Description
SYBMS STM NOTES - Environment Appraisal
CHAPTER – 4 - Environment Appraisal Concept of Environment Environment literally means the surroundings, external objects, influences of circumstances under which someone or something exists. The environment of any organization is “the aggregate of all conditions, events and influences that surround and affect it.” Since the environment influences an organization in many ways, its understanding is of crucial importance. The concept of environment can be understood by looking at some of its characteristic. Characteristic of Environment Business environment (or simply environment) exhibits many characteristics. Some of the important – and obvious – characteristic are briefly described here. 1. Environment is Complex The environment consists of a number of factors, events, conditions and influences arising from different sources. All these do not exist in isolation but interact with each other to create entirely new sets of influences. It is difficult to comprehend at once what factors constitute as given environment. All in all, environment is a complex phenomenon relatively easier to understand in parts but difficult to grasp in its totality. Environment is dynamic The environment is constantly changing in nature. Due to the many and varied influences operating; there is dynamism in the environment causing it to continuously change its shape and character. Environment is multi-faceted What shape and character an environment assumes depends on the perception of the observe. A particular change in the environment, or new development, may be viewed differently by different
2.
3.
observe. This is frequently seen when the same development is welcomed as an opportunity by one company while another company perceives it as a threat. 4. Environment has far-reaching impact The environment has a far-reaching impact on organizations. The growth and profitability of an organization depends critically on the environment in which it exists. Any environmental change has an impact on the organization in several different ways.
Since the environment is complex, dynamic, multi-faceted and has a far-reaching impact, dividing it into external and internal components enables us to understand it better. External and Internal Environment The external environment includes all the factors outside the organization, which provide opportunities or pose threats to the organization. The internal environment refers to all the factors within an organization, which impart strengths or cause weaknesses of a strategic nature. The environment in which an organization exists can, therefore, be described in terms of the opportunities and threats operating in the external environment apart from the strengths and weaknesses existing in the internal environment. The four environmental influences could be described as follows: 1. An opportunity is a favorable condition in the organization’s environment, which enables it to consolidate and strengthen its position. An example of an opportunity is growing demand for the products or services that a company provides.
2.
A threat is an unfavorable condition in the organization’s environment, which creates a risk for, or causes damage to, the organization. An example of a threat is the emergence of strong new competitors who are likely to offer stiff competition to the existing companies in an industry. A Strength is an inherent capacity, which an organization can use to gain strategic advantage over the competitors. An examples of a strength is superior research and development skills, which can be used for new product development so that the company gains competitive advantage. A weakness is an inherent limitation or constraint, which creates a strategic disadvantage. An example of a weakness is over dependence on a single product line, which is potentially risky for a company in times of crisis.
3.
4.
An understanding of the external environment, in terms of the opportunities and threats, and the internal environment in terms of the strengths and weaknesses, is crucial for the existence, growth and profitability of any organization. A systematic approach to understanding the environment is the SWOT analysis. SWOT analysis Business firms undertake SWOT analysis to understand the external and internal environment. Through such an analysis, the strengths and weaknesses existing within an organization can be matched with the opportunities and threats operating in the environment so that an effective strategy can be formulated. An effective organizational strategy, therefore, is one that capitalizes on the opportunities through the use of strengthens and neutralizes the threats by minimizing the impact of weaknesses. Exhibit 5.1
describes some of the primary environmental influences operating currently in the contexts of the instant foods industry in India. Exhibit - Environmental influences on the instant foods industry Instant foods industry is one of the sunrise industries that has come up well in India in the recent past. Essentially meant for middle and upper-middle class urban consumers, instant foods are a product line that offers considerable potential for growth. The business environment in which the instant foods industry exists at present could be explained in terms of the opportunities and threats operating currently. Opportunities are supported by factors like: • High demand potential, estimated at around Rs 20,000 crore. At present, the total industry output in just Rs 300 crore. • Rising personal incomes, emergence of nuclear families and rise in the number of workingwomen. • Availability of packaging material to keep instant foods fresh and unadulterated. • Spread of television as a media for advertising. Threats arise due to factor like: • Problems of acceptability, as Indian are typically used to eating fresh vegetables and foods. • High taxes, instant foods are considered a luxury item; direct and indirect taxes constitute 70 to 80 per cent of the price of processed foods. • High raw material costs • High overhead expenses.
