Meaning of business environment
Business Environment class 12: The term ‘business environment‘ means the total of all persons, institutions, and other
Forces that are outside the control of a business enterprise but which may affect its performance
Thus, the economic, social, political, technological, and other forces that operate outside a business enterprise are part of its environment.
Importantly, these individuals, entities, and forces are likely to affect the performance of a business enterprise, although they exist outside its borders. For example, changes in the economy of government based on the foregoing
Discussion, which can be called business environment, has the following characteristics:
(i) Totality of External Forces:
The business environment is the total of everything external to business firms and, as such, is holistic.
(ii) Specific and Normal Forces:
specific forces (eg investors, customers, competitors, and suppliers) directly and immediately impact individual enterprises in their day-to-day operations
(iii) Inter-relatedness:
The various elements or parts of the business environment are closely intertwined. For example, people’s increased life expectancy and increased awareness of health care have increased the demand for many health products and services such as soft drinks, fat-free cooking oils, and health resorts. In turn, new health products and services have changed people’s lifestyles.
(iv) Dynamic Nature:
The business environment is dynamic in the sense that it changes in terms of technological improvements, changes in consumer preferences, or the entry of new competition into the market.
(v) Uncertainty:
The business environment is largely uncertain as it is very difficult to predict future events, especially when environmental changes are happening very frequently such as
The case of information technology or the fashion industry.
(vi) Complexity:
Since the business environment consists of many interrelated and dynamic situations or forces that arise from a variety of sources, making it is difficult to understand at once what exactly constitutes a given environment. In other words, the environment is a complex phenomenon that is relatively easy to understand in parts but difficult to understand in its totality. For example, it could be
It is difficult to know the extent of the relative influence of social, economic, political, technological, or legal factors on changes in demand for a product in the market.
(vii) Relativity:
The business environment is a relative concept as it varies from country to country and even from region to region. For example, the political situation in the United States is different from that of China or Pakistan. Similarly, the demand for sarees in India may be quite high while in France it may be almost non-existent.
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