Business environment refers to all those forces and factors that directly or indirectly affect the activities of the business is known as business environment. Business environment may effect business in an positive way or as well as negative manner.
for example:- After covid-19 all those businesses or institution whose primary based on digital, online or internet are seen rapidly growth in an aggressive manner. so, business environment effect business in an positive or negative manner. That why understanding of business environment play an curial role in effective growth of an any business or industry.
External and Internal Environment:-
Business environment can be internal or external. The internal environment refer to those forces or factors that’s effect business performance through internally and it consists of various factors within the organization such as human resources, finance and organization current technology.
The external environment refers to the forces and factors that affect a company’s performance through externally . The external business environment consists various factors like investors, competitors, economic, political factors, and global factors and etc.
A. Economic Factors:-
Economic play an important role of Influencing external economic that influence buying habits of consumers and businesses and therefore, affect the performance of a company. These types factors are often beyond to company’s control, and may be either large-scale or a small-scale.
B. Political and Legal Factors:-
The political climate of a country is another critical factor of external environment to be consider in day-to-day business operations. The amount of government activity, the types of laws it passes are directly or indirectly affect the business performance. For example, In 1991 Indian governemet passes LPG policy to attract foreiegn companies and currency for growth of a country.
C. Social Factors:-
Social factors are nothing it’s our attitudes, values, ethics, and lifestyles—influence what, how, where, and when people purchase any particular brand or company products or services. They are consider difficult to predict. Howerver, They also change as people move through different life stages.
D. Technology Factors:-
Technology Factors refers to all those forces and factors that affect a company’s performance through technically manner.
Many business houses use Environment scanning for for efficiently analysis of business environment. One more term which help business environment is environment scanning. Environment Scanning refer to the process of arranging information and resources convert them into useful information or preparation for understanding business environment to achieve goal is called Environment Scanning.
Feature of Business Environment
1. Specific and General Forces:
Business Environment include both the specific and general forces. Specific forces are those forces that directly effect particular business or industry.
General Forces refer to those forces that directly or indirectly effect the group of various business or industry. for example:- Covid-19 affect mostly every type of industry so, it considered as a general forces.
All those forces and factor that affect business are inter-related to each other.
Then business analysis any environment it required various resources and information which should be accurate because it keep changing so, understanding of business environment is very difficult and uncertainly.
As we know, Business environment is uncertain and it is very flexible due to this business environment is considered as a dynamic. Any analytics need complete information and resources with an full accuracy for understanding Business environment.
Business environment is considered differ from country to country, states to states, region to region or person to person.
Importance of understanding Business Environment:-
1 Help to gain First Mover Advantage:-
Efficiently Understanding of business environment help business or institution to gained an benefit of first-mover advantage in an market. First-mover advantage refers to an company gaining an advantage of introducing a product or service first to the market and attracting huge amount of customers. It enables a company to establish strong brand recognition in a market for the product or service with an loyalty to the customers.
2 Early warning signal:-
Early warning systems refer to better understanding of environment and find out the effective solution so, this will works as Early warning signal for an company. However, Understanding of Environment help business identify various threats on time and it’s serve as an early warning signal.
3 Helpful in arranging resources:-
When an business identify various threats on time and it’s act as an early warning signal so, it will help management to arranging resources on time. Business or industry avail the resources from the environment and convert them into usable output and provide to society.
4 Rapid Changes:-
AS we study above, business environment is changing rapidly, and the industry is directly or indirectly getting affected by changing market conditions and environment.
5 Improvement of performance:-
With an continuous scanning and understanding of environment, Many business houses or institution performance may improve by making various changing in strategy and internal environment of an company.
Dimensions of Business Environment:-
There are five dimensions of business environment. These are economic, social, legal, political and technological Environment.
1 Legal Environment:-
Legal Environment includes various laws passed by the government, administrative orders issued by government authorities, Supreme court judgments as well as decisions rendered by the central, state or local governments.
The legal environment includes various laws like some famous laws Companies Act 2013, Consumer Protection Act 1986 and Policies related to foreign trade etc.
2 Economic Environment:-
The economic environment include of an economic system, economic policies and economic conditions prevailing in a country. such as Interest Rates, Taxes, Inflation, Stock Market Indices, Value of Rupee, Personal Disposable Income, Unemployment rate etc.
3 Political Environment:-
Political Environment inculude actions were taken by the government, which potentially affect the routine activities of any business or company on a domestic or may be at the global level. However, success of business and industry depends upon the government attitude towards the business and industry, Stability of Government.
4 Social Environment:-
Social Environment include of social forces like traditions, values, social trends, level of education, the standard of living etc. All these forces have a directly impact on business.
5 Technological Environment:
Technological Environment consists of scientific improvements and innovations which provide new ways of producing goods or services and new methods and techniques to operate a business.
It is very important for a firm to understand the importance of technology in a business to which goals efficiently..