External Environment of Business

A host of external and often largely uncontrolled factors influence a firm's choice of direction and action and ultimately its organizational structure and internal processes. These factors which constitute the external environment can be divided into two interrelated subcategories those in the remote environment and those in immediate operating environment.

Remote environment
The remote environment is composed of a set of forces that originate beyond and usually irrespective of any single firm 's operating situation--

Economic
Political
Social
Technological
Industry

Economic Consideration
It refers to the nature and direction of the economy in which the business operates

Social Consideration
This involves the beliefs ,values, attitudes, opinions , and lifestyles of those in a firm's external environment, as developed from their cultural,ecological,demographic,religious,educational and ethnic conditioning.

Political Conditioning
The direction and stability of political factors is a major consideration for managers in formulating company strategy. Political considerations define the legal and otherwise governing parameters in which the firm must or may wish to operate.

Technological Considerations
To avoid obsolescence and promote innovation, a firm must be aware of technological changes that might influence its industry.

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RISK in Investments

Investment decisions are a trade off between Risk and Return. Risk refers to the possibility that the actual outcome of an investment will differ from its expected outcome. Most investors are concerned about the actual outcome being less than the expected outcome. The wider the range of possible outcomes,the greater the risk. SOURCES OF RISK The three major sources of risk are: Business Risk Interest Rate Risk Market Risk Business Risk As a holder of corporate securities (equity shares and debentures) you are exposed to risk of poor business performance. This may be caused by a variety of factors like heightened competition, emergence of new technologies, development of substitute products , shifts in consumer preferences, inadequate supply of essential inputs,changes in governmental policies and so on. The principal reason might be inept and incompetent management. Interest Rate Risk The changes in interest rate have a bearing on the welfare of investo...

Financial Glossary 1

Financial Resources Resources which have a monetary value Financial Management is planning, organizing and controlling the acquisition and use of financial resources for the purposes of achieving organisational goals. Financing is the process of determining the appropriate forms and sources of finance Financing strategy is the determination of the type of finance used to purchase assets, and the resulting mix between equity, short term debt and long term debt Investment is the use of finance to acquire an asset which will yield a required return Investment strategy is the determination of the appropriate mix of a business's assets Asset Item of value which is owned by an organisation Accounts receivable (Short term/ current asset) - customer who owes the business money for buying goods/services on credit Inventory stock - Items manufactured or purchased by the business for sale to the customers Financial Intermedia...

A note on Motivation

Motivation Theories Motivation- those factors that cause ,channel, and sustain people’s behavior. Motivation is not always easy to discern. Most successful managers ,however, have learned by experience that people are generally very responsive to praise and encouragement-expressed not only in words but also in actions and need to feel successful in their work to give their best effort to the organization. Different View points on Motivation The Traditional Model The traditional model of motivation is associated with Fredrick Taylor and scientific management which held that an important aspect of the manager’s job was to make sure that workers perform repetitive tasks in the most efficient way. The Human Relations Model In the human relations model, workers were expected to accept management’s authority because supervisors treated them with consideration and were attentive to their needs. The intent of managers ,however remained the same- to have the workers acc...

On Management

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