Key Notes
CHAPTER – 3
BUSINESS ENVIRONMENT
• Business environment can be defined as those forces, individuals and institutions who have
the ability to influence the working of an organization.
• Features of Business Environment:
(a) Totality of external forces: Business environment is the sum total of all the
forces/factors external to a business firm.
(b) Specific and general forces: Business environment includes both specific and general
forces. Specific forces include investors, competitors, customers etc. who influence
business firm directly while general forces include social, political, economic, legal and
technological conditions which affect a business firm indirectly.
(c) Inter-relatedness: All the forces/factors of a business environment are closely
interrelated. For example, increased awareness of health care has raised the demand for
organic food and roasted snacks.
(d) Dynamic: Business environment is dynamic in nature which keeps on changing with
the change in technology, consumer’s fashion and tastes etc.
(e) Uncertainty: Business environment is uncertain as it is difficult to predict the future
environmental changes and their impact with full accuracy.
(f) Complexity: Business environment is complex which is easy to understand in parts
separately but it is difficult to understand in totality.
(g) Relativity: Business environment is a relative concept whose impact differs from
country to country, region to region and firm to firm. For example, a shift of preference
from soft drinks to juices will be welcomed as an opportunity by juice making
companies while a threat to soft drink manufacturers.
• Importance of Business Environment
(a) Identification of opportunities to get first mover advantage: Understanding of
business environment helps an organization in identifying advantageous opportunities
and getting their benefits prior to competitors, thus reaping the benefits of being a
pioneer.
(b) Identification of threats: Correct knowledge of business environment helps an
organization to identify those threats which may adversely affect its operations. For
example, Bajaj Auto made considerable improvements in its two wheelers when Honda
& other companies entered the auto industry.
(c) Tapping useful resources: Business environment makes available various resources
such as capital, labour, machines, raw material etc. toa business firm. In order to know
the availability of resources and making them available on time at economical price,
knowledge of business environment is necessary.
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CHAPTER – 3
BUSINESS ENVIRONMENT
• Business environment can be defined as those forces, individuals and institutions who have
the ability to influence the working of an organization.
• Features of Business Environment:
(a) Totality of external forces: Business environment is the sum total of all the
forces/factors external to a business firm.
(b) Specific and general forces: Business environment includes both specific and general
forces. Specific forces include investors, competitors, customers etc. who influence
business firm directly while general forces include social, political, economic, legal and
technological conditions which affect a business firm indirectly.
(c) Inter-relatedness: All the forces/factors of a business environment are closely
interrelated. For example, increased awareness of health care has raised the demand for
organic food and roasted snacks.
(d) Dynamic: Business environment is dynamic in nature which keeps on changing with
the change in technology, consumer’s fashion and tastes etc.
(e) Uncertainty: Business environment is uncertain as it is difficult to predict the future
environmental changes and their impact with full accuracy.
(f) Complexity: Business environment is complex which is easy to understand in parts
separately but it is difficult to understand in totality.
(g) Relativity: Business environment is a relative concept whose impact differs from
country to country, region to region and firm to firm. For example, a shift of preference
from soft drinks to juices will be welcomed as an opportunity by juice making
companies while a threat to soft drink manufacturers.
• Importance of Business Environment
(a) Identification of opportunities to get first mover advantage: Understanding of
business environment helps an organization in identifying advantageous opportunities
and getting their benefits prior to competitors, thus reaping the benefits of being a
pioneer.
(b) Identification of threats: Correct knowledge of business environment helps an
organization to identify those threats which may adversely affect its operations. For
example, Bajaj Auto made considerable improvements in its two wheelers when Honda
& other companies entered the auto industry.
(c) Tapping useful resources: Business environment makes available various resources
such as capital, labour, machines, raw material etc. toa business firm. In order to know
the availability of resources and making them available on time at economical price,
knowledge of business environment is necessary.
Material downloaded from http://www.ncrtsolutions.in
Portal for CBSE Notes, Test Papers, Sample Papers, Tips and Tricks