The process of strategy formulation starts with, and critically depends on, the appraisal of the external and internal environment of an organization. In this chapter, we will attempt to understood and external environment and in the next chapter we will take up the internal environment for discussion. Following are the variables of external environment: Social Environment The social environment consists of factors related to human relationships, and the development, forms and functions of such a relationship having a bearing on the business of an organization. Some of the important factors and influences operating in the social environment are: 1. Demographic characteristic, such as population, its density and distribution, changes in population and age composition, inter-state migration and rural-urban mobility and income distribution. Social concerns, such as the role of business policy in society, environmental pollution, corruption, use of mass media and consumerism. Social attitudes and values, such as expectations of society from business, social customer, beliefs, rituals and practices, changing lifestyle patterns and materialism. Family structure and changes in it, attitude towards and within the family, and family values. Role of women in society, position of children and adolescents in family and society.
2.
3.
4. 5.
6.
Educational levels, awareness and consciousness of rights, and work ethics of members of society
The social environment primarily affects the strategic management process within the organization in the areas of mission and objective setting, and decisions related to products and markets. Strategists, in the Indian context, do not seem to be fully aware of the impact of the social environment on business or they are so preoccupied with other environmental influences that they do not give a high priority to social factors. One reason for such a lack of interest could be the nature of social influences. The social changes take place very slowly and do not seem to have an immediate and direct impact on shortterm strategic decisions. Nevertheless some social changes are too prominent to be ignored. One such social change in the Indian context is the emergence of the middle-class as a powerful socioeconomic group having considerable influences and purchasing power. Exhibit 5.2 describes a few aspects related to the emergence of the middle-class in India. Exhibit - The rise of the Indian middle-class According to the World Development Report for 1987 of the World Bank, the top 20 per cent of India’s population have an income share of 50 per cent of the GDP or a per capital income of Rs 10,000 and a family of Rs 50,000. This part of the population, consisting of 15 crore people, constitutes what is known as the rising middle-class of India. Owing to the black economy which largely benefits this class and the repatriation of money from abroad by non-resident Indian who mainly belong to this class, the rising Indian middleclass possesses the real purchasing power. By 2000 A.D. this class is expected to expand to the size of 30 crore and would, most probably be the single largest middle-class group in the world.
There are important implications of the changing socio-economic structure, taking shape in India currently for the economy in general and industry and business in particular. Much of the macrolevel sectoral shift away from agriculture to manufacturing and services could be attributed, directly or indirectly, to the middleclass affluence. To the corporate sector, the middle-class provides more than a crore investors and a continuing demand potential for a variety of consumer items, ranging from detergents to refrigerators, and a number of services like insurance, leisure and advertising. New lifestyles and images have a appeared due to the consumerist and materialistic ethos prevailing in the middle-class society. Urban middle-class spend time and money on leisure activities like amusements parks while the rural middle-class takes pride in wearing readymade garments and driving motorcycles. In sum, the social environment facing Indian business is radically changing and these changes have to be taken into consideration for strategic management. Political Environment The political environment consists of factors related to management of public affairs and their impact on the business of an organization. Some of the important factors and influences operating in the political environment are: 1. The political system and its features like nature of the political system, ideological forces, political forces, political parties and centers of power. The political structure, its goals and stability.
2.
3.
Political processes like operation of the party system election, funding of elections, and legislation with respect to economic and industrial promotion and regulation. Political philosophy, government’s role in business, its policies and interventions in economic and business development.
4.
India is a democratic country having a stable political system where the government plays an active role as planner, promoter and regulator of economic activity. Businessmen, therefore, are conscious of the political environment that their organizations face. Most governmental decisions related to business are based on political considerations in line with the political philosophy followed by the ruling party at the center and the state levels. Here are a few examples of the impact of political environment on business. • The Janata government during the three-year rule at the center after 1977, followed a strict policy with regard to multinationals. As a result of the socialistic leanings of some of the ministers, Coca Cola and IBM were forced to move out of India, causing a far-reaching impact on the business environment within the country. For instance, a vast market was opened up for indigenous soft drink manufactures. The decision to allow Pepsi Cola to set up plant in Punjab is viewed by many political commentators as a part of the government’s policy to deal with the Punjab problem. Economic Environment The economic environment consists of macro-level factors related to the means of production and distribution of wealth that have an impact on the business of an organization.
