL ENVIRONMENT
As stated earlier, the external business environment consists of a micro environment and a macro
environment.

 Micro Environment
“The micro environment consists of the actors in the company’s immediate environment that affect the
performance of the company. These include the suppliers, marketing intermediaries, competitors,
customers and the publics.” The macro environment consists larger societal forces that affect all the
actors in the company’s micro environment — namely, the demographic, economic, natural,
technical, political and cultural forces.”
It is quite obvious that the micro environmental factors are more intimately linked with the
company than the macro factors. The micro forces need not necessarily affect all the firms in a
particular industry in the same way. Some of the micro factors may be particular to a firm. For
example, a firm which depends on a supplier may have a supplier environment which is entirely
different from that of a firm whose supply source is different. When competing firms in an industry
have the same micro elements, the relative success of the firms depends, inter alia, on their relative
effectiveness in dealing with these elements.

 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/sources of supply to the smooth functioning of the business is obvious. Uncertainty regarding the
supply or other supply constraints often compel companies to maintain high inventories causing
cost increases. Because of the sensitivity of the supply, many companies give high importance to
Vendor development. Vertical integration, where feasible, helps solve the supply problem. For example,
Nirma has always been a believer of the logic that captive production plants for raw materials is the
best way to production costs in check and it has gone for a mammoth backward integration. In many
cases, however, outsourcing is more beneficial.
It is very risky to depend on a single supplier because a strike, lock out or any other production
problem with that supplier may seriously affect the company. Similarly, a change in the attitude or
behaviour of the supplier may also affect the company. Hence, multiple sources of supply often
help reduce such risks.

 Customers
As it is often exhorted, the major task of a business is to create and sustain customers. A business exists
only because of its customers. Monitoring the customer sensitivity is, therefore, a prerequisite for the
business success.
A company may have different categories of consumers like individuals, households, industries and other
commercial establishments, and government and other institutions. For example, the customers of a tyre
company may include individual automobile owners, automobile manufacturers, public sector
transport undertakings and other transport operators.
Depending on a single customer is often too risky because it may place the company in a poor
bargaining position, apart from the risks of losing business consequent to the winding up of
business by the customer or due to the customers switching over to the competitors of the company.
With the growing globalisation, the customer environment is increasingly becoming global. Not only
that the markets of other countries are becoming more open, the Indian market is becoming more
exposed to the global competition and the Indian customer is becoming more “global” in his shopping.

 Competitors
A firm’s competitors include not only the other firms which market the same or similar products but
also all those who compete for the discretionary income of the consumers. For example, the
competition for a company’s televisions may come not only from other T.V. manufacturers but also from
two-wheelers, refrigerators, cooking ranges, stereo sets and so on and from firms offering savings and
investment schemes like banks, Unit Trust of India, companies accepting public deposits or issuing
shares or debentures etc. This competition among these products may be described as desire competition
as the primary task here is to influence the basic desire of the consumer. Such desire competition is
generally very high in countries characterised by limited disposable incomes and many unsatisfied desires
(and, of course, with many alternatives for spending/investing the disposable income).
If the consumer decides to spend his discretionary income on recreation (or recreation-cum- education),
he will still be confronted with a number of alternatives to choose from like T.V., stereo, two-in-one,
three-in-one etc. The competition among such alternatives which satisfy a particular category of desire is
called generic competition.
If the consumer decides to go in for a T.V., the next question is which form of the T.V. — black and
white or colour with remote control or without it etc. In other words, there is a product form competition.
Finally, the consumer encounters the brand competition, i.e., the competition between the different brands
of the same product form.

 Marketing Intermediaries
The immediate environment of a company may consist of a number of marketing intermediaries
 which are “firms that aid the company in promoting, selling and distributing its goods to final
buyers”.
The marketing intermediaries include middlemen such as agents and merchants who “help the
company find customers or close sales with them”, physical distribution firms which “assist the
company in stocking and moving goods from their origin to their destination” 8 such as
warehouses and transportation firms; marketing service agencies which “assist the company in
targeting and promoting its products to the right markets” 9 such as advertising agencies, marketing
research firms, media firms and consulting firms; and financial intermediaries which finance
marketing activities and insure business risks.
Marketing intermediaries are vital links between the company and the final consumers. A
dislocation or disturbance of the link, or a wrong choice of the link, may cost the company very
heavily. Retail chemists and druggists in India once decided to boycott the products of a leading
company on some issue such as poor retail margin. This move for collective boycott was,
however, objected to by the MRTP Commission; but for this the company would, perhaps, have
been in trouble. Hindustan Lever too faced major challenge when it faced a collective boycott
in Kerala on the issue of trade margin.

