Business Environment
Definition: Aggregate of all conditions,
events and influences that surround and
effect the business organization. (Keith
Davis)
Features of Business Environment
1. Totality of External Forces - Aggregate of
all factors external to the business
enterprise. Ex - Customers, Competitors.
2. General and Specific Forces - Includes
both general and specific forces.
3. Inter-relatedness - Different elements are
closely interrelated.
4. Complexity - It consists of several
interrelated elements which keeps on
changing.
5. Dynamic - Business Environment is not
static but rather keeps on changing. Ex -
new competitors, new technology.
6. Uncertainty - Difficult to predict future.
Ex - change in technology.
7. Relativity - Business Environment differs
from country to country, region to region.
8. Multidimensional - Several environments
govern business environment like micro and
macro.
9. Mutual Dependence - Different components
of business environment are interdependent
on each other.
10. Diversity - Business Environment is
diverse in nature.
, 11. Non-controllable - Some things are
beyond the control of the business
enterprise.
Importance of Business Environment
Some of the direct benefits of understanding
the business environment are given below:
1. First Mover Advantage - Awareness of the
business environment allows the enterprise
to take advantage of early opportunities
rather than losing them to the competitors.
2. Early Warning Signal - Environmental
awareness serves as an early warning signal.
It makes the enterprise aware of the
impending threats or crises so that the
enterprise can take timely actions to
minimize the adverse effects.
3. Customer Focus - Environmental
understanding makes the business management
sensitive to the changing needs and
expectations of the consumers.
4. Strategy Formulation - Environmental
monitoring provides relevant information
about the business environment. Such
information serves critical for planning and
policy making.
5. Coping with Change - In order to decide
the direction and nature of change the
business leaders need to understand the
aspirations of the customers and other
Definition: Aggregate of all conditions,
events and influences that surround and
effect the business organization. (Keith
Davis)
Features of Business Environment
1. Totality of External Forces - Aggregate of
all factors external to the business
enterprise. Ex - Customers, Competitors.
2. General and Specific Forces - Includes
both general and specific forces.
3. Inter-relatedness - Different elements are
closely interrelated.
4. Complexity - It consists of several
interrelated elements which keeps on
changing.
5. Dynamic - Business Environment is not
static but rather keeps on changing. Ex -
new competitors, new technology.
6. Uncertainty - Difficult to predict future.
Ex - change in technology.
7. Relativity - Business Environment differs
from country to country, region to region.
8. Multidimensional - Several environments
govern business environment like micro and
macro.
9. Mutual Dependence - Different components
of business environment are interdependent
on each other.
10. Diversity - Business Environment is
diverse in nature.
, 11. Non-controllable - Some things are
beyond the control of the business
enterprise.
Importance of Business Environment
Some of the direct benefits of understanding
the business environment are given below:
1. First Mover Advantage - Awareness of the
business environment allows the enterprise
to take advantage of early opportunities
rather than losing them to the competitors.
2. Early Warning Signal - Environmental
awareness serves as an early warning signal.
It makes the enterprise aware of the
impending threats or crises so that the
enterprise can take timely actions to
minimize the adverse effects.
3. Customer Focus - Environmental
understanding makes the business management
sensitive to the changing needs and
expectations of the consumers.
4. Strategy Formulation - Environmental
monitoring provides relevant information
about the business environment. Such
information serves critical for planning and
policy making.
5. Coping with Change - In order to decide
the direction and nature of change the
business leaders need to understand the
aspirations of the customers and other
