THE ENVIRONMENT OF MANAGEMENT

Concept of Business Environment

Business is an institution organized and operate in the society to achieve goals and
objectives. The primary task of a business manager is to make business success by
proper utilization of its resources. Business organizations establish, operate and grow in
society, which is surrounded by environment components. Environment is the aggregate
of events, surroundings and conditions which directly and indirectly influenced the
business organization. Therefore, the sources of any business depends up on the
analysis and study of environmental forces and apply the activities accordingly in the
business institutions.

Business environment consist of all those components of the surrounding of a business

organization, which affect or influence its operations and determine its effectiveness.
Environment is dynamic and change according to time. It is also complex and difficult to
forecast. Managements must needs to estimate and forecast environmental influence
time and again sustain its business operation in a competitive environment. It is
necessary to maintain regular monitoring on environmental changes, which is helpful to
grab opportunities and digest probable threats and challenges.

There are as many definitions of environment as are given by many scholars. Some of
them are as follows:

"Business environment is the aggregate of all conditions, events and influences that
surround and affect it" - Keith Davis

"Environment refers to institutions or forces that affect the organizations performance."

- Stephen P Robbins and Mary Coulter

"Business environment encompasses the climate of set of conditions, economic, social,

political or institutional in which business operations are conducted"

-Arthur M Weimer

In conclusion, all business organization establish, operate and grow within the wide
range of factors. All such factors and forces affecting the survival and growth of business
organizational are known as business environment. Business organization cannot exist
and operate without environment. Every business organization obtains inputs from
environment, transforms tem into outputs and again supplies them to the environment.
So, the management must be assess the environmental affect and influences by using
SWOT Analysis tool.

Importance of Business Environment

• To achieve organizational goals and objectives
• To Formulate of business plans, policy and strategy

• To Facilitate to take business decision

• To Change management

• To identify the growing competition and challenges

• To innovate and generate new ideas and philosophies

Types of Business Environment: Internal and External

Broadly, there are two types of environment: Internal and external.

TYPES OF BUSINESS ENVIRONMENT

INTERNAL ENVIRONMENT Specific or Task Environment

 Owners  Customers
 Board of directors  Suppliers
 Organizational  Competitors
resources  Government agencies
 Organizational  Pressure groups
structure  Financial institutions
 Organizational  Strategic alliance
culture
General Environment
 Political-legal
 Economic
 Socio-cultural
 Technological
Internal Environment
Factors/forces within the organization affecting business operation are internal
environment. These environmental components are easily controlled by the business
manager so that it is the controllable forces/ factors of environment. Internal
component of environment is needed to operate by the Organization. Organizational
resources are strengths but bad policy, outdated technology, untrained human
resources, poor materials are weakness
The elements of internal component of environment are as follows:
 Owners
Owners are the investors who have direct interest in the welfare and prosperity
of a business. They have the legal right on the property and assets of the
business. They are known as sole proprietors, partners and shareholders as per
types and nature of business.
 Board of directors
Members of board of directors are the representatives of the shareholders who
are directly involves in the day-to-day operations of the company. Their
responsibility is to run the business in the best interest of shareholders and the
stakeholders. They are also involved in the preparation of long term plans and
business strategies of the organization.
 Organizational resources
The success and failure of the organization depends upon the effective and
efficient utilization of the available resources such as human resources, financial
resources and physical resources. In business operations, all there resources have
equal importance, however human resources plays a major role in the mobilizing
other resources.
 Organizational Structure
Organizational structure is the foundation of an organization involving Strategies
and plans (Division of work, job description, hierarchy of authority and
responsibility, Coordination among departments or executive and subordinates).
It also helps maintain functional network among them and achieve a desired
result of an organization.
 Organizational culture
It is a set of values, norms, beliefs, rules, practices that helps its members to
understand what the organization stands for, how does things and what is
considers important. It is a system of shared belies held by the organizations
members.
 External environment
External environment is uncontrollable forces of environment. It is beyond the control of
a business manager. It provides opportunities in global context in the organization and
also threats because competition is increasing. They are very remote/
macro/competition environment forces.
External environment of component are uncontrollable forces of environment because it
is beyond the control of business organization or business manager. It is related to the
opportunity and threats of the environment.
It is also remote, macro level and competitive forces of environment while formulating
the business plan and polices and taking the business decision. It is required to study
and analyses systemically the various environmental component.

