2.4 BUSINESS ENVIRONMENT

Prepared by:Komala GResearch ScholarDepartment of CommerceBUB

Meaning of Business Business means all activities which generates wealth. In these activities, goods are

produced or purchased and then are sold on profits. In the restricted sense, business will be treated as the purchase and sale of things. In the Broader sense of the term, business is the sum total of all those activities

which take place right from the production of goods and services down to the task of taking them to the consumers.

Following are main business objectives:

1. Economic objectives 2. Social objectives

a) To earn profit a) Service to society

b) To Grow the business b) Employee satisfaction and development

c) Innovation of new products c) Quality products and services

d) Fair return to investors e) Good corporate citizenship

Meaning of Environment

The environment includes factors outside the firm which can lead to opportunities for or threats to the firm.

The environment means the set of relevant factors under the influence of which a firm has to operate.

Meaning of Business Environment

Business environment may be defined as the set of external and internal factors which affects the decisions of business. We can divide business environment into two parts

1. The Micro Environment 2. The Macro Environment The business firm is a micro-economic unit and

the business environment furnishes the macro economic content under which a firm operates.

The environment of business consists of all those external things to which it is exposed and by which it may be influenced, directly or indirectly.

Nature of Business Environment

Nature of Business Environment

The Micro or Internal Environment of Business

These are powers which are deeply related with company and company can control these type of environment by improving its capacity and efficiency. 

1. Suppliers

Suppliers are the persons who supply raw material to company. 

2. Customers

Customers are the persons who buy goods from company. 

3. Market Intermediaries 

Market intermediaries are those person who helps company to sell its products. 

4. Financial Intermediaries 

Financial intermediaries are those institutions who provide loan, credit and advance to company. 

5. Competitors

Competitors are those who also sell same product of company. 

6. Public

Public is those group of people who can buy or who can show their interest to buy the products of company. 

The Macro or External Environment of Business

Macro environment of business means all external factors which affects company and its business and there is no control of company on these factors. 

1. Economic Environment

In economic environment, we can include govt. budget, import and export policies, economic system and economic conditions. 

2. Political and Governmental Environment

In political and government environment, we can include legislature's decisions, executive's decisions and judiciary decision which affect company's business. 

3. Socio cultural Environment

Socio-cultural environment includes morality, religion, education, health of peoples and family importance. - See more at: http://business.svtuition.org/2010/09/introduction-to-business-environment.html#sthash.er9NJTmS.dpuf

The Macro or External Environment of Business4. Natural Environment In natural environment, we

can include season, place elements, natural resources etc.

5. Demographic Environment In demographic environment, we can include size of population, growth rate of population, age composition, sex composition and family size.

6. Technological Environment In technological environment, we can include ecommerce technology, online payment, Internet technology, mobile banking and 3G technology and all other new technology which affect company's business.

7. International Environment In international environment, we can includes rules and regulation of WTO, WB and MNC's affect on our company's business.

Environmental Scanning- Meaning

Definitions

PESTEL analysis

The six environmental factors of the PESTEL analysis are the following:

1. Political factors Taxation Policy Trade regulations Governmental stability Unemployment Policy, etc.

2. Economical factors Inflation rate Growth in spending power Rate of people in a pensionable age Recession or Boom Customer liquidations

3. Socio-cultural Values, beliefs language religion education literacy time orientation

4. Technological factors Internet E-commerce Social Media Electronic Media Research and Development Rate of technological change

5. Environmental factors Competitive advantage Waste disposal Energy consumption Pollution monitoring, etc.

6. Legal factors employment law Health and safety Product safety Advertising regulations Product labeling labor laws etc.

Characteristics of Environmental Scanning

Steps in Environmental Scanning

Steps in Environmental Scanning

Uses of Environmental analysis

Limitations of Environmental Analysis

SWOT Analysis

SWOT Analysis

Definition of Strategic Management

The definition consist of 3 basic elements

Strategic Management concerned with

Process of Strategic Management

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