BUSINESS ENVIRONMENT Module - 1
Introduction to Business
3
Note
BUSINESS ENVIRONMENT
Once a business is established, to successfully run and sustain it requires finance for
this it depends on financial institutions; accept the norms and culture in which it operates
for this it depends on the society; understand the requirements of the market for this it
depends on the customers; upgrade itself with the latest developments for which the
latest technological aspects are required. Also, it needs to understand the government
regulations and other legal aspects. Thus there are many factors and dimensions that
affect the business. They are combined under a single concept referred to as business
environment.
The business environment consists of the economic aspect, the socio-cultural aspects,
the political framework, the legal aspects, the technological aspects etc. Understanding
the environment within which the business has to operate is very important as it influences
every aspect, be it its nature, its location, the prices of products, the distribution system,
or the personnel policies. In this chapter, we shall learn about the concept of business
environment, its nature and significance and the various components of the environment.
In addition, we shall also acquaint ourselves with the concept of social responsibility of
business and business ethics.
LEARNING OUTCOMES
identifies various components of business environment and their likely impact
on a business;
discussies the changes in components of business environment for a business;
describe vulnerability of business to changes in external environment.
Business studies (319) Senior Secondary 67
, Module - 1 BUSINESS ENVIRONMENT
Introduction to Business identifyes various economic and promotional activities undertaken by
Government and their likely effect on business.
discusses the various CSR initiatives by companies in real life.
explains how business may become more environment friendly.
Note
reflects on making socially ethical responsible choices in business.
3.1 MEANING OF BUSINESS ENVIRONMENT
As stated earlier, the success of every business depends on adapting itself to the
environment within which it functions. For example, when there is a change in the
government polices, the business has to make the necessary changes to adapt itself to
the new policies. Similarly, a change in the technology may render the existing products
obsolete, as we have seen that the introduction of computer has replaced the
typewriters; the colour television has made the black and white television out of fashion.
Again, a change in the fashion or customers' taste may shift the demand in the market
for a particular product, e.g., the demand for jeans reduced the sale of other traditional
wear. All these aspects are external factors that are beyond the control of the business.
So the business units must have to adapt themselves to these changes in order to
survive and succeed in business. Hence, it is really necessary to have a clear
understanding of the concept of business environment and the nature of its various
components.
The term 'business environment' connotes external forces, factors and institutions
that are beyond the control of the business and they affect the functioning of a business
enterprise. These include customers, competitors, suppliers, government, and the social,
political, legal and technological factors etc. While some of these factors or forces
may have direct influence over the business firm, others may impact indirectly. Thus,
business environment may be defined as the total surroundings, which have a direct or
indirect bearing on the functioning of business. It may also be defined as the set of
external factors, such as economic factors, social factors, political and legal factors,
demographic factors, technical factors etc., which are uncontrollable in nature and
affect the business decisions of a firm.
3.1.1 FEATURES OF BUSINESS ENVIRONMENT
On the basis of the above discussion the features of business environment can be
summarized as follows.
68 Business studies (319) Senior Secondary
, BUSINESS ENVIRONMENT Module - 1
(a) Sum total of all factors: Business environment is the sum total of all factors Introduction to Business
external to the business firm and that greatly influences their functioning.
(b) Micro and Macro factors: It covers micro or specific factors that affect
business directly such as investors, competitors, customers. Macro or general
factors include social, political, cultural, legal, government and technological
Note
aspects.
(c) Inter-relatedness: All the micro and macro factors are inter-dependent and
inter-related to one another.
(d) Dynamic:The business environment is dynamic in nature, that means, it keeps
on changing.
(e) Uncertainty: The changes in business environment are unpredictable. It is very
difficult to predict the exact nature of future happenings and the changes in
economic and social environment.
(f) Complex: Business Environment differs from place to place, region to region
and country to country. Political conditions in India differ from those in Pakistan.
Taste and values cherished by people in India and China vary considerably.
3.1.2 IMPORTANCE OF BUSINESS ENVIRONMENT
There is a close and continuous interaction between the business and its environment.
This interaction helps in strengthening the business firm and using its resources more
effectively. As stated above, the business environment is multifaceted, complex, and
dynamic in nature and has a far-reaching impact on the survival and growth of the
business. To be more specific, proper understanding of the social, political, legal and
economic environment helps the business in the following ways:
(a) Determining Opportunities and Threats: The interaction between the business
and its environment helps in identifying opportunities and threats to the business.
It helps the business enterprises for meeting the challenges successfully through
future planning and decision making. For example, competition increases with
the entry of new firms in the market.
(b) Giving Direction for Growth: The interaction with the environment leads to
opening up new frontiers of growth for the business firms. It enables the business
to identify the areas for growth and expansion of their activities. For example,
seeing the potential of mobile phones growth Reliance launched the Jio.
