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Business Environment [Class 6/8/19] (Features of Business Environment…
Business Environment [Class 6/8/19]
Meaning of Business Environemnt
Business environment reffers to forces and institutions outside the firm with which its members must deal to achieve the organizational purposes
Forces
Economical
Social
Political
Technological
Institutions
Suppliers
Customers
Competitors
The firm must be aware of these external forces and institutions
The firm must be nagged keeping in mind these forces and institutions so that the organizational objectivves are achieved
Features of Business Environment
Totality of External Forces
Business environment is the sum total of ALL factors external to the business + aggregative in nature
Specific and General Forces
Specific forces affect the business directly and immediately in their day to day working
General Forces have an indirect effect on the Business
Inter Relatedness
Different aspects of the business are inter-related
for Example, increease in consumer awareness has led to more stringent lawsand redressal system, demand for environment friendly products etc
Dynamic Nature
It keeps changing
-for example, technology used, Consumers' tastes and preferences keep changing and the firms need to change their operations to suit these changing conditions
Uncertainty
It is very
difficult to predict
the environmental changes that will take place
Complexity
Environment is a complex phenonemon as it consists of numerous components which are inter-related and have an influence on each other
It becomes very difficult to comprehend the exact effect that different components have on a particular factor
Relativity
That is,
it differs
from country to country and region to regions
Importance of Business Environment
Enables the firm to identify opportunities and getting first over advantage
Helps the firm to capitalize on early opportunities
Eg. Maruti Udyog in the small car market
Helps Firms to identify threats and early warning signals for adverse conditions
Environment analysis provides a base of information about possible future conditions that can be used to the firm's advantage
Eg. MNCs introducing new products to compete with indian Firms
Helps in tapping Useful Resources
The Business needs several inputs such as finance, raw materials, labour, etc to carrry out its activities
These inputs are available from its environment, and the business, in turn, supplies goods and services to customers, taxes to govt, returns to investors, etc.
Business depends on the event for its inputs and as an outlet for its outputs
The enterprise, thus should design policies that allows it to get the resources it needs so that it can convert them into outputs that the environment desires.
Helping in coping with Rapid changes
Environmental factors such as market conditions, competition etc are changing very rapid and more important at a very fast pace
In order to cope with the pace at which environment is changing, managers, must understand teh environment and develop suitable courses of actions
Helps in assisting in planning and policy formulation
Since environment is a source of both opportunities and threats, its understanding is the basis of planning and policy formulation
Helps in improving performcance
Enterprise that monitor and adapts to change happening in the environment not only improve its present performance but also to succeed in the long run
Influence of Business Environments
#
Positive
Opportunities
Negative
Constraints/Threats