Business Environment
A business is a combination of internal as well as some external force. Hence, it became essential for a business organization to take some steps for analyzing both internal and external influences so that the manager can make the best possible decision as per the situation.
It means a business is made up of various surroundings, which are called a business environment.
Business is the combination of internal as well as external forces.
1. Internal - Those things which are internal & within the control of the business. It includes rules, policies, regulations, etc.,
2. External - Those things which are external & outside the control of the business. It includes customers, political, legal, technology, economy, etc.,
So all these together are said as dimensions of the business environment.
Economic environment:- Those changes which affect the working of a business economically are known as the economic environment.
Social environment:- Those changes which affect the working of a business socially than it is known as social environment.
Technological environment: Those changes that affect the working of a business technique are the technical environment.
Legal environment:- It refers to the framework of laws and various legislation within which the business activities occur.
Political environment:- Those changes which affect the working of a business politically are known as political environment.
Five features of the Business Environment are as follows:-
1. Totality of External Forces
It is already clear from the meaning of Business Environment that it is a combination of internal and external forces. Hence, it is a total of external points which have a direct or indirect impact on business.
2. Specific and General Forces
Business Environment includes both general and specific forces. Available forces affect the whole country, every business of that country, for example, the government charges 5%tax on every company, in that case, this will affect every business.
On the other hand, General forces are those force that indirectly affects the functioning of business enterprise. Example - The government charges 5% tax on clothes so that will going to act to the cloth industry and businesses which are related to cloths.
3. Dynamic Nature
The business environment is dynamic, which means it keeps on changing. For example, change in taste and preference of customers.
4. Complexity
We know that the business environment is continuously changing, and it is tough to predict, so we can say that the business environment is also complex and uncertain.
5. Relativity
The business environment is also relative, which means that the business environment depends from country to country, even region to region. The change in one affects the other.
Five important of the Business Environment are as follows:-
1. Improvement in Organization Performance
Continuous and constant monitoring and adapting suitable business practices result in improve the business environment.
2. Helps in Coping with Rapid Changes
Turbulent markets, less brand loyalty, divisions and sub-divisions (fragmentation) of markets, more demanding customers, rapid changes in technology, and intense global competition combined with a challenging business environment call for flexible planning to cope with the changes.
3. Basis for Planning and Policy for formulation
Identification of threats and opportunities serves as the basis for deciding the future course of action.
4. Identify the opportunities and getting the first-mover advantage
By being aware of the changes in the business environment, enterprises can identify opportunities and strategize ways to capitalize on them.
5. Tapping helpful Resources
The resources are required to carry on a successful business enterprise. These have to be procured from the business environment.
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