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Business Environment

Business Environment and its Meaning

After going through this chapter, you shall be able to understand the following concepts.

  • Concept of Business Environment
  • Characteristics of Business Environment
  • Importance of Business Environment

We know that the main motive of every business is to provide meaningful goods & services to its customers and clients besides earning profits. However, apart from these some of the important social objectives of businesses include generating employment opportunities, adding to the standard of living of the people, producing good quality comfort and luxury goods for people, etc. So, it would be no wrong to say that every business proves to be beneficial for the society in their own various ways, it may be by adding value to the goods or it may be in the form of employment opportunities.

All businesses differ in their size and nature. Where some may be as huge as Apple Inc. and Coca Cola, some may be comparatively smaller catering to lot lesser number of customers around their geographical boundaries. However, the common challenge that is faced by each and every business organisation is Survival. This is because in a world so large and dynamic, it is necessary to keep pace with the developments of the changing world. To survive and thrive in a competitive world, it becomes imperative for a business to keep themselves updated with the new developments and technology. And for this, every business is required to have two capabilities. These are:
  • Ability to Grow
  • Ability to Change
As once stated by Charles Darwin; “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.
So, we can say that a business needs to change and adapt to the surrounding environment in order to survive and grow in the long run.
In a world so large and dynamic, thousands of firms are born every month, and almost an equal number of firms close down. In this era of high speed and technology, where the demand of customers change every minute and every second a new product is developed; very few organisations cross the mark of 10 years in business; rather most firms around the globe shut down before hitting the standard benchmark. But, with the tremendous growth opportunities on the roll, some organisations go a very long way; for even more than a century. Take for example, Tata Group in India, which has been running its business since 1907. However, such examples are countable and there’s a lot that can be learned from their working pattern and ideologies to make it good in the business world.

Although all businesses share some common objectives and similarities in regards with working style, rules, policies, etc., every single organisation operates in its own individual and unique environment; environment that has a tremendous impact over the growth and sustainability of a business and also gets influenced by it. No business can operate without any interference from forces which are outside its domain. For instance, where online shopping was non-existent till last decade, since its emergence, every company is entering the online world and trying to make it big with the online sale of their products. This sudden shift in the business world marked by the entrance of social media and e-business over the traditional business, shows the power and influence of business environment.

Meaning of Business Environment

Business environment includes all the external factors, forces and conditions which impact the business decisions and strategies adopted by a firm. In other words, we can say that all the external forces — including economic, social, political, technological and legal— which are outside the purview or control of an organisation but affect its performance constitute business environment. These forces can affect the performance of the organisation either in a positive or in a negative manner. Along with exerting some degree of impact on the actions taken by the firm, these factors form the major contributors towards the success or failure of a business. For example, a change in consumer’s tastes and preferences in favour of a firm’s product increases the demand for its product. On the other hand, political instability can have an adverse impact on its performance.

According to Gluek and Jauch: “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 the factors are socioeconomic, technological, suppliers, competitors, and government.”

It should be noted that in order to be successful, it becomes essential for a business t…

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