BUSINESS

ENVIRONMENT

By: Shruti Maske -18

Ashima Malik- 8
 DEFINITION
According to Keith Davis
“Business environment is an aggregate of all
conditions events influences that surround and affect it. It
is broad and ever-changing as its separate elements
interact with one another. A single firm’s environment is
narrower in scope than the total environment of business.
It is complicated and continuosly changing. “
 NATURE
External
Complex in nature
Multi-dimensional
Ever-changing
Favourable or unfavourable
High degree of adaptability
Inability of business to influence environment
Adaption is a challenging task
SCOPE
 Distinction between Internal & External
Environment
Internal Environment External Environment
Internal business refers to all internal
The External Environment consist of a
factors and resources that affect the variety of factors outside the company
running of the business doors that affects the running of the
business.
Workforce: Employees, company assets. Includes PESTEL.
Less Controllable Uncontrollable

Recognize the Strengths of Internal Recognize the potential opportunities

operations. of market.
It is affected by the elements of Micro It is affected by the elements of Micro
Internal factors. External and Macro factors.
Example: Reputation and Credit Example: Nestle Retailers introducing
worthiness. its brand products among competitors.
 ENVIRONMENT ANALYSIS
It is a process to identify all the external and
internal elements, which can affect the
organization’s performance.
The analysis entails assessing the level of threat or
opportunity the factors might present. These
evaluations are later translated into the decision-
making process.
 .
Limitations or Disadvantages of Environment Analysis

• Based on Assumptions: All forecasts are based on certain assumptions which may
not always be true. The basic assumption behind forecasting is that events do not
change haphazardly and there is an orderly pattern in their behavior. This assumption
may not hold good in all cases. As a result forecast may become unreliable.

• Not Absolute Truth: Forecasts merely indicate the trend of future events and may not
be fully true. The various technique of forecasting simply project the future trends and
cannot guarantee that a particular trend will occur in future. All forecasts are wrong,
they only differ in the degree of error. There is always a possibility of mistake.

• Time-consuming and Expensive: Lot of time and money are involved in the
collection, analysis and interpretation of data for forecasting. Therefore, forecasting is
useful only to the extent that benefits expected from it exceed the time and cost
involved.
THANK YOU