(c) Continuous Learning: Environmental analysis makes the task of managers
Business studies (319) Senior Secondary 69
Introduction to Business
3
Note
BUSINESS ENVIRONMENT
Once a business is established, to successfully run and sustain it requires finance for
this it depends on financial institutions; accept the norms and culture in which it operates
for this it depends on the society; understand the requirements of the market for this it
depends on the customers; upgrade itself with the latest developments for which the
latest technological aspects are required. Also, it needs to understand the government
regulations and other legal aspects. Thus there are many factors and dimensions that
affect the business. They are combined under a single concept referred to as business
environment.
The business environment consists of the economic aspect, the socio-cultural aspects,
the political framework, the legal aspects, the technological aspects etc. Understanding
the environment within which the business has to operate is very important as it influences
every aspect, be it its nature, its location, the prices of products, the distribution system,
or the personnel policies. In this chapter, we shall learn about the concept of business
environment, its nature and significance and the various components of the environment.
In addition, we shall also acquaint ourselves with the concept of social responsibility of
business and business ethics.
LEARNING OUTCOMES
identifies various components of business environment and their likely impact
on a business;
discussies the changes in components of business environment for a business;
describe vulnerability of business to changes in external environment.
Business studies (319) Senior Secondary 67
, Module - 1 BUSINESS ENVIRONMENT
Introduction to Business identifyes various economic and promotional activities undertaken by
Government and their likely effect on business.
discusses the various CSR initiatives by companies in real life.
explains how business may become more environment friendly.
Note
reflects on making socially ethical responsible choices in business.
3.1 MEANING OF BUSINESS ENVIRONMENT
As stated earlier, the success of every business depends on adapting itself to the
environment within which it functions. For example, when there is a change in the
government polices, the business has to make the necessary changes to adapt itself to
the new policies. Similarly, a change in the technology may render the existing products
obsolete, as we have seen that the introduction of computer has replaced the
typewriters; the colour television has made the black and white television out of fashion.
Again, a change in the fashion or customers' taste may shift the demand in the market
for a particular product, e.g., the demand for jeans reduced the sale of other traditional
wear. All these aspects are external factors that are beyond the control of the business.
So the business units must have to adapt themselves to these changes in order to
survive and succeed in business. Hence, it is really necessary to have a clear
understanding of the concept of business environment and the nature of its various
components.
The term 'business environment' connotes external forces, factors and institutions
that are beyond the control of the business and they affect the functioning of a business
enterprise. These include customers, competitors, suppliers, government, and the social,
political, legal and technological factors etc. While some of these factors or forces
may have direct influence over the business firm, others may impact indirectly. Thus,
business environment may be defined as the total surroundings, which have a direct or
indirect bearing on the functioning of business. It may also be defined as the set of
external factors, such as economic factors, social factors, political and legal factors,
demographic factors, technical factors etc., which are uncontrollable in nature and
affect the business decisions of a firm.
3.1.1 FEATURES OF BUSINESS ENVIRONMENT
On the basis of the above discussion the features of business environment can be
summarized as follows.
68 Business studies (319) Senior Secondary
, BUSINESS ENVIRONMENT Module - 1
(a) Sum total of all factors: Business environment is the sum total of all factors Introduction to Business
external to the business firm and that greatly influences their functioning.
(b) Micro and Macro factors: It covers micro or specific factors that affect
business directly such as investors, competitors, customers. Macro or general
factors include social, political, cultural, legal, government and technological
Note
aspects.
(c) Inter-relatedness: All the micro and macro factors are inter-dependent and
inter-related to one another.
(d) Dynamic:The business environment is dynamic in nature, that means, it keeps
on changing.
(e) Uncertainty: The changes in business environment are unpredictable. It is very
difficult to predict the exact nature of future happenings and the changes in
economic and social environment.
(f) Complex: Business Environment differs from place to place, region to region
and country to country. Political conditions in India differ from those in Pakistan.
Taste and values cherished by people in India and China vary considerably.
3.1.2 IMPORTANCE OF BUSINESS ENVIRONMENT
There is a close and continuous interaction between the business and its environment.
This interaction helps in strengthening the business firm and using its resources more
effectively. As stated above, the business environment is multifaceted, complex, and
dynamic in nature and has a far-reaching impact on the survival and growth of the
business. To be more specific, proper understanding of the social, political, legal and
economic environment helps the business in the following ways:
(a) Determining Opportunities and Threats: The interaction between the business
and its environment helps in identifying opportunities and threats to the business.
It helps the business enterprises for meeting the challenges successfully through
future planning and decision making. For example, competition increases with
the entry of new firms in the market.
(b) Giving Direction for Growth: The interaction with the environment leads to
opening up new frontiers of growth for the business firms. It enables the business
to identify the areas for growth and expansion of their activities. For example,
seeing the potential of mobile phones growth Reliance launched the Jio.
(c) Continuous Learning: Environmental analysis makes the task of managers
Business studies (319) Senior Secondary 69