Some of the important factors and influences operating in the economic environment are: 1. 2. 3. 4. 5. The economic stages existing at a given time in a country. The economic structure adopted, such as a capitalistic, socialistic or mixed economy. Economic planning, such as Five-Year Plans, annual budgets, etc. Economic policies such as industrial, monetary and fiscal policies. Economic indices like national income, distribution of income, rate and growth of GNP, per capita income, disposable personal income, rate of savings and investments, value of exports and imports the balance of payments etc. Infrastructural factors such as financial institutions, banks, modes of transportation, communication facilities, energy sources etc
6.
Strategists are acutely aware of the importance and impact of the economic environment on their organizations. Almost all annual company reports presented by the Chairmen devote attention to the general economic environment prevailing and the specific aspects that have an impact on their organizations and the business they are in. Technological Environment The technological environment consists of those factors related to knowledge applied, and the materials and machines used in the
production of goods and services that have an impact on the business of an organization. Some of the important factors and influences operating in the technological environment are as follows: 1. Sources of technology like company sources, external sources and foreign sources; cost of technology acquisition; collaboration in, and transfer of technology Technological development stages of development, change and rate of change of technology, and research and development. Impact of technology of human beings, the man-machine system, and the environmental effects of technology. Communication and infrastructural technology in management technology, and
2.
3. 4.
Strategists can ill afford to ignore the technological environment, as technology, besides customer groups and customer functions, defines the business of their organizations. The strategic implications of technological change, according to Boris Petrov, are three: it can create new markets and new business segments; and it can collapse or merge previously independent businesses by reducing or eliminating their segment cost barriers. In the Indian context, we find that the state of technological development varies among different sectors of the industry. Generally, it is felt that the technology used depends on a number of factors such as cost and availability of technology, nature of competition, relevance to customer needs, and government policy. At the macro-level, foreign technical collaborations are popular in India but subjected to strict regulation regarding indigenization,
impact on local technological development and employment, export commitments etc. Technology is often used as a strategic weapon by companies operating in a highly competitive environment.
INTERNAL ENVIRONMENT There are a number of internal factors, which influence the strategy and other decisions. An outline of the important internal factors is given 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 who 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. After the EID Parry group was taken over by the Murrugappa group, one of the most profitable business (liquor) of the ailing Parry group was sold off as the liquor business did not fit into the value system of the Murrugappa group. Mission and Objectives The business domain in the company, priorities, direction of development, business philosophy, business policy etc. are guided by the mission and objectives of the company. The main reason of
framing the mission statement is to list our various objectives of the organization. An analysis of internal environment will enable the firm to find out whether the objectives are in line with the mission statement. For e.g. if the mission statement emphasizes on quality products, then the firm must focus on activities like R &D, T&D, Technology upgradation etc. Internal Power Relationship Factors like the amount of support the top management enjoys from lower levels and workers, shareholders and Board of Directors have important influence on the decisions and their implementation. The relationship between the members of the board of directors is also a critical factor. For example, consider the differences of opinions between the ITC and BAT and their impact on the future of ITC, including its diversification plans. The role of the nominees of the financial institutions in the board of ITC also needs to be noted here. Human Resources The characteristics of the human resources like skill, quality, morale, commitment, attitudes etc. could contribute to the strength or weakness of an organisation. Some organizations find it difficult to carry out restructuring or modernization because of resistance by employees whereas they are smoothly done in some others. The involvement, initiative etc. of people at different levels may vary from organisation to organisation. 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. Other Factors There are a number of other internal factors, which contribute to business success/ failure 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, logistics etc. are among the factors, which influence the competitiveness of a firm. 2. R&D and Technological Capabilities, among other things, determine the ability to innovate and compete. 3. Marketing Resources like the organisation for marketing, quality of the marketing men; brand equity, distribution network etc. have direct bearing on the marketing efficiency. They are important also for brand extension, new product introduction etc. 4. Financial Factors like financial policies, financial position, and capital structure are also important internal environment affecting business performance, strategies and decisions.
