ENVIRONMENTOF BUSINESS .

Answer:

Introduction to Business Environment:

The formula for business success requires two elements - the individual and the environment. Remove either value and success becomes impossible. Business environment consist of all those factors that have a bearing on the business. The term business environment implies those external forces, factors and institutions that are beyond the control of individual business organizations and their management and affect the business enterprise.  Business environment influence the functioning of the business system. Thus, business environment may be defined as all those conditions and forces which are external to the business and are beyond the individual business unit, but it operates within it. These forces are customer, creditors, competitors, government, sociology-cultural organizations, political parties national and international organizations etc. some of those forces affect the business directly which some others have indirect effect on the business.

TYPES OF ENVIRONMENT:

On the basis of the extent of intimacy with the firm , the environmental factors may be classified into different types-internal and external.

                                                                i.                        INTERNAL ENVIRONMENT:

The internal environment is the environment that has a direct impact on the business.Here there are some internal factors which are generally controllable because the company has control over these factors. It can alter or modify such factors as its personnel, physical facilities, and organization and functional means, like marketing, to suit the environment.

The important internal factors which have a bearing on the strategy and other decisions of internal organization are discussed below.

01. Value system:

The value system of the founders and those at the helm of affairs has important bearing on the choice of business, the mission and the objectives of the organization, business policies and practices.

02.Mission and vision and objectives:

Vision means the ability to think about the future with imagination and wisdom. Vision is an important factor in achieving the objectives of the organization. The mission is the medium through which the objectives are achieved.

 

03. Management structure and nature:

The structure of the organization also influences the business decisions. The organizational structure like the composition of board of directors, in fluencesthe decisions of business as they are internal factors. The structure and style of the organization may delay a decision making or some other helps in making quick decisions.

04. Internal power relationships:

The relationship among the three levels of the organization also influences on the business. The mutual co-ordination among those three is an important need for a business.

05. Human resource:

The human resource is the important factor for any organization as it contributes to the strength and weakness of any organization. The involvement and initiative of the people in an organization at different levels may vary from organization to organization. The organizational culture and overall environment have bearing on them.

06. Company image and brand equity:

The image of the company in the outside market has the impact on the internal environment of the company. It helps in raising the finance, making joint ventures, other alliances, expansions and acquisitions, entering sale and purchase contracts, launching new products, etc. Brand equity also helps the company in some way.

 

07. Miscellaneous factors:

The other factors that contribute to the business success or failure are as follows:

•Marketing resources: - Resources like the organization for marketing, quality of the marketing men, brand equity and distribution network have direct bearing on marketing efficiency of the company.

•Financial factors:- factors like financial policies . financial positions and capital structure are also important internal environment affecting business performances ,strategies and decisions.

                                                            ii.                        EXTERNAL ENVIRONMENT:

The factors are uncontrollable by the business. There are two types of external environment.

01. Micro Environment:

The micro environment is also known as the task environment and operating environment because the micro environmental forces have a direct bearing on the operations of the firm.

 

“The micro environment consists of the actors in the company’s immediate environments that affect the performance of the company. These include the suppliers, marketing intermediaries, competitors, customers and the public”.

02. Suppliers:

An important force in the micro environment of a company is the suppliers, i.e., those who supply the inputs like raw materials and components to the company.

03. Customer:

The major task of a business is to create and sustain customers. A business exists only because of its customers. The choice of customer segments should be made by considering a number of factors including the relative profitability, dependability, and stability of demand, growth prospects and the extent of competition.

04. Marketing Intermediaries:

The marketing intermediaries include middlemen such as agents and merchants that help the company find customers or close sales with them. The marketing intermediaries are vital links between the company and the final consumers.

05. Financiers:

The financiers are also important factors of internal environment. Along with financing capabilities of the company their policies and strategies, attitudes towards risk , ability to provide non-financial assistance etc. are very important.

06. Public:

Public can be said as any group that has an actual or potential interest in or on an organization’s ability to achieve its interest. Public include media and citizens. Growth of consumer public is an important development affecting business.

07. Macro Environment:

Macro environment is also known as General environment and remote environment. Macro factors are generally more uncontrollable than micro environment factors. Some of the macro environment factors are discussed below:

A) Economic Environment:

Economic environment refers to the aggregate of the nature of economic system of the country, business cycles, the socio-economic infrastructure etc.

B) Social Environment:

The social dimension or environment of a nation determines the value system of the society which, in turn affects the functioning of the business. Sociological factors such as costs structure, customs and conventions, mobility of labor etc. have far-reaching impact on the business. These factors determine the work culture and mobility oflabor, work groups etc.

C) Political Environment:

The political environment of a country is influenced by the political organizations such as philosophy of political parties, ideology of government or party in power, nature and extent of bureaucracy influence of primary groups etc. The political environment of the country influences the business to a great extent.

D) Legal Environment:

Legal environment includes flexibility and adaptability of law and other legal rules governing the business. It may include the exact rulings and decision of the courts. These affect the business and its managers to a great extent.

E) Technical Environment:

 The business in a country is greatly influenced by the technological development. The technology adopted by the industries determines the type and quality of goods and services to be produced and the type and quality of plant and equipment to be used. Technological environment influences the business in terms of investment in technology, consistent application of technology and the effects of technology on markets.