Blog

Several internal and external factors directly or indirectly influence business operations. While some of these are within the business’s control, most of these are not; and the business has to adapt itself to avoid being affected by changes in such factors. Both of them combined forms the business environment.

Today’s fast-paced business world witnesses a trend of a rather dynamic business environment – that is, it’s never stable. Hence, keeping track of these changing trends, demands, strategies, and policies is crucial in the business world. 

But first, what is a business environment and what are the factors that influence it?

What Is Business Environment?

A business environment is a combination of internal and external factors and forces that significantly influence the operations of a business.

The business environment comprises an internal and external environment that directly or indirectly affects business operations.

• Internal Environment: It includes all the factors that are well within the control of a company. These factors are relatively predictable and can be worked on by the company to eliminate forces that negatively impact its operations. 
• External Environment: It includes factors that exist outside the company’s control. They tend to be unpredictable as a company cannot possibly control or predict a change in them. Their unpredictable nature has the potential to abruptly hinder or even boost a company’s functioning. 

Components Of Business Environment

The business environment can be categorised into two types based on the factors within the control or outside the control of a business.

Internal Environment

The internal business environment constitutes several internal forces or elements within the control of a business that influences its operations. These include:

• Value System: It is the ethical belief that guides the business towards achieving its mission and objective. The value system includes all components that form a business’s regulatory framework – organisational culture, climate, work processes, management practices and organisational norms.
• Vision, Mission, and Objectives: The vision, mission, and objective of a business relate to what it wants to achieve or accomplish in future. It is the reason why the business exists.  
• Organisational Structure: It outlines how the activities are directed within the organisation to achieve its goals. It includes the rules, roles, and responsibilities, along with how tasks are delegated and how the information flows among the organisation’s levels.
• Corporate Culture: It is a powerful system of shared norms and attitudes that works as a homogenising factor for an organisation’s employees and gets appropriated by them.
• Human Resources: Human resources form all the employees and other personnel associated with the business. It forms the most valuable asset of the organisation as success or failure depends on it.
• Physical Resources and Technological Capabilities: It includes tangible assets and the technical know-how that play an essential role in ascertaining the business’s competitive capability and future growth prospects.

External Environment

External components are those factors that a business cannot control. These exist beyond a business’ jurisdiction and supervision limit. External components influencing a business environment are further classified into two categories:

• Micro Environment
• Macro Environment

Micro Environment

Micro environment is the business’s immediate external environment that influences its performance as it has a direct bearing on the firm’s regular business operations.

It includes factors outside of the business’s control but can be analysed and worked upon by managing the business to prevent any business losses. 

Micro factors include:

• Customers comprise the target group of the business.
• Competitors are other market players who target a similar target group and provide similar offerings.
• Media is the channel the business use to market its offering to the customer.
• Suppliers include all the parties that provide the business with the resources it needs to perform its operations.
• Intermediaries comprise the parties involved in delivering the offering to the final customers.
• Partners are all external entities like advertising agencies, market research organisations, consultants, etc., who conduct business with the organisation and satisfy customer needs.
• Public includes any group with actual or potential interest in the business’s operations or a group that affects its ability to serve its customers.

Macro Environment: PESTLE

The macro environment includes remote environmental factors that influence an organisation. The extent of influence a macro element can have on a business is significant as they usually affect the industry as a whole. 

These factors are classified under PESTLE: P – Political, E – Environmental, S – Social, T – Technological, L – Legal, E – Economical.

• Political Factors comprise government policies, political stability, corruption in the system, tax policies, labour laws, and trade restrictions that affect the business or the industry.
• Economical Factors relate to the economy of the country. They include economic growth, exchange rate, interest and inflation rates, etc.
• Social Factors comprise the demographics of the country. They include population growth rate, age distribution, career attitudes, health consciousness, etc.
• Technological Factors pertain to innovation in technology that affects the operations of the business. This refers to automation, research and development activities, technological awareness, etc.
• Legal Factors are laws that affect business operations. They include business-specific, industry-specific, and even state-specific laws.
• Environmental Factors comprise of all those that influence or are determined by the environment a business operates in. It includes the weather, climate, environmental policies, and even pressure from NGOs to care for the environment.