The external environment is classified in to two categories.

1. Task environment
2. General environmental
1. Task environment
Task environment is the part of external environmental forces. It is also beyond the
control of business manager or business organization. Therefore, task environment is also
the uncontrollable forces of environment. It also greatly influences the business
organization. It is required to consider the element of tasks environment while operating
the business organization successfully.

The elements of tasks environment are as follows:

 Customers
Customers pay money for goods & services and are the main sources of revenue.
They represent potential uncertainty to an organization because their testes and
preferences may change with the change in time and fashion. A satisfied
customers of today may not satisfied tomorrow through the same kinds of goods
& services. Therefore, it is necessary to collect information about customers
through market research, survey and report from representatives and other
means.
 Suppliers
Suppliers are those parties and institutions they supplies materials, machines and
other resources to the organizations. The management of every organization
seeks to ensure regular and steady flow if needed inputs at a reasonable price.
The organization must supply goods and services to the customers. If suppliers do
not supply materials in time and also charge high price, it reduces the
organizational goodwill and effectiveness.
 Competitors
 Competition is a basic feature of an open market economy. Competitors are
rivals that complete with the organization for resources. No business
organization can ignore its competitors and their business strategy. So that, a
manager of an organizations must be know their competitors and should have
the ability to forecast customers' demand and develop new strategies to increase
market share.
 Government agencies
The government is concerned with regulating new rules and regulations for the
welfare and wellbeing of the society. All business organization need to perform
their business activities within the rules and regulations enacted by the
government. A new legislation enacted by the government to protect public
interest create new challengers to the business organizations.
 Pressure groups
Pressure groups are special interest groups, which may also create problems and
difficulties in business organizations. They may influence the business
organizations by using the media to draw attention to their positions. The
pressure groups consists labor unions, customers associations, Human right
activists, environmental associations, media, social institutions etc.
 Financial institutions
Financial institutions consists commercial banks, development banks, finance
companies, insurance companies, cooperatives etc. they supply short and long
term financial resources to the business firms. The credit policy directly affects
the business activities. Every business organizations needs to maintain sound
working relationship with financial institutions.
 Strategic alliance
When two or more companies working together in a joint venture or other
partnership form is known as strategic allies. Such allies help to get expertise
other companies to gain new business ideas and knowledge.
2. General Environment
General environment refers to broad external conditions the may affect the business
activities of a business organization. It is also known as macro environment. It is
uncontrollable and requires proper monitoring of the components to adapt on the basis
of emerging changes.
The general environmental components are further classified into four different
categories.
 Political-legal Environment
The political and legal force of the general environment refers to the government
regulations and legal system for the business. It influence three institutions;
legislature, executive and judiciary. These institutions play major roles in
directing, developing and controlling business activities. Legislature enacts rules,
regulations and laws whereas executives implement them. Judiciary ensures
whether rules and laws are effectively implemented or not in public interest
within the constitutions boundary.
Business organization spend a great deal of time and money to meet government
regulations, but effects of there go beyond time and money. It is accepted by all
that a stable political environment is essential to promote business activities in
the country.
The common components of political-legal environment are;
Constitution
Constitutions is the fundamental law acceptable to all the people of the nation. It
is an important formal document of democratic system of government. It
contains different section and subsections describing basic principles to protect
public interest. The nation monitors all economic activities to ensure that no
organization violates the law defined in it.
Political philosophy
Political philosophy is an ideology that a state has adopted. Broadly, there are
three types of political ideology; democratic, socialism and mixed. In democratic
form of philosophy more emphasis is given to private sectors business activities
whereas in socialism ideology, the state holds all the economic activities. In
mixed philosophy, both state and private sectors involves business activities.
Political parties
Political parties are an essential component of a democratic system. There are
many political parties in a democratic country. They might have different
ideologies, proclamations and declarations regarding political and economic
