Mellorando
Banned
Some people say a business environment refers to the place where a business is being situated. Well not exactly as I will define what this is, got a business environment consists of a number of activities that affect the operation of a business. The environment of business is full of complexity and intricacies in fact it is highly dynamic for a business to survive it must monitor what is going on in the environment.
Business environment is the sum totals of all factors external to the business firm and that greatly influence their functioning. It covers factors and forces like customers, competitors, suppliers, government, and the social, cultural, political, technological and legal conditions. Business environment encompasses all those factors that affect a company's operations and includes customers, competitors, stakeholders, suppliers, industry trends, regulations other government activities, social and economic factors and technological developments.
The business environment can be classified as follows:
1. Economic Environment:
The economic environment consists of macro-level factors related to the means of production and distribution of wealth that have an impact on the business of the organisation. The survival and success of each and every business enterprise depend fully on its economic environment.
2. Market Environment:
The market environment consists of the factors related to the groups and other organisation that compete with and have an impact on the organisation’s markets and business. Some of the factors and influences operating in the market environment are as follows:
i. Demand Related Factors:
By monitoring the demand related factors of one’s industry a firm gather vital clues on consumption pattern, buying habits, invasion of substitute products, growth potential, attractiveness of the industry, expansion, divestment, etc. The aspects to be considered are: nature of demand, demand potential, current level of demand, changes in demand, consumption pattern, buying habits, etc.
ii. Consumer Related Factors:
Monitoring the customer’s taste may result in attractive business opportunities. Hence, customer analysis is very important during environmental survey.
3. Technological Environment:
The technological environment consists of factors related to technology used in the production of goods and services that have an impact on the business of an organisation. Technological factors to be considered are:
i. Source of technology like company, external and foreign sources, cost of technology acquisition, collaboration and transfer of technology.
ii. Technological development, rate of change of technology and research and development.
iii. Impact of technology on human beings, the man-machine system and the environmental effects of technology.
iv. Communication, infrastructure and managerial technology.For a business firm, technology affects its final products by changing processes in raw material sourcing, production and distribution. Technology, when rightly used can bring about huge changes in the productivity of firms. Computer industry is one example where technology in the industry keeps pushing competition to the brink.The varying technological environments of different countries affect the designing of products. For example, in USA and many other countries electrical appliances are designed for 110 volts. But when these are made for India, they have to be of 220 volts. In the modern competitive age, the pace of technological changes is very fast.Hence, in order to survive and grow in the market, a business has to adopt the technological changes from time to time. It may be noted that scientific research for improvement and innovation in products and services is a regular feature in most of the big industrial organisations. Nowadays in fact, no firm can afford to persist with the out-dated technologies.
4. Sociocultural Environment:
Sociocultural environment regulates the values, morals and customs of society.
Important factors to be considered are:
i. Demographic characteristics.
ii. Social concerns, social attitudes.
iii. Family structure and changes in it.
iv. Role of women in society, position of children and adolescents in family and society.
v. Educational level, awareness and consciousness of rights and work ethics of members of the society.
The social environment primarily affects the strategic management process within the organisation in the areas of mission and objective setting and decision related to products and markets. The social environment of business includes social factors like customs, traditions, values, beliefs, poverty, literacy, life expectancy rate, etc. The social structure and the values that a society cherishes have considerable influence on the functioning of business firms. For example, during festive seasons there is an increase in the demand for new clothes, sweets, fruits, flower, etc. Due to increase in literacy rate the consumers are becoming more conscious of the quality of the products.
Due to change in the family composition, more nuclear families with single-child concept have come up. This increases the demand for different types of household goods. It may be noted that the consumption patterns, the dressing and living styles of people belonging to different social strata and culture vary significantly.
5. Political Environment:
Politico-legal forces allocate power and provide laws and regulations that may constrain or protect the business.
The factors to be considered are:
i. The political system and its features like nature of the political system, ideological forces of the political parties and sentries of power.
ii. The political structure, its goals and stability.
iii. Political process like party systems, elections, funding of elections and legislation in economic and industrial matters and regulations.
iv. Political philosophy, role of government in business and its policy approach towards economic and business development.
With the developments on the political front affecting the economy all the time, the economic environment often becomes a by-products of the political environment. Legislations regulating the business are the by-products to of the political configuration. In addition to government and legislative measures, media, social and religious organisations and lobbies of various kinds are also a part of the political environment. They collectively exercise a huge influence on the conduct of business in a country.
The political environment includes the political system, the government policies and attitude towards the business community and the unionism. All these aspects have a bearing on the strategies adopted by the business firms. The stability of the government also influences business and related activities to a great extent. It sends a signal of strength, confidence to various interest groups and investors. Further, ideology of the political party also influences the business organisation and its operations. The Coca-Cola, a cold drink widely used now, had to wind up its operations in India in late seventies. Again the trade union activities also influence the operation of business enterprises. Most of the labour unions in India are affiliated to various political parties. Strikes, lockouts and labour disputes, etc., also adversely affect the business operations. However, with the competitive business environment, trade unions are now showing great maturity and started contributing positively to the success of the business organisation and its operations through workers participation in management.
