Unit-2

Understanding Firm
Specific Environment
Definition
 The Firm specific business environment refers to the
unique set of internal and external factors that directly
impact a specific company or industry.
 Michael Porter-The firm-specific business environment
encompasses the internal and external factors that directly
affect a company's competitive position within its industry,
including its unique resources, capabilities, market
positioning, and competitive Dynamics
 Peter Drucker-The firm-specific business environment
refers to the constellation of internal and external factors
that shape a company's identity, strategy, and performance
including its organizational culture, management practices,
market conditions, and stakeholder relationships.
 Scope/Factors of the firm specific
Business Environment
 Internal factors External factors

Organization goals and policies Industry dynamics

Organization structure Market position
Organization resources Customer
Organizational culture Suppliers
Leadership style Competitors
Distributor
Media
Government
Pressure Groups
Internal environment
 a.Organization goals and policies-Goal are the longterm
desired outcome of an organization. Profit growth, market
growth, and social responsibility are some of the common
goals of a business. Policies are broad guidelines for
organizational activities. They bring coordination among
the organizational units.
 b. Organizational resources: Resources are the foundation
for strategy. They are inputs into a firm's production
process, such as capital equipment, employee skills, patents,
and finance. The unique bundles of resources generate
competitive advantages. Resources may be tangible and
intangible.
 Tangible resources: They have physical existence. They
include:
 Financial resources: Borrowing capacity, and internal fund
generation capacity
 Physical resources: Sophistication and location of plant and
equipment and access to raw material
 Technological resources: Presence of technology as patent,
copyrights. trademarks, and trade secret
 Intangible resources: They do not have physical presence.
They include
 Human resources: Knowledge, skill, managerial capability,
and organizational routines
 Innovation resources: Ideas, scientific capabilities, and
capacity to innovate.
 c.Organizational structure: Organizational structure
specifies jobs and relationship. It defines the job allocation,
responsibility, and accountability. Clear and swift
organizational structure is very important for the
implementation of a particular strategy.
 d. Organizational culture: Organizational culture refers to
the complex set of ideologies, symbols, and core values
that are shared throughout the firm. It influences how the
firm conducts business. It is a phenomenon and transfers
over generations.
 e. Leadership Style-The leadership approach adopted by
top level Management affects the company's strategic
direction and employee motivation. It may be autocratic,
bureaucratic, transformational, transactional, servant or
laissez-faire
External factors
a. Industry dynamics: Industry dynamics refer to the forces
and processes that shape the behavior, evolution, and
transformation of industries. These dynamics impact how
businesses operate, compete, and adapt within their specific
sectors. Industry evolution and change, competition and
market structure, industry eco-system, and innovation
b. Market position: The company's market share, brand
reputation, and customer perception play a crucial role.
Market position shows its ability to influence consumer
perception regarding a or product relative to competitors.
c. Industry specific regulations: These are the laws, rules and
regulations established by the government or regulating
bodies and apply to a particular industry or sector. They
have direct impact on the operations of firms within the
industry.
d. Task environment: These are the external factors and forces
that directly affect the operation and performance of the
firm.. They includes the following components:
i. Customer: Customer is the most important element of
task environment. All business activities are directed
towards satisfying customer needs and retaining them
effectively. Customers may be an individual, family or
business. An organization should always focus on
addressing the changing n e e ds a nd de m a nd s of
customers and build a long-term relationship with them.
ii. Suppliers: Suppliers are the persons or firms who
provide inputs to the business needed to produce goods
or services. The quality of product depends on the quality
of input. Besides, price, delivery time.A good
relationship with the suppliers always creates business
opportunities.
 iii.Competitors- Competitors are the firms that provide similar
products in the similar market. Businesses compete for
