Read this targeted article on the topic of (i) Meaning of Business Environment, (ii) Features of Business Environment, (iii) Characteristics of Business Environment, (iv) Nature of Business Environment, (v) Importance of Business Environment, and (vi) Components or Dimensions of Business Environment…
Meaning of Business Environment
What is Business Environment?
Business environment defined as a type of factors, forces, and institutions with which the businessman has to deal with to achieve its goals or objectives. In simple words, the business environment is the surroundings in which the business companies exist.
Whenever any businessman is working or operating then he has to interact with various customers, suppliers and he has to perform the transactions within the proper rules and regulations of the government (whether it is state or central). All these institutions, persons, and policies form a part of the business environment.
Features/Characteristics/Nature of Business Environment
The salient features of the business environment are also known as the Characteristics of Business Environment…
In this modern era of the business environment, all the forces and factors are interrelated to each other. For example with the tendency of youth towards western culture, the demand and want for fast food is increasing.
2. All the external forces:
Business environment consists of all the forces, factors, and institutions which directly or indirectly influence or affect the business organizations.
3. Specific and general forces:
Business environment consists of specific forces such as customers, investors, suppliers, or customers. Non-human or general forces are legal, social, political, technological, etc. which affect the business indirectly or informally.
It is very complicated to forecast or predict the changes in the business environment. As the environment is developing very fast for example in the fashion industry, IT, fast and frequent changes are taking place.
The impact of business environment is totally different from country to country or company to company. For Example, when consumer organization CES published the data report of finding pesticides in cold drinks, resulting in a fall in the sale of cold drinks, on the other hand, it increased the sale of juice and other soft drinks.
The business environment is potentially flexible and future changing. It is not stable or static that is the reason it is essential to scan or monitor the business environment continuously.
It is very complicated to understand the impact of the business environment on business companies. Although it is easy to monitor the environment but it is very difficult to know how these changes will affect the business decisions.
Sometime change may be minor but it might have a greater impact. For example, a change in government policy to increase the rate of tax by 5% may affect the wealth of the company by a large amount.
Importance of Business Environment
The importance includes various points such as:-
1. Helpful in Assembling and Tapping Resources:
The business has to supply the goods or products according to the demand in the market. To supply output they need various inputs like raw materials, labor, etc. They acquire all the resources keeping in mind the output demanded in the environment.
They select the best resources according to availability in the environment and demand for output in the environment.
2. Help to Adapt and Adjust with the Rapid Changes:
In today’s world, changes are taking place very fast and these fluctuations have a great impact on business. So it is important to understand these changes as fast as possible.
The business environment helps to scan the problems of the companies and also helps to remove them for future benefits. The businessman did changes in their internal environment also to match the external environment.
3. Enables the Firm to Identify Opportunities and Getting First Mover Advantage:
The business company or man who is able to identify and scan the opportunities of business environment at the early period they get maximum profit or they can easily capture a big part in the market. They can easily beat their competitors.
For Example, when Maruti Company was assuming to sign a contract with Suzuki Company of Japan then the Goodlass Nerolac Company was the 1st company to understand the business environment and analyze that very soon there will be huge demand for car painting in India and no number of paint company in our country was having car paint technology.
So, Nerolac Company made use of this opportunity and signed a valid contract with Kansai Paint Company to import the car painting technology and when the Maruti started its car manufacture in India then Nerloac Paint Company got all the car painting contracts of Maruti and today also 90% of car paintwork of Maruti is done by Nerolac Goodlass Company.
4. Assisting in Policy Making and Planning:
The big plans or strategies and policies in the organization are formed keeping in mind business environment because the strategies and policies have to execute in the presence of environmental factors.
Scanning of environmental factors helps to find out the problems of business and makes a better strategy to resolve them.
5. Keeping Business Dynamic and Flexible:
The proper study of the business environment is very essential to make business flexible and dynamic as per the factors of environmental forces. This will help to enable the business organization.
Components/Dimensions of Business Environment
It includes main or various components or dimensions of the business environment:
- Economical Environment
- Social Environment
- Political Environment
- Legal Environment
- Technological Environment
1. Economical Environment:
Economic environment includes Gross Domestic Product, Per capita level and Income level at the national level, Profit earning rate, Employment and Productivity rate, Monetary and Fiscal policy of the government. It includes various aspects like:
(i) Balance of trade.
(ii) Role of the private and public sector.
(iii) Money supply in the economy.
(iv) Balance of payment.
(v) Rate of saving and investment.
(vi) Transport and communication system.
(vii) Rate of growth of GNP, GDP, Per Capita Income.
(viii) International debt.
2. Social Environment:
Social environment includes customs and traditions of the society in which business is existing. It includes the taste and preference, standard of living, and education criteria of the people living in a society where the business exists.
This environment is very helpful for the success of any business in the long run. It includes various aspects such as:
(i) Tradition, customs, and habits of people.
(ii) Importance or place of women in the workforce.
(iii) Birth and death rates.
(iv) Quality of life.
(vi) Education and literacy rates.
(vii) Consumption habits.
(viii) An attitude of consumers towards lifestyle.
3. Political Environment:
Political environment includes all the factors which are related to government affairs like the attitude of the government, power of government towards different sectors of societies, policy changes implemented by different governments, etc.
The political environment creates a great impact on the business transactions so businessman must control this environment very easily and carefully. It includes various aspects such as:
(i) Constitution of the country.
(ii) Present political system.
(iii) Values and ideology of political parties.
(iv) Government intervention in business.
(v) The foreign policy of the government.
4. Legal Environment:
The legal environment represents laws and various legislations passed in the parliament. The businesses cannot overlook the legislations because he has to do his business transactions within the face of a legal environment.
The common legislation passed which has affected the legal transactions like Weights and measures act, essential commodity act, etc. It includes various aspects such as:
(i) Statutory warnings were important to be printed on the label.
(ii) Legal policies related to licensing.
(iii) Various laws and legislative acts.
(iv) Laws to keep a check on advertisements.
(v) Foreign exchange regulation and management act.
5. Technological Environment:
Technological environment means to changes taking place in the use of new equipment, method of production, and machines to improve the quality of the product. Technological changes always help to improve the quality of a product and bring more benefits to customers. It includes various aspects such as:
(i) Technological advances in computers.
(ii) Various innovations and Inventions.
(iii) Scientific improvements.
(iv) Developments in IT sector.
(v) Import and export of technology.
I hope you have cleared the meaning, features, characteristics, nature, importance, components, dimensions of the business environment…