prospects. They try to implement their declarations when thy form the
government which may effect in the business activities of many organizations.
Political institutions
Political institutions consist three institutions; legislature, executive and
judiciary. These political institutions play major roles in the formulation,
implementation and supervision of rules and laws of the nation, their fair role
contributes in developing economic activities.
Legal institutions
There are three level of legal institutions; District court, Appeal court and
Supreme court. The Attorney General's office and other offices performing
similar functions are also part of the legal institution. These institutions provide
judgement and define unclear laws and regulations. Besides these, police
administration and bureaucrats are also involved in it, which are responsible for
implementing court decisions.
 Economic Environment
Economic environment indicates the system of producing and distributing good
and services. It refers all factors, which gives shape and form to the development
of economic activities. These factors consist of interest rates, inflation, change in
disposable income, stock market fluctuation and stage of general business
cycle.
There is close relationship between business and general economic environment.
Business Organization get inputs from economic environment and they also
supply their outputs to economic environment. It is more difficult for an
organization to forecast overall economic environment of the nation because
many economic environment forces affect the business organization.
The common components of economic environment;
Economic System
Economic systems are the means by which countries and governments distribute
resources and trade goods and services. An economic system is
a system of production, resource allocation and distribution of goods and
services within a society or a given geographic area. It also represents the
foundation of economic environment of a country. Broadly, there are three
models of economic system; open market economy, state owned economy and
mixed economy. In open market economy more priority is given to private
sectors in business activities. In state owned economy, the government directly
involves in all economic activities of the nation. In mixed economy, both private
sectors and government involve either solely or jointly in economic activities of
the nation.
Economic policies
Economic policies are typically implemented and administered by the
government. Economic policies are the guidelines adopted by the government
for the economic prosperity of the nation. These policies consist of industrial
policy, commercial policy, monetary policy and fiscal policy. Industrial policy
deals with all the steps taken by the government for industrial development
which consist of licensing, infrastructure and technology transfer. Commercial
policy indicates the import and export policy consisting of export duty, customs
duty and clearance charges etc. The central bank formulates monetary policy
consisting money supply, credit policy and interest rate. Likewise, the fiscal policy
declares by the government through budget which involves government revenue,
expenditures, tax policy, liberalization policy, infrastructure development etc.
 Economic conditions
Economic conditions can be considered the economic characteristics that
describe the state of an economy. Economic condition consist on economic
strength and weakness of the nation in which organizations perform and operate
their business activities. These involve per-capita income, economic growth rate,
business cycle inflation and stages of economic development. These forces
affect organizational activities, practices and goal achievement.
Capital Market
A capital market is a financial market in which long-term debt or equity and
securities are bought and sold. Capital markets are defined as markets in which
money is provided for periods longer than a year. Capital market involves banks
including central bank, finance companies, insurance, stock market etc. Capital
market plays an important role in mobilizing scattered resources. Therefore,
development of capital markets functioning influence the repaid development of
business activities.
Globalization
Globalization is a process of interaction and integration among the people,
companies, and governments of different nations, a process driven
by international trade and investment and aided by information technology. This
process has effects on the environment, on culture, on political systems,
on economic development and prosperity, and on being in societies around the
world. Globalization is the integration of world into a huge market. It is free flow
of goods and services throughout the world without any administrative
restriction. The development of an open market economy, new technology and
international agreements contributes in developing global economy. It creates
both opportunities and threats to domestic entrepreneurs.
 Socio-cultural Environment
Society is the composition of caste, culture, religions, tradition, population,
language etc. To operate the business institution in the society, it is required to
consider various social value and norms. The socio- cultural environment is
comprehensive since it includes the total social forces within which an
organization operates. Socio-cultural environment includes tradition, social
values, beliefs, norms, attitudes, customs and demographic composition of the
nation. These all elements are adaptable, shared and inter related.