 Financiers
Another important micro environmental factor is the financiers of the company. Besides the
financing capabilities, their policies and strategies, attitudes (including attitude towards risk), ability
to provide non-financial assistance etc. are very important.

 Publics
A company may encounter certain publics in its environment. “A public is any group that has
an actual or potential interest in or impact on an organisation’s ability to achieve its interests.”10
Media publics, citizens action publics and local publics are some examples.
Some companies are seriously affected by such publics. For example, one of the leading
companies in India was frequently under attack by the media public, particularly by a leading
daily which was allegedly bent on bringing down the share prices of the company by tarnishing
its image. Such exposures or campaigns by the media might even influence the government
decisions affecting the company. Many companies are also affected by local publics. Environmental
pollution is an issue often taken up by a number of local publics. Actions by local publics on
this issue have caused some companies to suspend operations and/or take pollution abatement
measures. Non-government organisations (NGOs), particularly in developed countries, have been
mounting up protests against child labour, sweat labour, cruelty against animals, environmental
problems, deindustrialisation resulting from imports and so on. Exports of developing countries,
particularly, are affected by such developments.
MACRO ENVIRONMENT
A company and the forces in its micro environment operate in a larger macro environment of forces
that shape opportunities and pose threats to the company.
The macro forces are, generally, more uncontrollable than the micro forces. When the macro
environment is uncontrollable, the success of a company depends on its adaptability to the environment.
For example, if the cost of the imported components increases substantially because of the depreciation of
the domestic currency, a solution may be their domestic manufacture. These are the factors or conditions
which are general to all businesses and are uncontrollable. Because of the uncontrollable nature of
macro forces, a firm needs to adjust or adapt it to these external forces. These factors are as follows:
  Economic environment: All those forces which have an economic impact on businesses are
called economic environment. It includes agriculture, industrial production, infrastructure, and
planning, basic economic philosophy, stages of economic development, trade cycles, national
income, per capita income, savings, money, etc., For example, low per capital income will
negatively impact business because people have less money to spend.
 Political-legal environment: The activities of legislature, executive and judiciary play a vital role
in shaping, directing, developing and controlling business activities. Rules and regulations, framed
by the government, like licensing policy, polythene ban, etc., affect the business. Business growth
can be achieved by using a stable and dynamic political-legal environment.
 Technological environment: Systematic application of scientific or other organised knowledge to
practical tasks or activities is called technology. As it is changing fast, businessmen should keep a
close look on those technological changes for its adaptation in their business activities.
 Global or international environment: The global environment is also important for shaping
business activity. In the era of globalisation, whole world is a market. Business analyses
international environment to cope up with the changes.
 Socio-cultural environment: People’s attitude towards work and wealth, lifestyle, ethical issues,
role of family, marriage, religion and education and also social responsiveness of business affect
the business.
 Demographic environment: Population size and growth, life expectancy of the people, rural-
urban distribution of population, the technological skills and educational levels of labour force
come under demographic environment. These features also affect the functioning of organisations.
 Natural environment: The natural environment plays an important role as it provides raw
materials and energy for production in a firm. Natural environment consists of geographical and
ecological factors a such as minerals and oil reserves, water and forest resources, weather and
climatic conditions and port facilities. These are very important for many business activities. For
example, in places where temperatures are high, the demand for coolers and air conditioners is high.
Also, demand for clothes and building materials depends on weather and climatic conditions.
Natural calamities like floods, droughts, earthquakes, etc., immensely affect business activities.

IMPACT OF ENVIRONMENT ON BUSINESS AND STRATEGIC DECISIONS

The set of decisions and actions that result in the formulation and implementation of plans designed
to achieve a company objectives are called strategic management. Strategic decisions are based on what a
manager forecasts rather than what he knows. Strategic decisions have complex implications for more
areas of the firm. The characteristics of strategic management decisions vary with the level of strategic
management activity.
 Strategic management helps in defining the objectives and policies for the business. To make
strategy, a business needs to scan its environment.
 In formulating a strategy, the strategic decision makers must analyse internal as well as
 external conditions in the environment, which are described in the following sections:
 The analysis of internal and external environment will help managers determine what goals and
mission they can or should adopt, and the strategic options that are available.
The monitoring process of the appropriate environment by an organization to identify the
opportunities and threats, that affect the business, is known as environmental scanning or analysis.
When the environmental scanning process is completed, planners gather all the information related to the
opportunities and threats for the organization. The techniques used for environmental scanning are as
follows:
 Environmental Threat and Opportunity (ETOP) Analysis
 Quick Environmental Scanning Technique (QUEST) Analysis
 Strengths Weaknesses Opportunity and Threats (SWOT) Analysis
 Political, Economic, Social and Technological (PEST) Analysis
Techniques of Environmental Analysis
Let us analyse the various techniques of environmental analysis.
1. ETOP Analysis
ETOP is a device that considers the environmental information and determines the relative impact
of threats and opportunities, for the systematic evaluation of environmental scanning. This analysis
divides the environment into different sectors and then analyses their effect on the organization.