doc_121398888.doc
SYBMS STM NOTES - Environment Appraisal
CHAPTER – 4 - Environment Appraisal Concept of Environment Environment literally means the surroundings, external objects, influences of circumstances under which someone or something exists. The environment of any organization is “the aggregate of all conditions, events and influences that surround and affect it.” Since the environment influences an organization in many ways, its understanding is of crucial importance. The concept of environment can be understood by looking at some of its characteristic. Characteristic of Environment Business environment (or simply environment) exhibits many characteristics. Some of the important – and obvious – characteristic are briefly described here. 1. Environment is Complex The environment consists of a number of factors, events, conditions and influences arising from different sources. All these do not exist in isolation but interact with each other to create entirely new sets of influences. It is difficult to comprehend at once what factors constitute as given environment. All in all, environment is a complex phenomenon relatively easier to understand in parts but difficult to grasp in its totality. Environment is dynamic The environment is constantly changing in nature. Due to the many and varied influences operating; there is dynamism in the environment causing it to continuously change its shape and character. Environment is multi-faceted What shape and character an environment assumes depends on the perception of the observe. A particular change in the environment, or new development, may be viewed differently by different
2.
3.
observe. This is frequently seen when the same development is welcomed as an opportunity by one company while another company perceives it as a threat. 4. Environment has far-reaching impact The environment has a far-reaching impact on organizations. The growth and profitability of an organization depends critically on the environment in which it exists. Any environmental change has an impact on the organization in several different ways.
Since the environment is complex, dynamic, multi-faceted and has a far-reaching impact, dividing it into external and internal components enables us to understand it better. External and Internal Environment The external environment includes all the factors outside the organization, which provide opportunities or pose threats to the organization. The internal environment refers to all the factors within an organization, which impart strengths or cause weaknesses of a strategic nature. The environment in which an organization exists can, therefore, be described in terms of the opportunities and threats operating in the external environment apart from the strengths and weaknesses existing in the internal environment. The four environmental influences could be described as follows: 1. An opportunity is a favorable condition in the organization’s environment, which enables it to consolidate and strengthen its position. An example of an opportunity is growing demand for the products or services that a company provides.
2.
A threat is an unfavorable condition in the organization’s environment, which creates a risk for, or causes damage to, the organization. An example of a threat is the emergence of strong new competitors who are likely to offer stiff competition to the existing companies in an industry. A Strength is an inherent capacity, which an organization can use to gain strategic advantage over the competitors. An examples of a strength is superior research and development skills, which can be used for new product development so that the company gains competitive advantage. A weakness is an inherent limitation or constraint, which creates a strategic disadvantage. An example of a weakness is over dependence on a single product line, which is potentially risky for a company in times of crisis.
3.
4.
An understanding of the external environment, in terms of the opportunities and threats, and the internal environment in terms of the strengths and weaknesses, is crucial for the existence, growth and profitability of any organization. A systematic approach to understanding the environment is the SWOT analysis. SWOT analysis Business firms undertake SWOT analysis to understand the external and internal environment. Through such an analysis, the strengths and weaknesses existing within an organization can be matched with the opportunities and threats operating in the environment so that an effective strategy can be formulated. An effective organizational strategy, therefore, is one that capitalizes on the opportunities through the use of strengthens and neutralizes the threats by minimizing the impact of weaknesses. Exhibit 5.1
describes some of the primary environmental influences operating currently in the contexts of the instant foods industry in India. Exhibit - Environmental influences on the instant foods industry Instant foods industry is one of the sunrise industries that has come up well in India in the recent past. Essentially meant for middle and upper-middle class urban consumers, instant foods are a product line that offers considerable potential for growth. The business environment in which the instant foods industry exists at present could be explained in terms of the opportunities and threats operating currently. Opportunities are supported by factors like: • High demand potential, estimated at around Rs 20,000 crore. At present, the total industry output in just Rs 300 crore. • Rising personal incomes, emergence of nuclear families and rise in the number of workingwomen. • Availability of packaging material to keep instant foods fresh and unadulterated. • Spread of television as a media for advertising. Threats arise due to factor like: • Problems of acceptability, as Indian are typically used to eating fresh vegetables and foods. • High taxes, instant foods are considered a luxury item; direct and indirect taxes constitute 70 to 80 per cent of the price of processed foods. • High raw material costs • High overhead expenses.