customers. Hence, a business needs to analyze the competitors
through competitive intelligence in which a firm gathers data and
information to understand competitors' objectives, strategies,
assumptions, and capabilities.
 iv.Creditors/financial institutions: Creditors/Financial institutions
are very important for a business, since they provide fund for
short as well as long-term financial requirements. Besides fund,
they also provide other services. They may be banks, insurance
companies.
 v. Distributor: Distribution management is an important factor
that determines the effectiveness of a business. A sound
distribution system enables a business to avail the product and
services to the consumer in the stipulated time. Distributors even
provide strong manpower and cash support to the supplier or
manufacturer's promotional efforts. Hence, it is essential for a
business to have a close relationship with the distributors.
 vi. Media: A business is very closely related to media.
Media always have a very close look on the business
activities. They largely influence the image of any business.
A number of opportunities may be created with a
continuous interaction with the media. It is necessary to
address the media promptly.
 vii. Government: Government regulates the business
system. It further formulates different policies for the
development of the business sector. It attempts to protect
the interest of the consumer as well general public. Hence,
the regulations and policies of the government exert
considerable impact on the operation of a business.
Importance of understanding the
internal dynamics of the firm
 1.Strategic decision-making: Internal dynamics of a firm
provide insights into a company's strengths, weaknesses,
and core competencies that allows effective strategic
decisions for sustainability and growth.
 2. Competitive advantage: Identifying and leveraging
internal unique resources and capabilities help to create a
competitive edge to outperform competitors.
 3. Optimization of operations: Internal dynamics shows the
workflows, processes, and procedures that enables leaders
to identify inefficiencies and areas for improvement. It
finally leads to increased productivity and cost savings.
 4. Resource allocation: Understanding internal dynamics
allows leaders to allocate resources effectively among
teams or departments.
 5. Communication and collaboration: Understanding of
internal dynamics allows better communication and
collaboration among employees due to clarity in their roles,
responsibilities, and perspectives.
6. Employee engagement and retention: Understanding
internal dynamics helps managers create a congenial work
environment where employees are valued and motivated.
7. Adaptation to change: Understanding the internal
dynamics allows leaders to anticipate external threats and
proactively implement strategies to address them.
Organizational Structure
 Organizational structure is the framework through which an
organization operates. It is required for smooth functioning
or organizational activities. It defines the job allocation,
responsibility, and accountability.
 Organizational structure is concerned with hierarchy within
the organization, division of work, delegation of authority
and responsibility and creation of departments and units.
The efficiency and effectiveness of an organization largely
depends on its structure.
 Organizational structure specifies the work to be done and
how to do it in regard to the strategy or strategies. It
influences how managers work and the decisions resulting
from that work.
Organization Culture
 Organizational culture refers to the complex set of
ideologies, symbols, and core values that are shared
throughout the firm. It influences how the firm conducts
business. It shapes how employees interact, make decisions,
and approach their work. Culture reflects an organization
Values,vision,workingstyles and beliefs.It influences
management,decision and all other business function
marketing and production. it helps to regulate and control
employees behavior,it may be a critical factor in promoting
and innovation.
Role of Culture in Shaping
Employee Behaviour and
Organizational Performance
 Organizational culture influences employee behavior by
setting expectations, shaping attitudes and values, and
defining acceptable norms. It can encourage behaviors like
collaboration, innovation, and customer-centricity.
 Organizational culture is crucial for performance
enhancement because it directly affects employee
engagement, productivity, innovation and customer
satisfaction. A positive culture can lead to better financial
performance and a competitive
 Role of culture
Employee
An effective behavior
Shape Enhanced
organizational That leads to
Organizational
culture performance
Through

