Meaning And Elements Of Business Environment

Meaning And Elements Of Business Environment – Today we will discuss about what is business environment and elements of business environment as well as we will learn how it effects business in English and Hindi.

Meaning Of Business Environment

Business Environment refers to those aspects of the surroundings of business enterprise which have influence on the functioning of business. An organisation can survive and grow only when it continuously and quickly adapts to changing environment. We are living in the dynamic world which is undergoing a rapid change, because of coming up of new ideas, economic changes, political changes and new technology. Keith Davis has observed that business environment is the aggregate of all conditions, and influences that surround and affect the business.

Internal Environment – includes internal factors of the business which can be controlled by business. It refers to environment within the organisation. It includes objectives of business, managerial policies, different departments of the organisation, management and employees of the organisation, labour management relationship, brand image and corporate images, physical resources including infrastructure available with the business, vision and thinking of top management,research and development actvities of organisation, working conditions in the organisation, morale and commitment of human resources etc.

External environment – refers to the external aspects of the surroundings of business enterprise which have influence on the functioning of business. The external aspects of the surroundings are by and large, beyond the control of business. External environment is of two types.

(a) Micro

(b) Macro

Micro environment

The forces which are close to the company and effects its ability to work constitute micro environment. Micro business environment includes the following.

(A) Suppliers

Every business enterprise requires a number of suppliers, who supply raw materials and components to the business unit. The following points should be kept in mind regarding suppliers:

(1) Reliability: If our supplier is reliable, our business will run smoothly. If our supplier is not It is very risky to depend on a single supplier because a strike, lockout or components to the business unit. The following points should be kept in mind regarding suppliers: reliable, we may have to maintain high inventories which will increase our cost.

(2) Multiple Supplier: other problem with that supplier will seriously affect the business unit. Multiple sources of supply will reduce such risk.

(B) Customers

Customer is the central point of any business. Success of a business organisation depends upon identifying customers, their needs, tastes, liking, etc. and enhancing the level of customer satisfaction. Because of increase in competition, attracting and satisfying the customer has become more challenging. For attracting new customers, business units conduct consumer research, design product as per needs and requirements of customers, spend heavily on advertisement, provide after-sale services, etc. Customers Customers may be of different types:

(i) Wholesale customers

(ii) Retail customers

(iii) Industrial customers

(iv) Government and other institutions

(v) Foreign customers

(C) Market Intermediaries

Every business enterprise may assisted by market intermediaries which include agents, and brokers who help the business unit to find customers. It is a link between business unit and final consumer Market intermediaries help the business unit to promote, sell and distribute its goods to final buyers. Market intermediaries include the following:

(1) Middlemen: These include wholesalers, retailers, departmental stores, etc.

(2) Marketing Agencies: These include advertising agencies, consultancy firms, media firms, market research firms, etc

(3) Financial Intermediaries: These include banks, insurance companies, financial institutions, money markets, capital markets, etc.

(4) Physical Intermediaries: These include warehouses, transport agencies, etc.

(D) competitors

Business has to adjust its various activities according to actions and reactions of competitors. competitor means other business units which are marketing or producing similar products or a very close Competitors substitute of our product. For example, a motorcycle manufacturer faces competition not only from other brands of motorcycle but also from other types of two-wheelers, viz., scooters. He may attract customers from other manufacturers of motorcycle and also from scooter manufacturing companies.

(E) Public

Public is any group that has actual or potential interest in the business. Public includes users and non-users of the product. Examples of public are

Media Public: It includes all newspapers, magazines, journals which may publish favourable or adverse remarks about company. Both types of remarks in media have effect on the reputation of company.

Local Public: Local public refers to people living in the area where business unit is set up. Environment pollution is an issue that is taken by local public. Actions of local public on this issue have forced some business units to suspend operations or to install pollution control equipments. If local public goes against business unit, it may force the business unit to close its operations.

Macro Environment

Macro Environment means general environment of business. Macro forces are uncontrollable in comparison to the micro forces of environment. The growth and survival of business depend upon its adaptability to macro environmental factors which include economic environment, political environment, socio-cultural environment, technological environment, natural environment, international environment, demographic environment. These factors create opportunities and pose threats to the business.

(A) Economic environment

Economic environment refers to those economic factors which have impact on the working of business viz., economic system, economic policy, nature of economy, trade cycles, economic resources, business viz., economic system business is very policies, change in political situations, etc.

(B) Political Environment

Political environment also affects different business units significantly. A stable and dynamic political environment is indispensable for business growth. Political environment mainly includes the following components:

(i) Political ideology of government

(ii) Political stability

(iii) Relations of our nation with other countries

(iv) Welfare activities of government

(v) Centre-state relationship

(vi) towards business.

(C) Socio-cultural Environment

Business is an integral part of society and both influence each other. It is one of the important non-economic external components of business environment. Socio-cultural environment refers to influence exercised by certain social and cultural factors which are beyond the control of business unit Such factors include: attitude of people to work, family system, caste system, religion, education, marriage, habits and preferences, languages, urbanisation, customs and traditions, value system, business ethics, social trends, social responsibility of business, etc. Culture shapes the thoughts and behavioural pattern of members of society. It shapes their customs, habits, belief, preferences, values,lifestyle, etc.

(D) Technological Environment

Technology is a systematic application of scientific or other organised knowledge to practical tasks. Technology has enabled man to save lives, generate and distribute energy, discover new materials and substitutes, introduce machines to work, substitute mental works with computers, etc. Technology is the most dramatic force shaping the destiny of people all over the world. Some of the technological inventions are wonders, some are horrors and some have mixed reactions. Technological changes bring about changes in products, services, lifestyles and living conditions. Some new products in the field of electronics, telecommunication,transportation and information technology have significantly affected the business.

(E) Natural/Physical Environment

It includes geographical and ecological factors such as natural resources, weather and climatic conditions, topographical factors such as soil, landforms, sea, rivers, rainfall; environmental pollution, etc. Climatic and weather conditions affect the certain industries. Sugar industry has been set up in those areas where sugarcane is cultivated. Similarly, rice mills have been set up in the areas where paddy is cultivated. In areas with a difficult terrain, jeeps are in greater demand than cars. Similarly natural calamities like flood, drought, cyclone, tsunami, etc. in some states badly affect the business units of that region.

(F) Demographic environment

Demographic environment is the study of features  of population viz : its size, its growth rate, age composition, sex composition, income level, education level, family size, family structure, etc. All these demographic factors affect size of demand; tastes, fashion, liking, preferences of consumer etc. Demographic environment differs from country to country and from place to place within the same country.

(1) Size of population and population growth

(2) Age composition

(3) Sex composition

(4) Education level

(5) Family size and structure

(6) Economic stratification of population

(7) Urban-rural population

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