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Meaning of Business Environment — It’s links an organization with outside world. Internal Factor: Employees, management & decisi...
Meaning of Business Environment
— It’s
links an organization with outside world.
Internal Factor: Employees, management &
decision maker.
External Factor: range of factor such as – customer
to competitor and Government.
— Business
has absolute control over all the internal
factor.
— It
has no control over the external environment.
— It
becomes necessary for business houses to modify their internal decisions and
policies, on the basis of the pressure from external factor.
— Business
environment: refers to the influences and pressures
exerted by external factors on the basis of business.
In Simple
Words:
— Its
is the combination of internal and external
factors that influence a company
operating situation.
— All
those conditions and forces external to a business unit under which it
operates.
— Mutual interdependence between business and
its environment.
— A
business enterprise – open system
— Continuously
interacts – with environment
Business
And External Environment Interacts In
The Following Ways:
— Exchange
of information
— Exchange
of resoursrces
— Exchange
of influences
These
Changes Are Referred To A Business Trends:
- Networking
Marketing
- Franchising
- Business
Process Outstanding
- Aggregator
- Knowledge
Process Outsourcing
- Digital
Economy
- E
- Commerce
- M
- Commerce
Various Factors Which
Constitute The Business Environment:
1.
Demographic
Environment
2.
Economic
Environment
3.
Geographical
And Ecological Environment
4.
Technological
Environment
5.
Political
Environment
6.
Educational
Environment And Cultural Environment
7.
Social
Environment
8. Legal Environment
1.
Demographic
environment:
It refers to the size and behavior
of population in a country.
o Huge
Size Of Population:
Provide
extensive business or marketing opportunities for all types of business
organization.
o Low
Size Of Population:
Force
the organization to seek external market for their products and services.
2.
Economic environment:
It refers to the overall economic
factors like economic philosophy of the country, economic policies, controls
and regulations etc.
o
Capitalist
Economy:
Business
organization subject to limited government regulations
and controls.
o Socialist
Economy:
Government decide everything on behalf of the
country.
In
this economy private enterprises may not exist at all.
o Mixed
Economy:
Work
on the basis of force of market demand and supply
The economics philosophy of the
country directly determines the scope and
functions of business
organizations in that country.
3.
Geographical and
Ecological Environment:
It refers to climatic conditions and natural
resources, which determines the manufacturing scope and the nature of the
products.
4. Legal environment:
It is well known that every country has a
number of legal regulations to ensure
that the interests of business organizations do not run to national interest.
o Listing in stock exchange,
o Payment of tax to the government,
o Manufacturing practices,
o Human resource development, etc.
5. Technological Environment:
Very
significant external factor
It
determine the density of business organization
Modern
organization have recognized that research and development alone can insure the
organizational
growth and stability.
Business
environment has become highly dynamic
o
Supported by:
I.
Computerized operation
II.
Minimizing the defects in products
III.
Ensuring the services at the right time
and place
6.
Social Environment:
Social responsibility of business
is an important force that modern business organization cannot wriggle out of
their duties and responsibilities towards the society.
Similarly, the expectation of
various interests in the society have undergone a sea change.
o
The shareholder, promoter and owner
expect a reasonable return on their investments.
o
The workers expect security of service,
terminal benefits, accident relief etc
from the organization.
o
Governments expects the business units
to pay tax regularly and participate in-social movements
A business unit which succeeds in
meeting the interests of all these groups remains successful and grows.
7.
Educational and
cultural environment:
Educational environment in a country
determines the quality of population.
A country with very high illiterate
population would always experience political and economic instability.
The economic development of a country completely depends on the literacy
level which alone can pave the way of improvement in science and technology,
modernization, industrialization, etc.
Cultural environment refers to the values,
norms, custom, ethics, goals and other accepted behavioral patterns of people
in a country.
8. Political environment:
Political stability is one important factor
which determines the business growth or downfall .
A country which relative political stability
would witness inflow of foreign capital and collooration.
By
political stability – government – plan and policies remain – constant
OBJECTIVES OF BUSINESS ENVIRONMENT
1. Knowledge
Of Information:
Every businessman should we aware of the
current
environment of business.
2. Basis Of Decision:
Business environment provide all the
information which is needed for taking good decision.
Helpful for decision relating to purchase,
sales, salary and price because you know the competitor.
3. Helpful In Making Polices:
For making good business policies, we need to
scan business through business environment.
4. Technological Planning:
Today, technology is changing very fastly.
So, you have to study technological environment. With this, you can make better
technological planning for your business.
5. Survive In The Business:
Sometime industry may face recession,
production may be unlimited but sales will be limited.
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Only these business enterprises will be able
to survive which will estimates all these situations in advance through
business environment study.
IMPORTANCE OF BUSINESS ENVIRONMENT
There is a close and continuous interaction between the business and its
environment.
Business environments is multifaceted, complex and dynamic in nature.
1. Determining Opportunities And Threats:
It helps the business
enterprises for meeting the challenges successfully.
2. Giving Direction To The Growth:
It enables the business
to identify the areas for growth and expansion of their activities.
3. Continuous Learning:
Environmental analysis
makes the managers easier in dealing with the business challenges.
4. Image Building:
Environmental
understanding helps the business organization in improving their image by
showing their sensitivity to the environment within which they are working.
5. Meeting Competition:
It helps the firms ton
analyze the competitor strategies and formulate
their own strategies accordingly.
6. Indentify Firms Strength And Weakness:
Business environment help to indentify the individual strengths and weakness in view of the technological and global development.
COMPONENTS OF GENERAL ENVIRONMENT OF A
BUSINESS
There are following key component of general environment:
1.
Economic Environment
2.
Social Environment
3.
Political Environment
4.
Legal Environment
5.
Technological Environment
ELEMENT OF THE BUSINESS
ENVIRONMENT
Main element or factors of business environment
are:
1. Micro Business Environment:
It is also known as
internal business environment because business has power to control it.
I.
Supplier
II.
Customer
III.
Market Intermediaries
IV.
Competitor
V.
Market Intermediaries
VI.
Competitor
VII.
Financial Intermediaries
2. Macro Business Environment or External Factors of Business
Environment:
I.
Economical Environment
a)
Economic Polices
b)
Economic Regulation
II.
Natural Environment
III.
Demographic Environment
IV.
Technological Environment
V.
Political Environment
a)
Executives
b)
Judiciary
c)
Legislature
VI.
International Environment
TYPES OF BUSINESS
ENVIRONMENT
Confining business environment to
uncontrollable external factors, it may be classified as:
1.
Economic environment
2.
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