Importance of Business Environment

The market is essentially flooded with competing businesses. It is, thus, integral for a business to keep a lookout for the forces that affect it. 

Emphasis is laid on maintaining continuous interaction with a company’s business environment. Understanding this environment allows companies to –

• Plan For Long Term: A sound knowledge of the business environment helps the company know its advantages and limitations, making it easier to choose the better positioning and plan to stay in the market for the long term.
• Identify Opportunities and Trends – Timely analysis allows a company to identify and consequently explore new opportunities and better performance ideas. A business opportunity is a factor that, upon identifying, allows the initiation of a business venture or aids the development of an existing business. An example of this is Nokia, a company that has previously held a whopping 49.9% of the global market share for mobile phones. However, the company did not adapt to the market’s changing demands as it failed to analyse new trends. Keeping a constant lookout for the new trends that rival firms are setting allows the company to adapt accordingly.
• Identify threats – Identifying potential threats to the business is another reason why a company needs to keep a watch on its environment. Threats are factors that have the potential to hurt a business. Steering clear of any possible threats ahead of time is integral for the survival of a company. Staying updated and adapting to the turbulent state of the overall business environment grants the company better flexibility when it comes to coping when a sudden, unexpected threat approaches the company. Understanding these conditions and forces thoroughly allows analysts to determine what direction the company should steer towards to stay relevant in the market.
• Gain First- Mover Advantage – A company gains the first-mover’s advantage if it succeeds to identify market demands at the right time. This allows the company to create its brand and gain brand recognition which benefits the business in the long run. As time passes, competitors try to enter the market after having examined the product’s expansive market demand. By that time, the first mover has plenty of time to establish strong customer loyalty and hence a significant market share which will be hard to compete with. A closer look at the history of Amazon shows how Jeff Bezos had recognised the power of the internet after having come across a statistic that claimed that the internet would change the way businesses operate. Identifying the internet’s potential ahead of time has made Amazon the world’s largest e-commerce company today.

Features Of Business Environment

A business environment is:

• Dynamic: The constant changing of the environment – be it socially, politically, economically and technologically – results in the dynamic nature of the business environment. A heavy interrelatedness of factors that consequently lead to this ever-changing environment is witnessed.
• Unpredictable: Due to its dynamic nature, an air of uncertainty always persists. Precognition is impossible, and hence, there is no way to foresee a future event that might impact the business environment. 
• Complex: The interrelatedness of factors and circumstances form a rather tangled environment which is often difficult to analyse. It is an arduous task to keep track of the sources and their impacts on conditions and forces that make up the business environment. Hence, it is a complex task to measure the relative impact a certain force may have on a business.
• Susceptible: It is difficult to foresee the impact a slight change in the environment can have on a business. An insignificant change may influence a company’s operations largely. It has the potential to impact a business’ entire existence, its revenue and development. 
• Relative: The business environment is not the same at all places. It varies from place to place. The political crisis in one nation affects the business environment only in that nation, not elsewhere. Hence, the business environment is a relative concept.
• Multiple-angled: A social, political or economic occurrence may have different impacts on different businesses. A political move that seems beneficial for one business might seem threatening to another. Hence, there exist multiple perceptions in a business environment.

Go On, Tell Us What You Think!

Did we miss something?  Come on! Tell us what you think of our article on the business environment in the comments section.

Today’s market is so saturated that sponsored forms of communications like advertising, sponsorships, and direct marketing find it hard to get the needed attention the brand pays for.

However, there’s a non-paid form of promotion that finds its way to get people’s attention through organic media reach. It’s an element of public relations called publicity.

But what is publicity, what are its types, and how it differs from other promotional mix elements?

Let’s find out.

What Is Publicity?