The process of strategy formulation starts with, and critically depends on, the appraisal of the external and internal environment of an organization. In this chapter, we will attempt to understood and external environment and in the next chapter we will take up the internal environment for discussion. Following are the variables of external environment: Social Environment The social environment consists of factors related to human relationships, and the development, forms and functions of such a relationship having a bearing on the business of an organization. Some of the important factors and influences operating in the social environment are: 1. Demographic characteristic, such as population, its density and distribution, changes in population and age composition, inter-state migration and rural-urban mobility and income distribution. Social concerns, such as the role of business policy in society, environmental pollution, corruption, use of mass media and consumerism. Social attitudes and values, such as expectations of society from business, social customer, beliefs, rituals and practices, changing lifestyle patterns and materialism. Family structure and changes in it, attitude towards and within the family, and family values. Role of women in society, position of children and adolescents in family and society.
2.
3.
4. 5.
6.
Educational levels, awareness and consciousness of rights, and work ethics of members of society
The social environment primarily affects the strategic management process within the organization in the areas of mission and objective setting, and decisions related to products and markets. Strategists, in the Indian context, do not seem to be fully aware of the impact of the social environment on business or they are so preoccupied with other environmental influences that they do not give a high priority to social factors. One reason for such a lack of interest could be the nature of social influences. The social changes take place very slowly and do not seem to have an immediate and direct impact on shortterm strategic decisions. Nevertheless some social changes are too prominent to be ignored. One such social change in the Indian context is the emergence of the middle-class as a powerful socioeconomic group having considerable influences and purchasing power. Exhibit 5.2 describes a few aspects related to the emergence of the middle-class in India. Exhibit - The rise of the Indian middle-class According to the World Development Report for 1987 of the World Bank, the top 20 per cent of India’s population have an income share of 50 per cent of the GDP or a per capital income of Rs 10,000 and a family of Rs 50,000. This part of the population, consisting of 15 crore people, constitutes what is known as the rising middle-class of India. Owing to the black economy which largely benefits this class and the repatriation of money from abroad by non-resident Indian who mainly belong to this class, the rising Indian middleclass possesses the real purchasing power. By 2000 A.D. this class is expected to expand to the size of 30 crore and would, most probably be the single largest middle-class group in the world.
There are important implications of the changing socio-economic structure, taking shape in India currently for the economy in general and industry and business in particular. Much of the macrolevel sectoral shift away from agriculture to manufacturing and services could be attributed, directly or indirectly, to the middleclass affluence. To the corporate sector, the middle-class provides more than a crore investors and a continuing demand potential for a variety of consumer items, ranging from detergents to refrigerators, and a number of services like insurance, leisure and advertising. New lifestyles and images have a appeared due to the consumerist and materialistic ethos prevailing in the middle-class society. Urban middle-class spend time and money on leisure activities like amusements parks while the rural middle-class takes pride in wearing readymade garments and driving motorcycles. In sum, the social environment facing Indian business is radically changing and these changes have to be taken into consideration for strategic management. Political Environment The political environment consists of factors related to management of public affairs and their impact on the business of an organization. Some of the important factors and influences operating in the political environment are: 1. The political system and its features like nature of the political system, ideological forces, political forces, political parties and centers of power. The political structure, its goals and stability.
2.
3.
Political processes like operation of the party system election, funding of elections, and legislation with respect to economic and industrial promotion and regulation. Political philosophy, government’s role in business, its policies and interventions in economic and business development.
4.
India is a democratic country having a stable political system where the government plays an active role as planner, promoter and regulator of economic activity. Businessmen, therefore, are conscious of the political environment that their organizations face. Most governmental decisions related to business are based on political considerations in line with the political philosophy followed by the ruling party at the center and the state levels. Here are a few examples of the impact of political environment on business. • The Janata government during the three-year rule at the center after 1977, followed a strict policy with regard to multinationals. As a result of the socialistic leanings of some of the ministers, Coca Cola and IBM were forced to move out of India, causing a far-reaching impact on the business environment within the country. For instance, a vast market was opened up for indigenous soft drink manufactures. The decision to allow Pepsi Cola to set up plant in Punjab is viewed by many political commentators as a part of the government’s policy to deal with the Punjab problem. Economic Environment The economic environment consists of macro-level factors related to the means of production and distribution of wealth that have an impact on the business of an organization.
