BASICS OF BUSINESS ENVIRONMENT

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 BASICS OF BUSINESS ENVIRONMENT

"Business environment is the aggregate of all conditions, events, and influences that surround and effect the business organization."

The environment includes factors outside the firm which can lead to opportunities for or threats to the firm although there are many factors, the most important of these factors are socio economic, technological, suppliers, competitors and government.

The term business environment means " the sum total of all individuals, institutions and other forces that are outside the control of business enterprise but may affect its performance". putting it in another way, we can say that the economic, technological, political, social, and other forces which operate outside a business enterprise are also a part of business environment. Any change in these factors will influence business decisions.


FEATURES OF BUSINES ENVIRONMENT

1. TOTALITY OF ALL EXTERNAL FORCES - Business environment includes all those forces, factors, institutions, which directly or indirectly affect the working of the business. the environment of a business is the sum total of all things external to a business enterprise and is thus, aggregative in nature. The organization has little control over those forces.

2. INTERRELATEDNESS- the various elements of business environment are closely interrelated for example, in the present social scenario in India, there is a growing awareness and concern for healthcare in society. this has led to the demand for health foods like low fat cooking oils, sugar free products and health centered services. 

3. DYNAMIC - Business environment is dynamic and active and keeps on changing according to the situation. The changes take place due to numerous reasons such as a change in the customer tastes and preferences, change in the product due to technological improvement, entry of new competitors or new products.

4. COMPLEXITY - Business environment is complex because it consists of several interrelated and dynamic forces which keep on changing. It is quite difficult to ascertain the influence of changes in the demand for products due to impact of social, political, or technological forces.

5. UNCETAINITY- Since business environment cannot be definitely predictable due to its dependance on a number of factors, it is said to be uncertain. changes in fashion or technology or tastes and preferences of people have a great bearing on business environment.

IMPORTANCE OF BUSINESS ENVIRONMENT

  • Opportunity Identification: The business environment helps businesses spot opportunities for growth and success. By understanding the environment, businesses can identify trends, customer needs, and gaps in the market. This allows them to develop new products, services, and strategies to capitalize on these opportunities.

  • Threat Awareness: The business environment isn't just about sunshine and rainbows. It also helps businesses identify potential threats such as new regulations, competitor activity, or economic downturns. By being aware of these threats, businesses can take steps to mitigate them or adapt their strategies accordingly.

  • Resource Utilization: A good understanding of the business environment allows businesses to find and utilize valuable resources more effectively. This could include things like raw materials, labor, funding, or technological advancements.

  • Adaptability: The business world is constantly changing. The business environment helps businesses stay informed about these changes, allowing them to adapt their strategies and operations to remain competitive.

  • Improved Performance: By understanding the environment and making informed decisions, businesses can improve their overall performance. This can lead to increased profitability, market share, and customer satisfaction.


  • Better Planning: A comprehensive understanding of the business environment allows for better planning. Businesses can use this knowledge to set realistic goals, develop effective strategies, and make sound business decisions.

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