 Establishment of a common set of values and beliefs

 Development of acceptable behaviors
 Creation of a cohesive work environment
 Fostering innovation and teamwork
 Employee satisfaction and retention
 A strong sense of customer service
Cultural alignment and strategic
fit
 Cultural alignment refers to the degree of congruence between an organization's culture
and its strategic goals, mission, and values. It fosters a workplace environment where
every employee understands, engages, embraces, and actively supports the company's
mission and strategic direction. It is said that no matter how great a strategy is, if an
organization's culture is not aligned with and supportive of that strategy, the strategy will
either halt or fail.
 The alignment between the culture and strategy involves a three step process.

 First defining the strategy clearly.

 Second, identifying the key elements of the
culture to support the strategies and
 Third , adopting a leadership style that
actively shapes the required culture.
Operations management
 Operations management is concerned with the processes
that transform inputs (raw materials, labor, and energy) into
outputs (finished goods and services). It involves planning,
organizing, coordinating, and controlling resources to
ensure efficient production and delivery of goods and
services. Hence, it deals with a series of interrelated
activities that transform inputs into outputs.
 Operations management includes designing, optimizing,
and improving processes to enhance both efficiency and
effectiveness.
Operations management
Principle
 1.Customer focus: Operations management should be
aligned with customer needs and expectations. It involves
understanding customer requirements and delivering value-
added products and services accordingly.
 2. Efficient production processes: Operations management
involves determining the sequence of activities, resource
allocation and layout design to optimize productivity and
quality.
 3. Effective resource management: Operations management
involves developing plans and schedules to ensure that
resources are utilized to meet production targets and
customer demand.
 4. Supply chain management: Supply chain management
(SCM) is a major component of operations management. It
is the process of managing the flow of goods and services
to and from a business. It encompasses every step involved
in turning raw materials and components into final products
and delivering them to the ultimate customer.
 5. Logistics: It focuses on the movement and storage of
items within the supply chain and has internal focus. It
primarily deals with internal processes related to efficient
transportation, warehousing, and distribution.
 6.Quality Management:It is the essential to ensure that
products and service meet customer expectations.the
common technique are quality circles,statistical process
control.
 7. Capacity planning: Operations management is concerned
with planning the capacity in terms of resources, facilities,
equipment to meet demand most efficiently. This involves
forecasting demand, allocating resources, and managing
capacity constraints.
 8. Continuous improvement: Continuous improvement is at
the heart of operations management. Organizations should
constantly work to identify inefficiencies, eliminate waste,
and improve processes to enhance productivity, quality, and
customer satisfaction. Kaizen, Lean Management, and Six
Sigma are the major principles of continuous improvement.
 9. Flexibility and adaptability: Operations management
should be flexible and adaptable to changing market
conditions, customer preferences, and other environmental
issues.
Production Processes
 The production process include the series of steps involved
in manufacturing a product or providing a service.hence,it
encompasses all the activities,resource and technique
required to transform raw materials or input into finished
goods/serivce.
Steps of Production process
 1. Design and planning: The first stage of production
process involves conceptualizing the product, designing its
specifications, and planning the production process.
 2. Sourcing of inputs: In the second stage, raw materials,
components, and other necessary inputs are sourced from
suppliers.
 3. Manufacturing and quality control :In this stage, the raw
materials are converted into finished products. Throughout
the production process quality control measures are
implemented to ensure that products met specified
standards and requirements.
 4.Packaging and assembly: After the products are
manufactured, they are packaged and assembled according
to customer specifications.
 5. Distribution and logistics: Finished products are
transported distribution centers or directly to customers.
 6. Sales and marketing: Finally, products are marketed and
sold to customers through various channels such as retail
stores, online platforms, or direct sales.
 7. Customer service and support: After-sales services such
as customer support, warranties, and product maintenance
are offered to the customers as per the specified agreements
or terms.
Capacity Planning
 Capacity planning is a process of determining the
production capacity needed to meet the changing demands
of its products and services.
 The major components of capacity planning are:
 1. Demand forecasting: The first step in capacity planning
is to forecast the demand for products or services over a
specific period which is essential for determining the
required production capacity.
 2.Assessment of current capacity: After demand forecasting,
the current capacity of the organization is assessed. Now,
the required capacity and the current capacity are compared
to identify potential gaps or mismatches between supply
and demand.
 3. Capacity expansion or optimization: Based on the gaps,
organizations can develop strategies to address capacity
constraints by expanding existing facilities, investing in
new technology, or outsourcing certain processes.
 4. Risk assessment: Capacity planning also involves
assessing various risks and uncertainties emerging from
changes in market demand, supply chain disruptions,
regulatory changes, or technological advancements.
Organizations need to anticipate and mitigate these risks.
 5. Financial analysis: Capacity planning affects capital
investments, operating costs, and revenue. Hence, it is
necessary to evaluate the feasibility and profitability of
capacity alteration.
 6. Implementation and monitoring: Once capacity plans are
formulated, they need to be implemented effectively in way
that capacity levels align with changing demand dynamics
and business objectives.
 7.Continuous Improvement: Capacity planning is an
ongoing process that requires continuous
monitoring,evaluation and refinement.
Supply Chain management and
logistics
 Supply chain management (SCM) is a major component of
operations management. It is the process of managing the
flow of goods and services to and from a business. It
encompasses every step involved in turning raw materials
and components into final products and delivering them to
the ultimate customer. It should streamline company
activities, eliminates waste, maximizes customer value, and
provides a competitive advantage in the marketplace.
 Logistics focuses on the movement and storage of items
within the supply chain and has internal focus. It primarily
d e a l s w i t h i n t e r n a l p r o c e s s e s r e l a t e d t o e ff i c i e n t
transportation, warehousing, and distribution.
 Stages of supply Chain
 SUPPLY MANUFACTURE
Obtaining of the raw
material and all of Transforming of raw
the processes related materials into final
to it. sale products