Socio-cultural environment determines the products, services and standard of

behavior that society is likely to value. It may create opportunities and threats to
the business organization. So, the business manager of an organization need to
monitor changes in socio-cultural environment. It is necessary to grab the future
scope of business in the competitive market.
The common component of socio-cultural environment;

Demography
Demography is the statistical study of populations, especially human beings. It
consist of size and distribution of population, age groups, sex ratio, urbanization,
migration of people etc. These components also affect the business activities of
the organization. So the business manager must be made detail analysis if the
demographic structure of the nation.
Lifestyle
Lifestyle is the pattern and living standard of human being. The change of level of
income, interest, fashion, education, social inter-relationship and media change
the life style of people. It also affect the business activities. Therefore the
manager need to identify and consider the changing lifestyle of people of the
nation.
Social values
Social values of the norms and beliefs of the society. There are different society
consist in the nation. Different society has different social values. It affect the
attitude towards organization and work itself. Nowadays, people prefer greater
participation in decision making, equity in opportunities etc.
Social institutions
Social institutions involves basic elements of the society like family, reference
group and social class. Family is the primary unit of society which involves
members and relation with other families. Reference groups represent the
prestigious individuals and models of society. There activities may bring change in
behavior, beliefs, attitudes and lifestyle of the people. Social class is the division
of society into different group on different basic like upper, middle and lower
economic groups and on the basic of profession like farmers, employees,
professional, businessmen etc. It also affect the business organization.
Religion
Religion is the belief and trust that the group of people have accepted since long
time. It provides the foundation of perception that a group of people has
accepted the norms and values of the society. There are so many religious group
in society. Such religious belief also affect the need and demand of the society.
Language
Language is the means of communication in which expressing views, opinion,
ideas, knowledge and experience etc. Language of people may differ on the basic
of castes and ethnicity. Some language are speared at the national and
 international level whereas some are limited in a particular area or people. It also
affects the needs and wants of the people.

 Technological Environment
Technology is also an important component of external environment. Technology
is the process of transformation. It is the process of converting inputs into
outputs. It refers to systematic application of organized knowledge essential to
do things. It focuses on machines and equipment, transmission of information,
new techniques and processes, research and development that necessary to
transform resources into finished goods and services.
Technology is ever changing and growing rapidly in the global society and it has a
crucial impact on the success and prosperity of the business organization. In
production and distribution of goods and services of every organization
implements a kind of technology. Therefore, the manager must have knowledge
about technological changes in their own area of business and for this they need
to maintain a close touch with such technological changes.
The major components of technological environment;
Nature of Technology
Technology may be manual or automatic. Manual technology is labor based and
automatic is capital based. On the basis of nature and size of business,
organization implement either manual or automatic technology. Low initial
investment is needed in manual technology but the labor and other operating
cost is high. Beside these, in automatic technology more initial investment is
needed but operating cost is low.
Pace of technology change
Technology is dynamic and ever changing day to day. The change of technology
leads to immediate impact in business organization. It creates both opportunities
and threats to the business. A business can only be successful if it is able to grab
opportunities created by the changing technology in changing environmental
context.
Technology transfer
Every organization may have some short of technology that is operated in the
production and distribution process. No organization is self-sufficient in modern
technology. So, it is essential to get transfer of technology from technologically
advanced countries to the developing country. It can be transferred through
joint venture with multinational companies, direct technical assistance, project
support, training, workshop and publication.
Research and Development budget
 In the changing environment, customers' demands change rapidly. The manager
must understand the needs and demand of customers on the basis of changing
time. For this task, it is necessary to invest a certain part of budget in research
and development work. It is helpful in innovation of new knowledge and
technology in production and distribution system with changing of time.