Publicity is the communication about a brand, offering, or a business by placing commercially significant news about it in the media without paying for time and space directly.

In simple terms, publicity is the movement of information to the public via media coverage and other non-paid mass media sources.

Publicity is not a process but a result of a good public relations strategy where the marketers succeed in providing favourable information to media and other third-party outlets like bloggers, vloggers, podcasters, etc.

How Does Publicity Work?

Usually, brands appoint a publicist who is entrusted with the job to generate and manage publicity for the brand, offering, business, or a public figure by persuading the news media to report about the same in the most positive way possible.

Publicists identify newsworthy aspects of brands and offerings like speeches, interviews, comments, or social work by the brand representatives, ambassadors, etc. and present the same media outlets as possible reportage ideas. 

While publicity doesn’t require brands to buy advertising time and space, it does require them to put in efforts. Publicists use multiple ways to generate news stories about the brand. These are:

• Press release: A press release is a short, compelling story written in a specific format to inform local media outlets about newsworthy events or business information. It could be related to general news, launch release, events, new products, or expert positions of a brand on a particular matter.
• Networks: Public relations specialists and publicists develop media personnel relations to increase their brand’s media coverage.
• Digital Media: Brands also use digital marketing strategies like social media marketing to get the attention of the target audience and media outlets.

Objective Of Publicity

The main objective of publicity to garner public exposure, awareness, and attention to channelise the information about a brand or an offering to build its goodwill, stimulate demand, or change public opinion.

Besides this, publicity aims to:

• Build Brand Image: Publicity aims at communicating brand values, mission, and vision through trustable channels like news outlets, blogs, and opinion leaders. This helps the company build its brand image organically.
• Remove Misunderstanding: Often, a company may be a victim of misunderstanding or misinformation among the target audience. Publicity aims at removing such misunderstanding and maintaining the goodwill of the company.
• Stimulate Interest and Demand: When the product information reaches the target audience organically, it automatically stimulates their interest and increases the product’s demand.
• Communicate Reliable Information: There are certain information that can’t be communicated through advertisements. Such information is often propagated through publicity.

Characteristics Of Publicity

Publicity has the following five characteristics:

• Non-Paid Form: Publicity is a non-paid form of promotion. All of the media coverage is organic.
• Driven By Media: Publicity depends on media outlets that give a viral blow to the shared information by publicising it.
• No Control: The brand has no control over message, time, frequency, information, and medium. 
• Focuses On A Broader Audience: Publicity isn’t targeted marketing. It focuses on the shotgun approach, where the information is publicised to a broader audience.
• Credible: The target audience considers publicity to be a more credible form of communication as it uses trustworthy channels like news outlets.
• Short-Term Focus: Publicity is a promotional strategy focused on fulfilling short-term goals like a product launch, event promotion, etc.

Importance Of Publicity

Publicity adds credibility to the overall communication message. It gives the target audience a reason to talk about the brand and, in turn, increases the effectiveness of word of mouth and viral marketing.

Publicity is considered an important promotional tool. This free placement of message in the media creates public awareness and attention around a brand that develops brand image, stimulates demand, and assists sales efforts.

Types Of Publicity

Based on User sentiments

Depending upon the sentiments of the target audience, publicity can be categorised into positive and negative publicity.

• Positive Publicity: This is when positive sentiments about a brand accompany the information that’s publicised by the media or other sources. It positively affects the brand image and often increases the demand for its offerings.
• Negative Publicity: It is when negative sentiments about a brand accompany the information that’s publicised by the media or other sources. It could negatively affect the brand image and can even deteriorate its current demand.