Business environment is the sum totals of all factors external to the business firm and that greatly influence their functioning. It covers factors and forces like customers, competitors, suppliers, government, and the social, cultural, political, technological and legal conditions. Business environment encompasses all those factors that affect a company's operations and includes customers, competitors, stakeholders, suppliers, industry trends, regulations other government activities, social and economic factors and technological developments.
The business environment can be classified as follows:
1. Economic Environment:
The economic environment consists of macro-level factors related to the means of production and distribution of wealth that have an impact on the business of the organisation. The survival and success of each and every business enterprise depend fully on its economic environment.
2. Market Environment:
The market environment consists of the factors related to the groups and other organisation that compete with and have an impact on the organisation’s markets and business. Some of the factors and influences operating in the market environment are as follows:
i. Demand Related Factors:
By monitoring the demand related factors of one’s industry a firm gather vital clues on consumption pattern, buying habits, invasion of substitute products, growth potential, attractiveness of the industry, expansion, divestment, etc. The aspects to be considered are: nature of demand, demand potential, current level of demand, changes in demand, consumption pattern, buying habits, etc.
ii. Consumer Related Factors:
Monitoring the customer’s taste may result in attractive business opportunities. Hence, customer analysis is very important during environmental survey.
3. Technological Environment:
The technological environment consists of factors related to technology used in the production of goods and services that have an impact on the business of an organisation. Technological factors to be considered are:
i. Source of technology like company, external and foreign sources, cost of technology acquisition, collaboration and transfer of technology.
ii. Technological development, rate of change of technology and research and development.
iii. Impact of technology on human beings, the man-machine system and the environmental effects of technology.
iv. Communication, infrastructure and managerial technology.For a business firm, technology affects its final products by changing processes in raw material sourcing, production and distribution. Technology, when rightly used can bring about huge changes in the productivity of firms. Computer industry is one example where technology in the industry keeps pushing competition to the brink.The varying technological environments of different countries affect the designing of products. For example, in USA and many other countries electrical appliances are designed for 110 volts. But when these are made for India, they have to be of 220 volts. In the modern competitive age, the pace of technological changes is very fast.Hence, in order to survive and grow in the market, a business has to adopt the technological changes from time to time. It may be noted that scientific research for improvement and innovation in products and services is a regular feature in most of the big industrial organisations. Nowadays in fact, no firm can afford to persist with the out-dated technologies.
4. Sociocultural Environment:
Sociocultural environment regulates the values, morals and customs of society.
Important factors to be considered are:
i. Demographic characteristics.
ii. Social concerns, social attitudes.
iii. Family structure and changes in it.
iv. Role of women in society, position of children and adolescents in family and society.
v. Educational level, awareness and consciousness of rights and work ethics of members of the society.
The social environment primarily affects the strategic management process within the organisation in the areas of mission and objective setting and decision related to products and markets. The social environment of business includes social factors like customs, traditions, values, beliefs, poverty, literacy, life expectancy rate, etc. The social structure and the values that a society cherishes have considerable influence on the functioning of business firms. For example, during festive seasons there is an increase in the demand for new clothes, sweets, fruits, flower, etc. Due to increase in literacy rate the consumers are becoming more conscious of the quality of the products.
Due to change in the family composition, more nuclear families with single-child concept have come up. This increases the demand for different types of household goods. It may be noted that the consumption patterns, the dressing and living styles of people belonging to different social strata and culture vary significantly.
5. Political Environment:
Politico-legal forces allocate power and provide laws and regulations that may constrain or protect the business.
The factors to be considered are:
i. The political system and its features like nature of the political system, ideological forces of the political parties and sentries of power.
ii. The political structure, its goals and stability.
iii. Political process like party systems, elections, funding of elections and legislation in economic and industrial matters and regulations.
iv. Political philosophy, role of government in business and its policy approach towards economic and business development.
With the developments on the political front affecting the economy all the time, the economic environment often becomes a by-products of the political environment. Legislations regulating the business are the by-products to of the political configuration. In addition to government and legislative measures, media, social and religious organisations and lobbies of various kinds are also a part of the political environment. They collectively exercise a huge influence on the conduct of business in a country.
The political environment includes the political system, the government policies and attitude towards the business community and the unionism. All these aspects have a bearing on the strategies adopted by the business firms. The stability of the government also influences business and related activities to a great extent. It sends a signal of strength, confidence to various interest groups and investors. Further, ideology of the political party also influences the business organisation and its operations. The Coca-Cola, a cold drink widely used now, had to wind up its operations in India in late seventies. Again the trade union activities also influence the operation of business enterprises. Most of the labour unions in India are affiliated to various political parties. Strikes, lockouts and labour disputes, etc., also adversely affect the business operations. However, with the competitive business environment, trade unions are now showing great maturity and started contributing positively to the success of the business organisation and its operations through workers participation in management.
