Business Environment

Business is a very economic activity of buying, selling, manufacturing, and rendering auxiliary services to trade and generating income through this activity. Modern Business is the economic and social organ of the society and also of the country and in today’s world modern business is not independent and it cannot work in isolation and business environment constitute- Government, public and economic, political and social situations constitute the business environment. Business environment may be defined as those conditions and forces external to a business unit under which it operates and these forces include government, suppliers, customers, creditors, political parties, socio-cultural organizations, and internal organizations, etc. Some of these may be direct influence over the business firm while others may operate indirectly. “Business environment encompasses the ‘climate’ or set of conditions, economic, social, political or institutional in which business operations are conducted”- Arthur M. Weimer.

The broad national economic environment is set by the nature of the economic system embodying the nature of property rights, ownership means of production, the role of planning, the functioning of the price mechanism, etc. Judged from these angles, the economic system of a country may be characterized as capitalist, socialist, communist, or mixed. The business environment consists of all those conditions and forces in the surroundings of a business enterprise under which the business operations are to be carried out efficiently and effectively and without any mistake. The management of the environment forces is an important task before every businessman of today and suitable decisions are required to be made in respect of various developments that are expected to take place for shaping the survival and growth of the business.

Characteristics of the business environment

1. The totality of external forces: The business environment is the total of all those factors/forces which are available outside the business and over which the business has no control. It is the group of many such forces, that is why the nature of it is totality.

2. Specific and General forces: The forces that exist outside the business are (a) Specific forces: These are the forces which affect the firms of an industry separately like customers, suppliers, etc. (b) General forces: These are the forces that affect all the firms of an industry equally, e.g., social, legal, political and technical situations.

3. The Business environment is dynamic: It is obvious that the environment is a mixture of so many factors and there are constant changes in some of them, due to these changes the business environment is dynamic.

4. The Business environment is complex: The nature of an environment in any field is the combination of so many factors and all these factors are related to one another. So the influence that they exercise on business cannot be recognized independently. That is why it is difficult for a business to face them.

5. The Business environment has a long-term impact: Any change in the environment has a long-term effect and impact on any kind of business because the changing environment affects the profitability, productivity, and development of the business.

6. The Business environment affects different firms differently: A change in the environment doesn’t need to affect all businesses in the same manner. One business may welcome the change in the environment while the other may not. Therefore, it is a special o environment that affects different businesses differently.