BUSINESS ENVIRONMENT

DEFINITION:-

                                     The definition of business environment means all of the internal and external factors that affect how the company functions including employees, customers, management, supply and demand and business regulations.

MEANING :-

                                    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.

• It consists of all those factors that have bearing on the business…..

• A set of conditions – Social, Legal, Economical, Political or Institutional that are uncontrollable in nature and affects the functioning of organization.

IMPORTANCE OF BUSINESS

 (a) Determining Opportunities and Threats: The interaction between the business and its environment would identify opportunities for and threats to the business. It helps the business enterprises for meeting the challenges successfully.

(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.

(c) Continuous Learning: Environmental analysis makes the task of managers easier in dealing with business challenges. The managers are motivated to continuously update their knowledge, understanding and skills to meet the predicted changes in realm of business.

(d) Image Building: Environmental understanding helps the business organisations in improving their image by showing their sensitivity to the environment within which they are working. For example, in view of the shortage of power, many companies have set up Captive Power Plants (CPP) in their factories to meet their own requirement of power.

(e) Meeting Competition: It helps the firms to analyse the competitors’ strategies and formulate their own strategies accordingly.

(f) Identifying Firm’s Strength and Weakness: Business environment helps to identify the individual strengths and weaknesses in view of the technological and global developments.

FACTORS

INTERNAL ENVIRONMENT

 The internal environment is the environment that has a direct impact on the business. Here there are some internal factors which are generally controllable because the company has control over these factors. It can alter or modify such factors as its personnel, physical facilities, and organization and functional means, like marketing, to suit the environment.   

·  (A) VALUE SYSTEM The value system of the founders and those at the helm of affairs has important bearing on the choice of business, the mission and the objectives of the organization, business policies and practices.  

· (B) MISSION,VISION AND OBJECTIVES Vision means the ability to think about the future with imagination and wisdom. Vision is an important factor in achieving the objectives of the organization. The mission is the medium through which the objectives are achieved.  

·  (C) Management structure and nature  The structure of the organization also influences the business decisions. The organizational structure like the composition of board of directors , influences the decisions of business as they are internal factors . The structure and style of the organization may delay a decision making or some other helps in making quick decisions.   

EXTERNAL ENVIRONMENT

It refers to the environment that has an indirect influence on the business. The factors are  uncontrollable by the business. There are two types of external environment:    

Micro Environment The micro environment is also known as the task environment and operating environment because the micro environmental forces have a direct bearing on the operations of the firm. a)Suppliers An important force in the micro environment of a company is the suppliers, i.e., those who supply the inputs like raw materials and components to the company.  

·   Customer  The major task of a business is to create and sustain customers. A business exists only because of its customers. Marketing Intermediaries The marketing intermediaries include middlemen such as agents and merchants that help the company find customers or close sales with them.  financers The financers are also important factors of internal environment.   

·  Public  Public can be said as any group that has an actual or potential interest in or on an organization’s ability to achieve its interest. Public include media and citizens.

 Macro Environment  Macro environment is also known as General environment and remote environment. Macro factors are generally more uncontrollable than micro environment factors. When the macro factors become uncontrollable , the success of company depends upon its adaptability to the environment.  

·  Economic Environment   Economic environment refers to the aggregate of the nature of economic system of the country, business cycles, the socio-economic infrastructure etc. Social Environment  The social dimension or environment of a nation determines the value system of  the society which, in turn affects the functioning of the business. Sociological factors such as costs structure, customs and conventions, mobility of labor etc. have far-reaching impact on the business.  

·  Political Environment The political environment of a country is influenced by the political organizations  such as philosophy of political parties, ideology of government or party in power, nature and extent of bureaucracy influence of primary groups etc. Legal Environment Legal environment includes flexibility and adaptability of law and other legal rules governing the business. It may include the exact rulings and decision of the courts.  

· Technical Environment The business in a country is greatly influenced by the technological development. The technology adopted by the industries determines the type and quality of goods and services to be produced and the type and quality of plant and equipment to be used.