INTRODUCTION TO BUSINESS ENVIRONMENT

MEANING

The key component of any firm is its environment. The phrase “business environment” refers to the whole of all individuals, groups, and other entities that operate independently of industry but have the potential to influence its output. Suppliers, competitors, the media, the government, customers, market circumstances, investors, and numerous other entities operating on the outside all contribute to the business environment. The term “business environment” refers to all those internal and external aspects that have an impact on how well/how poorly a company performs, as well as how it makes decisions, particularly strategic ones. It also includes the environment and situations that affect how businesses operate. The forces and variables that are either internal to or external to a company enterprise make up the business environment. The business environment helps in identifying business opportunities, tapping useful resources, assists in planning, and improves the overall performance, growth, and profitability of the business.

“Like the universe, withhold from it the subset that describes the system and the rest is environment,” wrote an unknown author. Therefore, an enterprise’s environment includes the financial, cultural, governmental, technological, and other elements that operate outside of it. The environment of an enterprise is made up of the specific clients or competing businesses, as well as the management, clientele, rivals, media, legal systems, and other organizations operating outside.

Definitions

The term “business environment” refers to the totality or collection of all internal and external aspects, including people working in the business, customers’ wants and needs, supply and demand, management, clients, suppliers, and owners, as well as government actions, technological innovation, social and market trends, economic shifts, and so on. These elements have a direct or indirect impact on how a firm operates and performs its functions. These factors taken together have an impact on the environment and situation of businesses. The entire environment that affects how a firm operates, whether directly or indirectly, can be referred to as the business environment.

On the basis of the above definitions, it is very clear that the business environment is a mixture of complex, dynamic and uncontrollable external factors within which a business is to be operated.

CONCEPT

A business firm is an open system that gets resources from the environment and supplies its goods and services to the environment.

Feature of Business Environment

The whole scope of external forces: The business environment refers to all factors that are external to the corporation. These factors will combine to create a business environment. For instance, when Pepsi and Coca-Cola received approval to establish their operations in India, it presented both an opportunity and a threat to indigenous manufacturers like Gold Spot and Camp-Cola.

Specific and General Forces

• Specific forces are those forces that directly affect the operational activities of the business enterprise. Example: Suppliers, Customers, Investors, Competitors, Financiers etc.
• General forces are those forces that indirectly affect the functioning of business enterprises. Example: Economic, Social, Political, Legal, and Technological conditions.

Interrelationships: There are connections between the various forces that shape the corporate environment. The operation of one element of the business environment has an impact on that of other elements. The demand for various health items, such as diet Coke, olive oil, and other health products, has increased as a result of people living longer and becoming more health conscious.

Dynamic Nature: Business environments are dynamic and constantly changing due to advances in technology, shifts in consumer tastes, and the introduction of new competitors. With the arrival of “Patanjali Products,” several established FMCG (Fast Moving Consumer items) companies are focusing on developing items with natural components.

Uncertainty: Future uncertainties make it impossible to make reliable predictions about how the business environment will change. Predicting changes in the economic and social environment is exceedingly challenging. As an illustration, the introduction of numerous new companies has led to a substantial decrease in the cost of Android smartphones.

Complexity: It is challenging to comprehend the factors at play in the business environment since they are dynamic and interconnected. If we study the business environment in sections, we can better understand its complexity. Example: Raising the goods and services tax to 15% would boost government revenue (economic), which would aid in enhancing public well-being (social) and lowering the personal disposable income of the wealthy, which would in turn help control inflation.

Relativity: Business environments vary from city to city, region to region, and nation to nation. For instance, in China, as consumption rises, the cost of the electricity provided to industry falls, enabling mass production, whereas in India, as consumption rises, the cost of the electricity increases, causing lower production and higher production costs.

NATURE

A business can be started, but in order to succeed, it needs resources like money, which it must obtain from financial institutions, social acceptance of social norms, which it must obtain from society, appropriate market conditions, which it must obtain from the market, the sale of goods and services, which it must obtain from customers, and labor, which it must obtain from society. Business Environment is influenced by a wide range of variables and aspects. These variables, which affect how a firm operates, are dynamic and ever-changing. For instance, the fidget spinner movement gave the silicon mold sector the biggest boost it has ever had.

The business environment includes new market innovations and shifting consumer needs. In this technology age, the difficulty for firms is not to enter the market, but to endure there. To succeed in the market, one must quickly adjust to the changes. Being aware of the corporate environment is necessary in order to adapt to change.

Suppliers, competitors, consumer groups, media, government, customers, economic conditions, market conditions, investors, technologies, trends, and numerous other institutions that work outside of a business are the forces that make up its business environment. Despite existing outside of the business’s limits, these forces have an impact on it.

For instance, the government’s adjustments to taxes may cause consumers to make fewer purchases. In this case, the company would need to raise its pricing in order to withstand the change. The firm had to adapt to the shift even though it had little to do with starting it in order to live or take advantage of the potential to generate money. The following elements help to explain the characteristics of the business environment:

System Approach: Business is originally defined as a system that uses a variety of inputs from the environment, such as raw materials, labor, capital, etc., to generate goods and services to satisfy consumer demands.

Social Responsibility Approach: With this strategy, business should meet its obligations to many societal groups, including stockholders, employees, the government, etc.

Creative Approach: According to this strategy, business shapes the environment by overcoming obstacles and seizing opportunities when they arise. By paying attention to the demands of the people, the business changes society.