DELIVERY STORAGE
The product reaches
the end customer from Stocking,organization
the point of sale or of transport and
directly from the distribution of
warehouse. products
LOGISTICS
Quality Management and
continuous improvement
 Quality is the most critical aspect of operations
management. Quality management is essential to ensure
that products and services meet customer expectations.
 1. Total Quality Management (TQM) is a management
approach that focuses on continuous quality improvement
of products and services by using continuous feedback.
 The objective of TQM is doing things right the first time
over and every time. It seeks to integrate all organizational
functions to focus on meeting customer needs and
organizational goals. It ensures that every single employee
is working towards the improvement of work culture,
processes, services, and systems to ensure long term
organizational wellbeing.
 2. Statistical Process Control (SPC) is a methodology used
to monitor control, and improve processes by analyzing
data and statistical techniques. It aims to ensure that
processes operate efficiently. consistently, and within
specified quality standards.
 3. Quality circles (QC) are small groups of employees who
voluntarily come together to identify, analyze, and solve
work-related problems within their organization. These
circles aim to improve productivity. quality, and efficiency
by harnessing the collective knowledge, skills, and
creativity of employees at the bottom level.
Continuous improvement
 Continuous improvement is a philosophy and methodology
focused on making incremental and ongoing improvements
to processes, products, and services. It involves: identifying
opportunities for improvement. implementing changes,
monitoring and measuring, standardizing best practices,
and engaging employees.Its major aspects are:
 Understanding and meeting customer needs and
expectations.
 Active participation and involvement of all employees
 Data and evidence-based decision making
 Process optimization for efficiency, consistency, and quality.
 Small and incremental improvements.
 Feedback and review mechanisms.
Human Resource Management
 Human resources are the people who make-up the
workforce of an organization, business sector, or economy.
It is also called the human capital or human assets. It is the
resource that resides in the knowledge, skills and
motivation of people. (HRM) is the strategic approach to
the effective management of people in an organization, so
that they help the organization to gain the competitive
advantage
 Human Resources Management is a process consisting of
the acquisition development, motivation, and maintenance
of human resources.
Human Competencies and Resource
 Human competencies and resource refer to the knowledge,
skills, abilities and personal attributes that individual
possess. they enable employee to perform their roles
effectively.
 The major human resource competencies are
 1. Technical skills: These encompass the specific
competencies and knowledge necessary to execute job-
related tasks efficiently.
 2. Effective communication abilities: The skill of
conveying ideas, seamless collaboration with peers, and
successful engagement with customers or clients all depend
on effective communication.
 3. Aptitude in problem-solving: Effective problem-solving
capabilities encompass critical thinking, swift decision-
making, and the capacity analyze and create innovative
solutions.
 4. Adaptability: Adaptability entails embracing change,
exhibiting resilience in challenging circumstances, and
thriving in dynamic environments.
 5. Collaborative spirit: Successful teamwork rests on clear
communication seamless cooperation, and the ability to
effectively collaborate with a diverse array of team
members.
 6. Leadership and proactiveness: Regardless of hierarchical
position individuals can exhibit leadership qualities by
proactively seizing opportunities, inspiring others, and
setting a positive example.
 7. Time management and priority setting: Efficient time
utilization and task prioritization are indispensable for
meeting deadlines and accomplishing objectives.
 8.Emotional intelligence: Emotional intelligence
encompasses the ability to understand and regulate one's
emotions, Employees with high emotional intelligence
n a v i g a t e s o c i a l d y n a m i c a d e p t l y, f o s t e r p o s i t i v e
relationships, and demonstrate empathy and resilience in
challenging scenarios.
 9.Client-centric approach-A mindset geared towards
meeting the needs of customers/clients is indispensable for
roles involving direct interaction with them.
Assignment
 Define Firm specific business environment with its scope .
 Describe the importance of understanding the internal dynamics of firm.
 Describe organizational structure and culture.Explain the role of culture in shaping
employee behaviour and organizational performamnce .
 Describe cultural Alignment and strategic fit .
 Define operations management and expalin its principles.
 Write short Note :Steps of Production process
 Describe major components of capacity planning .
 Write short Note :Stages of supply Chain
 Quality Management and continuous improvement and its objectives .
 what are the major human resource competencies ?
 Define HRM .