2. QUEST Analysis
QUEST analysis was proposed by B. Nanus. It is a four-step process that uses scenario writing for
environmental scanning. The four steps involved in this technique are as follows:
 Strategy planners first observe the events and trends of the organization.
 From the first observation, they broadly consider important issues that may affect the
organization, using environment appraisal.
 A report is created by summarizing these issues, their effects and different scenarios to show
the implementation of these strategies.
 In the last step, reports and scenarios are reviewed by the planners who decide the feasibility
of the suggested strategies that are beneficial for the organization.

3. SWOT Analysis

SWOT is the heart of strategic analysis. SWOT analysis is the process of carefully
inspecting the business and its environment through the various dimensions of strengths,
weaknesses, opportunities, and threats. SWOT is also known as TOWS analysis. SWOT is a tool
used for auditing the organization, which helps in finding the key issues and problems in the
business. SWOT analyses the problems through internal and external analysis. In internal analysis,
strengths and weaknesses of the organization are considered, whereas in external analysis,
opportunities and threats for the organization are considered. The factors that are considered during
internal analysis are as follows:
 Organizational structure
 Business location
  Organization’s operational efficiency and capacity
 Market share
 Brand awareness
 Financial resources
 Patents and trade laws
 Expertise of marketing personnel
 Business reputation in the market
 Similarly, various factors that an organization needs to consider in external analysis are as
follows:
 Customers and clients
 Competitors
 Market trends
 Suppliers
 Business partners
 Social change
 Latest technology
 Economic situation
 Political and legal restrictions

SWOT Analysis
Strengths are a company’s core competencies, and include proprietory technology, skills, resources,
market position, patents and others.
Weaknesses are the conditions within the company that can lead to poor performance and could be
obsolete equipment, heavy debt burden, poor product or market image, weak management, and others.
Opportunities are external conditions or circumstances a the company which suddenly realizes a
growth in broad market interest, could turn to its advantage. The following opportunities must be
considered in SWOT analysis:
 Advertising a product on the Internet.
 Mergers, joint ventures or strategic alliances.
 Business proposal from a new client with a good reputation in the market.
 Moving into new market segments with improved profits.
 Getting a chance to enter the international market.
Threats are the current or future conditions in the environment that may harm the company and might
include an increase in competition. The following threats must be considered in SWOT analysis:
 A new competitor in the same location.
  Price wars with competitors.
 Innovative products and services of competitors.
 Competitors with superior access to channels of distribution.
 Tax to be paid for a product or service.
 Purchasing preferences.
 Population shifts.
 New technologies.
 Increase in competition
4. PESTLE Analysis
PESTLE analysis helps in analysing the environmental factors that highly affect organizational strategies.
There are a few questions that need to be considered during PESTLE analysis to ascertain the key forces at
work in the wider environment. These questions are as follows:
a. What are the environmental factors affecting the organization?
b. Which of these factors is the most important at the present time?
PESTLE analysis helps in analysing the organizational strategies in the following ways:
 It helps in identifying the environmental factors that affect the strategies of the organization.
However, it is not necessary that the environmental analysis provides valuable information to
the organization. Hence, it becomes important for the organization to go in for a more
quantitative approach to get the real data for organizational goals.
 PESTLE analysis may be used to identify the long-term factors that lead to globalization. For
example, given the increasing globalization of some markets, it is important to identify the
forces that lead to globalization. The worldwide convergence of production systems and
consumer tastes in the market leads to the possibility of major economies benefiting from
global manufacturing and marketing. The growth of the multinational customer and competitor
has also led to the shift towards global markets, as has the overall pressure on the business for
cost reduction and therefore, the search for scale economies. A further force for global
development is the worldwide search for raw materials, energy and often, skills to provide
service to the global business networks.
 PESTLE analysis helps in identifying the key factors of business and their differential impact
on the organization. It also helps in determining the extent to which these factors affect the
competitors of the organization. The three key external factors that affect the organizations
include short life-span of technology, convergence of customer requirements and access to
the resources available globally.
 Consider an example of the three competitors, A, B and C who have the differential ability to
cope with factors such as short life-span of technology, convergence of customer
requirements and access to the resources available globally. The PEST analysis shows that
firm A can easily handle the technological changes by examining its track record, its
investment in Research and Development and its high market. Similarly, for firm C,
centralized product planning helps in coping with more convergent customer requirements.
However, A and C are not well placed when compared to B, in accessing the technical
changes. But when B is compared to A and C, in terms of purchasing organizational
resources, it is not centralized and does not help to cope with the convergent customer
requirement.