Business Environment
Introduction:
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. As one writer has put it– “Just take the
universe, subtract from it the subset that represents the
organisation, and the remainder is environment”. Thus, the
economic, social, political, technological and other forces
which operate outside a business enterprise are part of its
environment.
Dimensions of Business Environment:
Dimensions of, or the factors constituting the business
environment include economic, social, technological, political
and legal conditions which are considered relevant for
decision-making and improving the performance of an
enterprise. In contrast to the specific environment, these
factors explain the general environment which mostly
influences many enterprises at the same time.
POLITICAL ENVIRONMENT:
, Political environment includes political conditions such as
general stability and peace in the coun-try and specific
attitudes that elected government representatives hold
towards business.
The significance of political conditions in business success lies
in the predictability of business activities under stable
political conditions. On the other hand, there may be
uncertainty of business activities due to political unrest and
threats to law and order. Political stability, thus, builds up
confidence among business people to invest in the long term
projects for the growth of the economy.
Political instability can shake that confidence. Similarly, the
attitudes of government officials towards business may have
either positive or negative impact upon business.
ECONOMICAL 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 management
practices in a business enterprise. Short and long term
interest rates significantly affect the demand.
SOCIAL ENVIRONMENT:
The social environment of business include the social forces
like customs and traditions, values, social trends, society’s
expectations from business, etc. Traditions define social
practices that have lasted for decades or even centuries.
For example, the celebration of Diwali, Eid, Christmas, and
Guru Parv in India provides significant financial opportunities
for greetings card companies, sweets or confectionery
, manufacturers, tailoring outlets and many other related
business.
TECHNOLOGICAL ENVIRONMENT:
Technological environment includes forces relating to
scientific improvements and innovations which provide new
ways of producing goods and services and new methods and
techniques of operating a business.
For example,Tesla has growth opportunities through further
automation of its business processes. In addition, the
increasing popularity of online mobile systems should prompt
the company to increasingly integrate these systems into its
automobiles.
Legal Environment:
It refers to the broad features of the legislature in which a business
enterprise operates, including various legislations, which are placed
and passed by the government in the parliament or state
legislature. It also involves administrative orders issued by the
government authorities, and courts, and also on recommendations
made by the various committees. It is imperative for the
management of all business enterprises to obey the law of the land
for proper and smooth functioning. Non-compliance with the law will
attract punishment as per the statutory provisions. Therefore,
business managers must have adequate knowledge of various
rules and regulations. In fact, such awareness and knowledge are
prerequisite for better business coordination and performance.
Environmental dimensions:
With the increasing global warming and environmental hazards, the
government issues certain guidelines according to which the industries
have to function. This is done to minimise the waste that is produced by
Introduction:
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. As one writer has put it– “Just take the
universe, subtract from it the subset that represents the
organisation, and the remainder is environment”. Thus, the
economic, social, political, technological and other forces
which operate outside a business enterprise are part of its
environment.
Dimensions of Business Environment:
Dimensions of, or the factors constituting the business
environment include economic, social, technological, political
and legal conditions which are considered relevant for
decision-making and improving the performance of an
enterprise. In contrast to the specific environment, these
factors explain the general environment which mostly
influences many enterprises at the same time.
POLITICAL ENVIRONMENT:
, Political environment includes political conditions such as
general stability and peace in the coun-try and specific
attitudes that elected government representatives hold
towards business.
The significance of political conditions in business success lies
in the predictability of business activities under stable
political conditions. On the other hand, there may be
uncertainty of business activities due to political unrest and
threats to law and order. Political stability, thus, builds up
confidence among business people to invest in the long term
projects for the growth of the economy.
Political instability can shake that confidence. Similarly, the
attitudes of government officials towards business may have
either positive or negative impact upon business.
ECONOMICAL 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 management
practices in a business enterprise. Short and long term
interest rates significantly affect the demand.
SOCIAL ENVIRONMENT:
The social environment of business include the social forces
like customs and traditions, values, social trends, society’s
expectations from business, etc. Traditions define social
practices that have lasted for decades or even centuries.
For example, the celebration of Diwali, Eid, Christmas, and
Guru Parv in India provides significant financial opportunities
for greetings card companies, sweets or confectionery
, manufacturers, tailoring outlets and many other related
business.
TECHNOLOGICAL ENVIRONMENT:
Technological environment includes forces relating to
scientific improvements and innovations which provide new
ways of producing goods and services and new methods and
techniques of operating a business.
For example,Tesla has growth opportunities through further
automation of its business processes. In addition, the
increasing popularity of online mobile systems should prompt
the company to increasingly integrate these systems into its
automobiles.
Legal Environment:
It refers to the broad features of the legislature in which a business
enterprise operates, including various legislations, which are placed
and passed by the government in the parliament or state
legislature. It also involves administrative orders issued by the
government authorities, and courts, and also on recommendations
made by the various committees. It is imperative for the
management of all business enterprises to obey the law of the land
for proper and smooth functioning. Non-compliance with the law will
attract punishment as per the statutory provisions. Therefore,
business managers must have adequate knowledge of various
rules and regulations. In fact, such awareness and knowledge are
prerequisite for better business coordination and performance.
Environmental dimensions:
With the increasing global warming and environmental hazards, the
government issues certain guidelines according to which the industries
have to function. This is done to minimise the waste that is produced by
