Meaning of Business Environment
The business environment refers to all the external forces which affect business decisions. It mainly consists of social, economic, political, and technological factors. All these factors which affect the business environment are beyond the control of business progress. Business organizations can control all these only up to a certain level.
In other words. the business environment can be termed as the total of all the external forces. That affects the business functioning and are beyond its control. They are due to this is uncertain in nature. Business environments are actually dynamic in nature, which means that it keeps on changing and do not remain constant.
It changes according to the change in various factors. Like changes in preferences of customers, Coming to better competition and improvement in technology, etc. An important feature about the business environment to be noted is that it is uncertain and is challenging to predict hence necessary steps to take actions according to conditions should be taken.
The study of the environment of the business helps us to detect the strengths, weakness, threats, and opportunities. Once these are detected necessary steps can be easily taken. These factors analysis is better for proper growth and continuity of the business.
Objective of Business Environment
Identify Business Opportunities
The business environment helps the business to find opportunities in the market. Change in the market condition, customer behaviour, technology, and other factor, business need to finding new opportunities. Business needs to change to survive in the market. Business needs to identify the problem of the market and solve it to gain the customer.
The company is a group of activities undertaken with the possibility of a sale to make a profit. The business environment helps to improve sale and profit. The main aim of any business is to make a profit. If the sales grow it leads to an increase in profit. Higher profit means the performance is also increasing.
Basis of Decisions
The business environment provides information about inside and outside of the organization. The information related to change in culture, fashion, trends, customer purchasing power, and others. This information becomes the basis of the decision of any organization.
Survive in the Business
Survive in the market is very difficult in the time of competition. The business environment helps the business to find out information about the internal and external environment. So that the business can make Good decisions to survive in the market.
Making of Policies
The business makes policy according to the market conditions. The market condition can find out by analyzing the environment of the business. This is how the business environment helps in the making policies of the organization.
Assistance in Planning
Planning is the fundamental management function, which involves deciding beforehand, what is to be done, when is it to be done, how it is to be done, and who is going to do it. The business environment provides enough information to make a plan for the future.
Features of Business Environment
Influence Business Planning And Performance
The business environment directly influences the planning and performance of business organizations. Business planning and the environment go together. All plans and policies of business are framed in accordance with situations of environment.
The environment provides the basic framework within which business is required to operate. It influences the performance by providing various opportunities or obstructions. Business is able to operate efficiently with the support of their environment in which they exist.
Business for its continuity and growth is required to adapt to environmental changes. In order to survive, business needs to works in accordance with its environment. Every change in the business environment brings several opportunities and threats to it.
It affects their performance and profitability. The business needs to continuously monitor these changes and should take all corrective measures accordingly. These changes are in terms of change in customer taste or preferences, technological improvements, and entry of various new competitors.
Several factors that make up the business environment are interrelated with each other. Change in any one of the factors of the business environment will bring changes in several other factors. With the rise in the price of raw materials, the final price of products will also go up due to which customers will either stop buying or will buy less of products thereby reducing the overall revenue of the business. In this way, all factors are connected to each other.
The business environment is uncertain in nature and cannot be predicted. Factors that constitute business environment changes very rapidly and no one can determine them in advance. Prediction of several future conditions that affect business is quite difficult because no one knows what is going to happen in the future. These changes occur too frequently like change in IT, fashion, demand, technology, economic conditions etc.
Brings Strengths And Weakness
Environmental changes bring certain strengths and weaknesses to business. They may pose unfavorable situations or threats to business and may even bring opportunities for business. The business should keep an eye on all environmental changes to detect all opportunities as early as possible for taking maximum benefits out of it. Also in case of any unfavorable situations businesses can make effective plans timely to minimize the losses.
Relative In Nature
The business environment differs from business to business or from country to country. The environment of business have relativity to place where it operates. It changes in accordance with local conditions of the area in which business exists.
The business environment varies from place to place, region to region, and country to country. The technology used in different countries differs from each other and accordingly business need to frame their policies. The nature of products demanded will vary from country to country like shalwar kameez will be in more demand in India than in the U.S.A.
The environment around the business is dynamic in nature. It keeps on changing regularly. The business environment does not remain the same for a longer period of time and changes frequently. It is due to several factors that constitute the environment and their ever-changing nature. All these always changing factors bring changes in character and shape of the business environment making it dynamic.
Mutual Interdependence Between Business And Environment
Business and its environment are interdependent on each other. Business depends on its environment for various inputs like raw materials, labor, machinery, capital, etc. In the same way, the environment is dependent on the business organization for various goods and services manufactured by it. Businesses manufacture goods and deliver them to the environment in return for inputs supplied by them.