Based on Information Propagation

Publicity can also be categorised into eight types depending upon how the information is propagated:

• News: News is information about current events provided through an identified media outlet. An example of such publicity would be an article by Forbes on how Toyota improved its employee policy during the covid19 pandemic.
• Product Release: Big brands automatically gain the attention of public, media, and even influencers during new product releases. This hype results in publicity.
• Emergency: Emergency situations or steps like mass hiring or mass firing of employees, etc., get the attention of the world organically.
• Offers: Attractive offers often get publicity by word of mouth.
• Conferences: Notable conferences get the attention of the industry players as well as the target audience.
• Events: Events that host influencers, industry experts and other notable personalities or those who stand out of the lot gain much popularity among media and other information outlets.
• Partnerships: Partnerships increase a company’s publicity horizon as it gets free publicity whenever the partner gets attention. Moreover, partnerships attract eyeballs of investors, financial analysts, and other enthusiasts.
• Digital Activity: Digital activities like tweets, posts, images, etc., often result in getting followers, media, and public attention.
• Social Efforts: A brand giving back to society often gets appreciation by the public in the form of positive publicity.
• Marketing Communication: Often, paid marketing activities also result in organic publicity. For example, an advertisement can be considered to be offensive by a media outlet that can lead to negative publicity.

Publicity Examples

Every day, news comes out with a new example of publicity – a brand holds a press conference, releases a new product, distributes a press release, does a social activity, or gets famous just because of that one tweet.

Here are a few examples of publicity that explain the concept better.

Reebok Backing Shakira Tour

Reebok held a press conference in 2002 to let the world know that the company would sponsor Shakira’s worldwide concert tour.

In return, Shakira became the brand ambassador of the brand and did some advertisements for them.

Star Wars: Passing The Baton

Till 2018, Star Wars had the record for the biggest opening weekend. But Avengers broke the record by collecting over $250 million. Instead of being bitter, LucasFilm congratulated Avengers by posting a tweet with a picture handing over a baton.

This heart-warming tweet earned the respect of movie lovers and media alike.

Congratulations, @MarvelStudios and @Avengers: #InfinityWar. pic.twitter.com/PnHfaouOlP

— Star Wars (@starwars) May 1, 2018

Johnnie Walker: Jane Walker

Johnnie Walker is a whiskey brand with a male mascot. However, to honour achievements of women throughout history, the company launched a female version of its whiskey on International Women’s Day called the Jane Walker.

The company launched this limited edition bottles in march 2018 and even pledged to donate $1 for every bottle sold to organisations that empower women.

This brought the company into the limelight for a short timespan, and the company enjoyed good publicity.

ALS Ice Bucket Challenge

ALS association’s Ice bucket challenge is probably the best example of publicity till now. The organisation succeeded in giving rise to a viral trend where people would dump a bucket of ice water over their heads to raise money for the ALS Association and research on the disease. 

Over 2.4 million people took part in the challenge and helped the organisation raise more than $115 million.

What Is A Publicity Stunt?

A publicity stunt is a planned event designed to get viral and attract public attention and press coverage.

For example, Oreo convinced pop star Lewis Capaldi to lick its biscuits and then auctioned it as a part of its charity stunt.

Publicity stunts are pre-planned and are usually a part of bigger marketing campaigns. These stunts usually add the virality touch to such campaigns and bring the brand into the spotlight for a short period.

Publicity Vs Advertising Vs Public Relations

	Publicity	Public Relations	Advertising
Definition	Publicity is a non-paid promotion of a brand where media or other viral communication tools are involved in transferring information from the brand to the public in an organic manner where the brand has very little or no control.	Public relations is a strategic communication process companies, individuals, and organisations use to build mutually beneficial relationships with the public.	Advertising is the action of calling public attention to an offering through paid announcements by an identified sponsor.
Type of promotion	It’s a result of public relations, publicity stunt, or marketing communication.	It’s a strategised process of managing the release and spread of organisation-related information to the public to maintain a favourable reputation of the organisation and its brands.	It’s a paid tool for promotion of offering, brand, business, or ideas by an identified sponsor.
Objective	Its objective is to get media attention to the brand or offering for a short term.	Its objective is to develop the brand image over a long term.	Its objective is to communicate the desired information to the public, to persuade them to buy the offerings, or to reinforce the brand message.
Earned or paid media	Earned	Earned	Paid
Control	No control over the information.	Less control over the information.	More control over the communicated information.

