Business Environment
Meaning of Business Environment
The term ‘business environment’ means the sum total of all individuals, institutions and
other forces that are outside the control of a business enterprise but that may affect its
performance.
Features of Business Environment
• Totality of external forces: Business environment is the sum total of all the forces/
factors external to a business firm.
• Specific and general forces: Specific forces includes investors, competitors,
customers, etc. who influence business firm directly while general forces includes
social, political, economic, legal and technological conditions which affect a business
firm indirectly.
• Interrelatedness: All the factors of a business environment are closely interrelated.
• Dynamic: Business environment is dynamic in nature which keeps on changing with
the change in technology, consumers fashion and tastes etc.
• Uncertainty: Business environment is uncertain as it is difficult to predict the future
environmental changes.
• Complexity: Environment is a complex phenomenon that is relatively easier to
understand in parts but difficult to grasp in its totality.
• Relativity: Business environment is a relative concept since it differs from country to
country and region to region.
Importance of Business Environment
, 1. Identification of opportunities: Environment provides numerous opportunities for
business success. Early identification of opportunities helps an enterprise to be the
first to exploit them.
2. Identification of threats: Environmental awareness help managers to identify various
threats on time and serves as an early warning signal.
3. Tapping useful resources: Business environment helps to know the availability of
resources and making them available on time.
4. Coping with rapid changes: Environmental scanning enables the firms to adapt
themselves to the changes in the market.
5. Assistance in planning and policy formulation: Environmental understanding and
analysis is the basis for planning and policy making.
6. Improving performance: Environment scanning helps an organisation in improving
its performance
Dimensions of Business Environment
1) Economic Environment: Interest rates, inflation rates, changes in disposable income of
people, stock market indices and the value of rupee are some of the economic factors that can
affect the business enterprise.
2) Social Environment: The social environment of business includes the social forces like
customs and traditions, values, social trends, literacy rate, educational levels, lifestyle, etc.
3) Technological Environment: Technological environment consists of new products, new
technologies, new approaches to product, new methods and equipment etc.
4) Political Environment: Political environment includes constitution, political parties and
their ideology, types of govt., political stability, attitude towards business, etc,
5) Legal Environment: Legal environment includes various legislations passed by the
central, state or local government.
Economic Environment in India
Meaning of Business Environment
The term ‘business environment’ means the sum total of all individuals, institutions and
other forces that are outside the control of a business enterprise but that may affect its
performance.
Features of Business Environment
• Totality of external forces: Business environment is the sum total of all the forces/
factors external to a business firm.
• Specific and general forces: Specific forces includes investors, competitors,
customers, etc. who influence business firm directly while general forces includes
social, political, economic, legal and technological conditions which affect a business
firm indirectly.
• Interrelatedness: All the factors of a business environment are closely interrelated.
• Dynamic: Business environment is dynamic in nature which keeps on changing with
the change in technology, consumers fashion and tastes etc.
• Uncertainty: Business environment is uncertain as it is difficult to predict the future
environmental changes.
• Complexity: Environment is a complex phenomenon that is relatively easier to
understand in parts but difficult to grasp in its totality.
• Relativity: Business environment is a relative concept since it differs from country to
country and region to region.
Importance of Business Environment
, 1. Identification of opportunities: Environment provides numerous opportunities for
business success. Early identification of opportunities helps an enterprise to be the
first to exploit them.
2. Identification of threats: Environmental awareness help managers to identify various
threats on time and serves as an early warning signal.
3. Tapping useful resources: Business environment helps to know the availability of
resources and making them available on time.
4. Coping with rapid changes: Environmental scanning enables the firms to adapt
themselves to the changes in the market.
5. Assistance in planning and policy formulation: Environmental understanding and
analysis is the basis for planning and policy making.
6. Improving performance: Environment scanning helps an organisation in improving
its performance
Dimensions of Business Environment
1) Economic Environment: Interest rates, inflation rates, changes in disposable income of
people, stock market indices and the value of rupee are some of the economic factors that can
affect the business enterprise.
2) Social Environment: The social environment of business includes the social forces like
customs and traditions, values, social trends, literacy rate, educational levels, lifestyle, etc.
3) Technological Environment: Technological environment consists of new products, new
technologies, new approaches to product, new methods and equipment etc.
4) Political Environment: Political environment includes constitution, political parties and
their ideology, types of govt., political stability, attitude towards business, etc,
5) Legal Environment: Legal environment includes various legislations passed by the
central, state or local government.
Economic Environment in India
