Business Environment

By:Prof.Manoj Kumar Behera

Global Institute of Management, Bhubaneswar
Business environment
• Is that it is the sum of all external and internal factors that impact a
business and its operations. Internal factors are those components
that exist within the company and external factors are outside causes
that influence an organisation's functioning.
• The business environment indicates the totality of all the individuals,
resources, stakeholders, institutions, regulations and market forces
that subsist around the organisation.
• It represents the sum of all the individuals, institutions, competing
organisations, government, courts, media, investors, and other factors
outside the power of the business organisations but affects the
business performance.
• Hence, changes in government economic policies, rapid changes in
technology, changes in consumer tastes and preferences, increasing
market competition, etc. are outside the business organisations'
power but affect the business performance immensely.
• For example, an increase in taxes by the government makes
everything expensive in the market; technology changes may make
the existing product obsolete, political uncertainty creates fear in the
mind of investors, increase in competition in the market due to
competitors may affect business profit, and changing in demand and
preferences may increase the need for a new product and decrease
the demand for old product.
• Components of Business Environment
• Internal - It combines the factors that exist within the company. These
are –
• Human resources
• Value system
• Vision and mission
• Labour union
• Corporate culture
• External - An external Environment includes those outside factors
that exercise an influence on a business’s operations. It is further
classified into two segments.
• Micro - This environment has a direct and immediate impact on a
business. It consists of customers, investors, suppliers, etc.
• Macro - Political, Economic, Socio-cultural,Technological,
Environmental, legal, and global factors fall into this category.
• Features of Business Environment
• The business environment is the sum of all external factors that affect
its growth.
• The business environment includes both general and specific forces.
Specific forces include investors, customers, competitors, and
suppliers.
• These factors affect individual enterprises directly and immediately in
their day-to-day working. General forces include social, political, legal,
and technological conditions. The general forces affect the business
environment individually.
• The business environment is dynamic.
• The business environment is highly uncertain.
• The business environment is a relative concept as it differs from
country to country and even region to region.
• Thank You