Advantages And Disadvantages Of Publicity

Like other elements of the promotion mix, publicity comes with its own set of advantages and disadvantages. These are:

Advantages

Publicity is considered an effective form of promotion as it can make the brand go viral within hours or days. It has the following advantages:

• Economical: Publicity brings in free attention from the media and the public. Hence, the only cost a business incurs is to strategise and execute the activity or stunt, which will result in public exposure, awareness, or attention.
• Credible: Since publicity uses trustable channels like news outlets, influencers, and opinion leaders, it is considered to be a more credible form of communication compared to advertising and other paid forms.
• Innovation: An activity, conference, or stunt needs to be innovative in order to gain publicity. Hence, publicity always come with innovation.
• Viral: Virality is a characteristic feature of publicity. A publicity stunt, event, or activity always spread like wildfire without the brand paying for the same.

Disadvantages

Publicity also comes with its own set of disadvantages. These are:

• No Control: When it comes to publicity, the brand has no control over the message, medium, or the narrative of the publicised information. It could even backfire on the brand. 
• No Guaranteed Results: It’s not guaranteed that an event will be publicised. Hence, there’s always a chance that the cost of the preparations may go in vain.
• Requires Specialised Skills And Efforts: Not everything receives positive publicity. It requires specialised skills and efforts to get the needed attention and make something go viral.

Go On, Tell Us What You Think!

Did we miss something? Come on! Tell us what you think about our article in the comments section.

The present monetary system is complex. Backed by fiat currencies, the system involves many parties – buyer, seller, banks, and even government, just to carry out one single transaction.

However, this was not always the case. 

Today’s era of digital currencies is a product of centuries of a developing monetary system that finds its roots in a little known concept of barter.

Barter was easy, involved just two parties (usually), but was highly inefficient. 

But what exactly is barter and how it works? How is it different from money trade?

Let’s find out.

What is Barter?

Barter is an act of exchange involving goods or services without the use of money or any other monetary medium. 

In simple terms, it involves a direct trade of commodities without the use of money, where the exchange is reciprocal and the trade is negotiated in a way where each party gets what it desires for, in an even amount to what it offers in exchange.

When an entire economy utilizes a similar way to transact, it establishes a complex whole system of exchange, known as the barter system.

To understand the barter definition better, take this example. Mr. A owns a poultry farm and deals in eggs. Mr. B is a farmer who deals in wheat. Now, in a barter system, Mr. A can get a kilogram of wheat flour from Mr. B in exchange for some eggs of similar worth.

How Barter Works?

Bartering is the oldest and one of the simplest forms of commerce.

The way a barter works is pretty straightforward. The participating parties negotiate and exchange one valuable product for another.

Generally, barter occurs between two parties (bilateral barter) but can involve three (triangular barter) or more than three parties (multilateral barter).

Bartering involves double coincidence of needs and mutual valuation of the same. For example, a shepherd can trade his wool to a farmer in exchange for some wheat. However, the quantity or volume of the same requires both the parties to negotiate and come to a conclusion. This negotiation depends on needs and wants of the parties and the timing of the trade. In winters, the shepherd may have an upper hand in the negotiation while in summers, he might have to settle for less.

Some people confuse barter system with the gifting economy. However, barter system involves bilateral or multilateral trade and immediate reciprocal exchange, different from the gifting economy where the exchange could even be unilateral and be delayed in time.

Characteristics Of Barter

The construct is rather modest and has the following characteristics:

• Immediate reciprocal exchange: Bartering involves immediate exchange of goods, where the exchange is reciprocal. This means that the trade is negotiated in a way where each party gets what it desires for in an even amount to what it offers in exchange.
• Double coincidence of wants: It requires both the parties to want what the other party has to offer. If any party is not interested in the other party’s offerings, the trade doesn’t take place.
• Eliminates the use for money: Barter is direct trade. It involves immediate swapping of goods and chattels with no medium of exchange involved.
• Limited circle of trade: People do not want goods of compromised quality. Therefore, bartering occurs within a circle of trusted people. This acts as a restraint to the free flow of trade across communities and geographical locations.
• No focus on economic growth: A barter economy is focused on fulfilling the essential needs of humans, not on economic growth. As a consequence, the pace of modernization stagnates.