Ethics in Management

Meaning
Ethics is the set of moral principles and rules guiding an individual's behavior. It is
also personal beliefs of an individual about right or wrong. Ethics is the set of
moral principles and rules guiding an individual’s behavior. The literal meaning of
ethics is a science that deals with morals. It is, in fact the moral principle or belief
about what is right and what is wrong. It remains with an individual or group of
individuals which represents a belief concerning what is right or what is wrong
and what is good and what is bad. It is to be observed in relative terms as it differs
from person to person.
Ethics in management is the standard of social norms and values, truth and justice
that is accepted by managers. Ethics in management is the science, study or
philosophy which directs human behavior toward the moral values or ethical
code. It ensures the management system sound and systematic with making its
handles under certain moral values in connection to their individual behavior and
management decision making.

"Ethics commonly refers to a set of rules or principles that defined right and
wrong conduct." - Decenzo and
Robbins
"Ethic is defined as the discipline dealing with what is good and bad with moral
duty and obligation" -Webster's ninth New Collegiate
Dictionary
"Management ethics is concerned with truth and justice and has a variety of
aspects such as expectation of society, fair competition, advertising, public
relations, social responsibilities, consumer autonomy and corporate behavior in
the home country as well abroad." -
Clarance D. Wwalton
From the above definitions it may concluded that ethics are personal beliefs of an
individual about right and wrong. Similarly, managerial ethics is the standard of
social norms and values, truth and justice that is accepted by the manager in the
decision making process. A manager acts ethically or unethically will depend on
various factors. These factors involve an individual's morality, values, personality
and experiences.

Significance of Ethics in Management

Ethics is derived from the society and the norms, values, beliefs, culture and
standard of the society determine it. Managerial ethics is the moral behavior of
manager. An ethical manager can promote goodwill and reputation in the society,
gain benefits in the long run and promote uniform growth of the organization.
The following are the common significance of ethic in management:

Significance of Ethics in Management

1. Promotes goodwill and image
2. Helps to maintain better relation with stakeholders
3. Less Interference from government
4. Promotes fair Competition
5. Promotes social responsibility
6. Improve working Environment
7. Helps to increase Market Share

 Board of directors
 Organizational
1. Promotes goodwill and image
resources
 Organizational structure
Ethical management dealing helps to promote goodwill and image of the
 Organizational culture
organization in the society. The supply of goods and services by considering
quality, quantity, time and price expected by the consumers. That facilities to
gain beliefs and truth. Therefore, the organization must be avoided artificial
shortage, black marketing, inferior quality, unfair competitions etc.
2. Helps to maintain better relation with stakeholders
 Ethical behavior helps to maintain better relationship with different interested
group consisting of employees, customers, suppliers, lenders, society,
government etc. An ethical manager always tries to fulfill the needs and
requirements of these stakeholders.
3. Less Interference from government
If management is not ethical, it will be certainly attract intervention of the
government. However, an ethical manager never preforms any business activity
by violating government rules and regulation.

4. Promotes fair Competition

Management ethics helps to promote fair competition among the
firms. It discourages manger to involve in unfair trade practices like
shortage, black marking, adulteration, obsolescence etc.
5. Promotes social responsibility
The manager performs business in the society to fulfill his/her economics
objectives. Management ethics guides manager to involve in social welfare
programs like participating in education, heath, sports environmental
protections etc.
6. Improve working Environment
Management ethics guides managers to develop a better work environment
within the organization. He tries to motivate employees by introducing a feeling
of justice, equality, freedom, belongings, sense of responsibility and ownership.
7. Helps to increase Market Share
An ethical management practices of a manager helps to an organization gain
prestige and reputation in the society. In the long term run of organization it
helps to increase market share of the organization.