Business Environment Full detail with introduction, features, and importance All we discuss in this post. After reading this post you will know all and your problems will also solve.
Business Environment Full detail with introduction, features, and importance All we discuss in this post. After reading this post you will know all and your problems will also solve.
What is Business Environment?
The word business environment comprises of two words, business, and environment. Before understanding the meaning of the business environment, firstly we discuss the meaning of both the words separately.
Business - Business refers to a form of activities basically with the objective of earning profits. In simple terms, a person who remains busy is known as business.
The word in economic sense means human activities like production, purchase, and sale of goods that are produced for earning the profit.
Environment - Environment refers to all external forces which have to wear on the functioning of the business.
Meaning of Business Environment
Business environment may be defined as the set of external factors such as economic factors, social factors, legal factors, and democracy factors which are uncomparable in nature and efficient to the business and the company.
Definition of Business Environment
The elements of factors outside a business organization directly affect it such as the supply of raw material and product demand.
Nature of Business Environment
1) The totality of external factors
The business environment is the sum of all the terms that externally affect business.
2) Specific and general forces
The business environment includes both specific and general forces. General forces include social, legal political and technological conditions. The specific factors include investors, customers, competitors, and suppliers.
3) Dynamic in nature
The business environment is dynamic that it keeps on changing from time to time. Any technological change will shift in consumer preference or tastes or entry of new competition in the market.
4) Uncertainty
The business environment is largely uncertain, it means it is very difficult to predict what will happen in the future, especially when the environment changes frequently.
5) Reality
The business environment is different from country to country, regions to regions, etc. The political environment is different in China and Pakistan.
6) Complex
The business environment is very complex, it is influenced by a number of factors. It is very difficult to judge the effect of these changes in the business.
Significance or Importance of Business Environment
The business environment provides opportunities for the future to the business. It shows the picture of positive and negative components.
The business environment is important for the following reasons:
1. Helps the firm to identify the opportunities
The firm who understand firstly their opportunities will stand first in the market. It helps the firm to expand its business.
For example- Maruti becomes famous in the small car market because it first recognizes the need for small cars in India.
2. Improve performance
The business that continuously monitors their environment will increase their performance in the market. This will help to expand our business.
3. Competing with rapid changes
It is very important to adopt the market changes to survive in the market if the business will no do so, the other businesses may eliminate this type of business.
4. Long term planning
With the help of a business environment, long term planning becomes easy. Management should know the ways and methods for taking advantage of the changes in the business environment.
5. Helpful in Preparing Strategies
The business environment helps the business in preparing business strategies according to the changes. Those businesses who were able to plan or prepare their strategies well in time have been able to survive and grow.
6. Helpful in identifying threats
It helps the firm to identify its threats and to reduce these threats and to create new and more opportunities.
7. Encourages Research and Development
Environmental changes throw new challenges before the business. The research will help in finding solutions to various problems. It also helps in undertaking more and more development in various fields of the business.
Elements of Business Environment
There are two types of elements of the business environment:
(1) Internal Environment
The internal environment includes those factors and forces which affect the success or failure of the business. it includes SMS carriers man, money, machinery, and management. It is usually within the control of the business.
Internal Environment includes the following:
(a) Men/ Human Resources
It is a very important factor for the success or failure of the business. The business cannot survive without competent human resources.
(b) Machinery
It is the production capacity and the technology which affects the success of the business. A very huge amount of capital is invested in acquiring plant and machinery.
(c) Money/ Financial Resources
The business raises its finance by way of shares or by borrowed capital. The choice of capital depends on the business.
(d) Material
Material means products. providing quality products at reasonable prices shows the market efficiency of the business.
(e) Management
Management of a business plays an important role in the business. It decides the progress of the company.
(2) External Environment
These are the factors outside the business and are the control of the business. These factors are further classified as under:
(i) Micro Environment
(ii) Macro Environment
(i) Micro Environment
Also called the operating environment. The environment which is close to business is known as Micro Environment. It includes suppliers, customers, public, labors, competitors, and market intermediaries.
(a) Suppliers- The persons who send raw material to the company is known as a supplier. The business should not depend on one supplier but have multiple suppliers.
(b) Customers- Customers are regarded as the king of the market. The success of the company depends upon the satisfaction level of its customers.
(c) Market Intermediaries- They work as a link between the customers and the business. Types of customers are-
Middlemen
Marketing agencies
Financial Intermediaries
Physical Intermediaries
(d) Competitors- Every move of competitors affects the business. The business has to keep an eye on the strategies of the competitors.
(e) Public- Any group who has an actual interest in the business is called the public. They are also called the users of the product.