Advantages And Disadvantages Of Barter

Like other monetary systems, barter comes with its own set of advantages and disadvantages. These are:

Advantages

The advantages of the barter system include:

Simplicity

As efficient as the present monetary system is, the intricate complexities inherent can’t be denied. On the contrary, the barter system is stripped of all menace. It involves a direct give and take of the commodities.

No Real Concentration Of Power

There is a limit beyond which commodities can’t be stored and hence the extreme concentration of wealth is a bleak possibility.

No Overexploitation Of Natural Resources

In a barter ecosystem, people tend to be a jack of all trades. People on their own try to produce or manufacture goods of utility. The quantum of production is enough, not plentiful. Thus, degradation and greedy exploitation of natural resources remain relatively contained. 

Disadvantages

There exist five major disadvantages to bartering. These include:

Double Coincidence of wants

Under the barter system, a double coincidence of wants is an essential prerequisite for an exchange to occur. Double coincidence refers to the mapping of people’s wants 1:1. 

For example, A person wants cloth and is willing to trade his wheat for it. Now he must find someone who not only desires wheat but also has cloth to trade for it. It is impossible for someone to come across such a person each time a need arises. Oftentimes, many intermediary transactions have to be undertaken to eventually be able to attain the commodity desired in the first place.

Lack Of Common Measure Of Value

Even if people with congruent needs meet each other, another dilemma is around the proportion in which one good should be exchanged for another. There is a void when it comes to a common measure of value. The problem is fixed in a manner lacking much thought to it.

An exact value cannot be assigned to the good in a barter system. The rates of exchange for it will be as many as the number of types and qualities of goods that it can be traded for.

Difficulty In Deferring Payments

Deferred payments are debt obligations to be repaid in the future. However, in a barter economy, the promise of a future repayment can lead to conflicts of many kinds. These conflicts as explained by an economist, Chandler may include:

• Disputes over the quality of goods or services to be repaid in.
• Controversy over changes in the value of the commodity over a period of time.
• Inability to agree upon the nature of goods to be used in fulfilling the obligation.

Indivisibility of Goods

An inability to peg an exchange rate to goods of indivisible nature happens to be an important limitation of barter trade. 

Suppose, the agreed-upon value of one ox is two sheep. Now, if a person wants 1 sheep, then he must give up half of an ox to be able to procure one sheep. This is impossible. The only route out of it is if the person agrees to barter the whole of an ox for a single sheep. This leads to losses for the party sacrificing an ox. This problem is done away with now. The present monetary ecosystem assigns a value to all goods in terms of a currency with so many denominations.

No Storage Of Value

In a barter ecosystem, goods and commodities exchanged are the precious store of wealth but are they the most efficient at it? Most certainly not. This is because of the following reasons:

• Commodities especially food items are perishable in nature.
• The quality of goods can deteriorate due to proliferation or other environmental factors if stored for long durations.
• Commodities are a store of value but storing themselves requires space that involves incurring expenses.

Barter vs. Money trade

Barter Trade	Money Trade
It involves a direct give and take of goods.	It includes currency in the form of paper notes, coins, or digital tokens as a mode of transaction.
It doesn’t have a scientific measure of value.	It has a well-established means to arrive at a definite value of all goods.
Double coincidence of wants is a prerequisite.	Double coincidence of wants as a concept itself doesn’t exist under this system.
The transaction is always immediate.	The transaction can occur both- Instantaneously and on a deferred basis.

Go On, Tell Us What You Think!

Did we miss something?  Come on! Tell us what you think about our article in the comments section.