BUSINESS ENVIRONMENT

CONCEPT & SIGNIFICANCE UNIT I

BUSINESS

1. Business include everything from a small owneroperated company such as a family restaurant, to a multinational conglomerate such as GeneralElectric. 2. To "do business" with another company, a business must engage in some kind of transaction or exchange of value with that company. 3. In this sense, the word "business" can be used to refer to a specific industry or activity, such as the "real estate business" or the "advertising business".

BUSINESS DEFINED

According to L. H. Haney - Business may be defined as human activities

directed toward providing or acquiring wealth through buying and selling of goods.

James Stephenson says that: - Every human activity which is engaged in for
the sake of earning profit may be called business.

ENVIRONMENT

The circumstances or conditions that surround one; surroundings. The totality of circumstances surrounding an organism or group of organisms. The combination of external physical conditions that affect and influence the growth, development, and survival of business. The complex of social and cultural conditions affecting the nature of an individual or community.

ENVIRONMENT

Environment refers to all External factors which have a bearing on the functioning of business . Environment factors or constraints are largely or if not totally, external and beyond the control of individual industrial enterprises and their managements. These are essentially the givers within which firms and their management must operate in a specific country and they vary, often greatly, from country to country.

Business Environment

Business is any activity undertaken for the purpose of producing or selling a particular commodity or service and earns a profit. The business has several dimensions such as purchasing the inputs, converting the inputs into the output, selling that output at a profitable price.

Every dimension of a business depends upon several factors. Hence a business is influenced by several factors, all them put together are described as Business Environment

Business Environment

Business environment is a sum total of all those factors, which directly affect the working of business. It is a comprehensive term and covers factors like consumer behavior, economic policies, competition in the market, technology and so on. Many authors and experts in different ways have defined the term Business Environment.

According to Keith Davis, "Environment of the business means the aggregate of all conditions, events and influences that surround and affect it."
In the words of B.O.Wheeler, "Business environment is the total of all things external to firms and individuals which affect their Organization and operations".

Concept of Business Environment

A business firm is an open system. It gets resources from the environment and supplies its goods and services to the environment.

There are different levels of environmental forces. Some are close and internal forces whereas others are external forces.

Concept of Business Environment

External forces may be related to national level, regional level or international level. These environmental opportunities or threats community. forces to the provide business

Every business organization tries to grasp the available opportunities and face the threats that emerge from the business environment.

Concept of Business Environment

Environment is Inseparable Part of Business: Environment is Dynamic:

Environment is decided by Chance and not by choice

Environment Regulates the Scope of Business: Environment has a direct and long lasting impact on Business .

Environment is Inseparable Part of Business

Business environment is the surrounding or atmosphere under which business is conducted . Business cannot work in vacuum or isolation and needs favorable surroundings to survive and grow. Business depends on environment supply of raw materials and to sell its finished product

Thus, business cannot function without environment, as both are independent and interdependent on each other.

Environment is Dynamic

Business environment is dynamic i.e. flexible and ever changing. The changes in the environment take place due to many external forces- the social, economic, cultural and other forces. A firm would not have the same type of economic or other conditions prevailing year after year

Environment is decided by Chance and not by choice

A favorable environment would be conducive for the survival and growth of a firm However, in reality, a firm has absolutely no control over its external environment. . A firm cannot decide or control or arrange its external environment as per its own requirements. To ensure survival and success, a business firm should adjust itself to the changing environment, or to mould the environment to suit the interest of business.

Environment Regulates the Scope of Business

The scope of business is regulated and restricted by the external factors surrounding it. A business firm is expected, to conduct its activities within the social, economic and legal limits set out in the form of rules, regulations and policies. For instance, advertising of liquor and cigarette is prohibited on government controlled media like Radio and TV.

Environment has a direct and long lasting impact on Business .

Both business and environment affect each other in many ways But environment has long lasting impact on the future of the business enterprise In the recent past, the Government of India has announced a number of economic reforms like, liberalization, privatization, open door policy for foreign investment etc

Environment is Complex

The environment of modern business is more complex, flexible, and highly unpredictable. The modern business has grown in size & scope and so is the environment. The growth of science and technology, expansion of market, large scale production, social awareness, changing social and cultural values, the role of government etc, have made the business environment a highly complicated subject to understand and follow.

Business Environment

Internal and External Environment Environment is Multi-Faceted

Environment and Planning

NEED AND IMPORTANCE OF BUSINESS ENVIRONMENT:

Business organizations cannot change the external environment but they just react. They change their internal business components (internal environment) to grasp the external opportunities and face the external environmental threats.

It is, therefore, very important to analyze business environment to survive and to get success for a business in its industry. It is, therefore, a vital role of managers to analyze business environment so that they could pursue effective business strategy.

SIGNIFICANCE OF BUSINESS ENVIRONMENT

A study of business environment useful in many ways like:

Identify Prospects and Problems

Optimum Use of Resources

Flexibility

Environmental analysis is Necessary

SIGNIFICANCE OF BUSINESS ENVIRONMENT

Effective planning Future Needs Face Competition Ecological Balance

Formulate Strategy

Critics of Business

Business dehumanises and exploits workers Business harms interests of consumers Business degrades nature and the environment Business causes scams and scandals