(f) Labour- The labor force is organized in the form of trade unions. They interact with the management for higher wages. They pressurize the management for fulfilling their demands.
(ii) Macro Environment
It is also known as the general environment. It tells the opportunities and threats to the business. These factors are uncontrollable.
Elements of Macro Environment:
(i) Economic Environment- It is the first element of the Macro Environment. This environment is very complex in nature and keeps on changing quickly. It has three elements-
(A) Economic Condition- These are the conditions prevailing in the country like the national income of the country, per capita income, etc.
(B) Economic System- There are three types of economic systems, capitalist, socialist and mixed economy.
(C) Economic Policies- These are related to the rules and regulations. Some of the examples are-
Business Law
Budget
Industrial Regulations
Industrial Policy
(ii) Political and Government Environment- There are three political institutions are included in this-
Legislative
Executive
Judicial
The Legislative decides that should be done
The Executive implements the decision of legislative.
The Judicial checks the working of both institutions.
(iii) Legal Environment- These are laws and policies made by the government within the business has to work. The law always keeps an eye on the activities of the business.
(iv) Socio-Cultural Environment- This includes marriage, religion, education, peoples' attitude towards their work. The traditions and customs are changed and have an effect on the organization.
(v) Natural Environment- This environment includes the following factors:
Natural Resources
Weather
Climatic conditions
These factors affect the location of the business.
(vi) Demographic Environment- It consists of following-
Family Size
Education level
Caste and Religion
Growth rate
Population
These factors affect the demand for goods.
(vii) Technological Environment- It is related to technology. The business has to adopt technological changes from time to time to survive in the market. This is because to provide the customer with a better thing.
(viii) International Environment- It consists of imports and exports. These factors affect the business through liberalization and globalization.
(2) External Environment
These are the factors outside the business and are the control of the business. These factors are further classified as under:
(i) Micro Environment
(ii) Macro Environment
(i) Micro Environment
Also called the operating environment. The environment which is close to business is known as Micro Environment. It includes suppliers, customers, public, labors, competitors, and market intermediaries.
(a) Suppliers- The persons who send raw material to the company is known as a supplier. The business should not depend on one supplier but have multiple suppliers.
(b) Customers- Customers are regarded as the king of the market. The success of the company depends upon the satisfaction level of its customers.
(c) Market Intermediaries- They work as a link between the customers and the business. Types of customers are-
Middlemen
Marketing agencies
Financial Intermediaries
Physical Intermediaries
(d) Competitors- Every move of competitors affects the business. The business has to keep an eye on the strategies of the competitors.
(e) Public- Any group who has an actual interest in the business is called the public. They are also called the users of the product.
(f) Labour- The labor force is organized in the form of trade unions. They interact with the management for higher wages. They pressurize the management for fulfilling their demands.
(ii) Macro Environment
It is also known as the general environment. It tells the opportunities and threats to the business. These factors are uncontrollable.
Elements of Macro Environment:
(i) Economic Environment- It is the first element of the Macro Environment. This environment is very complex in nature and keeps on changing quickly. It has three elements-
(A) Economic Condition- These are the conditions prevailing in the country like the national income of the country, per capita income, etc.
(B) Economic System- There are three types of economic systems, capitalist, socialist and mixed economy.
(C) Economic Policies- These are related to the rules and regulations. Some of the examples are-
Business Law
Budget
Industrial Regulations
Industrial Policy
(ii) Political and Government Environment- There are three political institutions are included in this-
Legislative
Executive
Judicial
The Legislative decides that should be done
The Executive implements the decision of legislative.
The Judicial checks the working of both institutions.
(iii) Legal Environment- These are laws and policies made by the government within the business has to work. The law always keeps an eye on the activities of the business.
(iv) Socio-Cultural Environment- This includes marriage, religion, education, peoples' attitude towards their work. The traditions and customs are changed and have an effect on the organization.
(v) Natural Environment- This environment includes the following factors:
Natural Resources
Weather
Climatic conditions
These factors affect the location of the business.
(vi) Demographic Environment- It consists of following-
Family Size
Education level
Caste and Religion
Growth rate
Population
These factors affect the demand for goods.
(vii) Technological Environment- It is related to technology. The business has to adopt technological changes from time to time to survive in the market. This is because to provide the customer with a better thing.
(viii) International Environment- It consists of imports and exports. These factors affect the business through liberalization and globalization.
Conclusion -
I hope this article solves your all doubts and problems About Business Environment. if you have any problem understanding this article or want to know more about the Business Environment you can comment down in the comment box we will surely help you. Thanks for reading this article keep visiting our blog Happy Dussehra.
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