Some of the important factors and influences operating in the economic environment are: 1. 2. 3. 4. 5. The economic stages existing at a given time in a country. The economic structure adopted, such as a capitalistic, socialistic or mixed economy. Economic planning, such as Five-Year Plans, annual budgets, etc. Economic policies such as industrial, monetary and fiscal policies. Economic indices like national income, distribution of income, rate and growth of GNP, per capita income, disposable personal income, rate of savings and investments, value of exports and imports the balance of payments etc. Infrastructural factors such as financial institutions, banks, modes of transportation, communication facilities, energy sources etc
6.
Strategists are acutely aware of the importance and impact of the economic environment on their organizations. Almost all annual company reports presented by the Chairmen devote attention to the general economic environment prevailing and the specific aspects that have an impact on their organizations and the business they are in. Technological Environment The technological environment consists of those factors related to knowledge applied, and the materials and machines used in the
production of goods and services that have an impact on the business of an organization. Some of the important factors and influences operating in the technological environment are as follows: 1. Sources of technology like company sources, external sources and foreign sources; cost of technology acquisition; collaboration in, and transfer of technology Technological development stages of development, change and rate of change of technology, and research and development. Impact of technology of human beings, the man-machine system, and the environmental effects of technology. Communication and infrastructural technology in management technology, and
2.
3. 4.
Strategists can ill afford to ignore the technological environment, as technology, besides customer groups and customer functions, defines the business of their organizations. The strategic implications of technological change, according to Boris Petrov, are three: it can create new markets and new business segments; and it can collapse or merge previously independent businesses by reducing or eliminating their segment cost barriers. In the Indian context, we find that the state of technological development varies among different sectors of the industry. Generally, it is felt that the technology used depends on a number of factors such as cost and availability of technology, nature of competition, relevance to customer needs, and government policy. At the macro-level, foreign technical collaborations are popular in India but subjected to strict regulation regarding indigenization,
impact on local technological development and employment, export commitments etc. Technology is often used as a strategic weapon by companies operating in a highly competitive environment.
INTERNAL ENVIRONMENT There are a number of internal factors, which influence the strategy and other decisions. An outline of the important internal factors is given 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 who 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. After the EID Parry group was taken over by the Murrugappa group, one of the most profitable business (liquor) of the ailing Parry group was sold off as the liquor business did not fit into the value system of the Murrugappa group. Mission and Objectives The business domain in the company, priorities, direction of development, business philosophy, business policy etc. are guided by the mission and objectives of the company. The main reason of
framing the mission statement is to list our various objectives of the organization. An analysis of internal environment will enable the firm to find out whether the objectives are in line with the mission statement. For e.g. if the mission statement emphasizes on quality products, then the firm must focus on activities like R &D, T&D, Technology upgradation etc. Internal Power Relationship Factors like the amount of support the top management enjoys from lower levels and workers, shareholders and Board of Directors have important influence on the decisions and their implementation. The relationship between the members of the board of directors is also a critical factor. For example, consider the differences of opinions between the ITC and BAT and their impact on the future of ITC, including its diversification plans. The role of the nominees of the financial institutions in the board of ITC also needs to be noted here. Human Resources The characteristics of the human resources like skill, quality, morale, commitment, attitudes etc. could contribute to the strength or weakness of an organisation. Some organizations find it difficult to carry out restructuring or modernization because of resistance by employees whereas they are smoothly done in some others. The involvement, initiative etc. of people at different levels may vary from organisation to organisation. 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. Other Factors There are a number of other internal factors, which contribute to business success/ failure 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, logistics etc. are among the factors, which influence the competitiveness of a firm. 2. R&D and Technological Capabilities, among other things, determine the ability to innovate and compete. 3. Marketing Resources like the organisation for marketing, quality of the marketing men; brand equity, distribution network etc. have direct bearing on the marketing efficiency. They are important also for brand extension, new product introduction etc. 4. Financial Factors like financial policies, financial position, and capital structure are also important internal environment affecting business performance, strategies and decisions.
doc_121398888.doc