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BUSINESS

ENVIRONMENT
BY:- PARDEEP
SINGLA

INTRODUCTION

Business environment in the present era of economic liberalization,


privatization and globalization is becoming increasingly complex,
unstable and unpredictable. Business environment is the state of
continuous change means dynamic.

Definition:The environment of business consist of all those external things to


which it is exposed and by which it may be influenced, directly or
indirectly.
In environment are external factors, which constantly spin out
opportunities and threats to the business firms.

Nature of Business Environment


Interdependence.
Dynamic.
Unlimited effect of Uncontrollable Factors.
Media of Social Change.
Uncertainties and Restrictions.

Adverse Conditions
To keep regular vigil on the changing Environment.

COMPONENTS OF
BUSINESS ENVIRONMENT

Environment is a mixture of different factors. Forces, condition and


effects of the environment are dynamic in nature.
Following are the components of a business environment.
Economic Factors.
Social and Cultural Factors.
Geographical and Situational Factors.
Political and Administrative Factor.
Scientific and Industrial Factor.
Leal and Justifiable Factor.
Other Factors:Population.
Educational Level.
International Pressures.
Consumer Behaviour.
Industrial Disputes and industrial Peace.

International
Environment

Domestic
Macroeconomic
Env.

Economic
System

External

Growth
&
Distribution

Economi
Employee
c
Input
Economi
s
Stabilit
Provide
c
y
r
Policy
Compe
INTERNAL
titive
Rival
ENVIRONEMEN
Custome
Env.
s
T
rs

Socio
Cultural
Env.

Channel
Member

Govt.
Busines
s

Non-Economic
Macroeconomic

International
Environment

DemoGraphi
c
Env.

INTERNATIONAL
ENVIRONMENT
This is among the most dynamic and volatile components of
business environment. At the outset, it must be appreciated that
this layer concerns all business firms whether they have
international transactions or not.
The international environment is basically determined by the
growth of the world economy distribution of world GDP; economic
relations and interdependence between nations and international
economic policies of major industrial market economies ;
multinational corporations; banks and multilateral institutions like
IMF,WTO and World Bank and ILO.
Factor affect International Trade:
Economic Laws
Treaties
Agreements & conventions
This Factor Cost :International Investment.
International Finance

DOMESTIC MACROECONOMIC
ENVIRONMENT
Macroeconomic Environment envelopes all business firms and provides
then a framework within which they have to operate and adapt
themselves. The environment provider national level economic conditions
and circumstances affecting the level of aggregate economic activity in
which individual firms drive or seek their own business opportunities.
DOMESTIC MACROECONOMIC ENVIRONMENT INCLUDES
Economic System
Growth & Distribution Environment
Macroeconomic Stability
Economic Policy
Monetary Policy
Fiscal Policy
Industrial Policy
Trade Policy
Competitive Environment
Non- Economic Environment(Political, legal, Cultural, Demographic)

Economic System:-

An economic system provides the framework


within which an economy operates and the various economic units and agents
mould themselves to fit into the system.

Types of Economic System:Market Economy:- USA, Australia , Japan


Mixed Economy:-Soviet Union and number of East European Countries.
Command Economy:-India
Socialist Market Economy:-Yugoslavia, Czechoslovakia and Hungry.

Growth & Distribution Environment:-Economic growth refers to the


process of increase in real output over a period of time. There are three basic
measures of a country s real output. The most widely used measure is GDP
which is the sum of four major components:Personal Consumption Expenditure.
Gross Private Domestic Investment.
Government expenditure on Consumption and Investment.
Net Exports.

Macroeconomic Stability:- it is Manifested in the stability of the price level,


exchange rate, interest rate, money supply, aggregate demand, balance of
payments, employment rate, budgetary balance and eventually national income
and output. In a macroeconomic framework, all of these variables are interactive
and interdependent so that instability of one or few variables has the potential to

Economic Policy:- Economic Policy as determined and changed from


time to time, impact business conditions more directly.

Types of Economic Policy:Monetary Policy:- Its refers the all the action of the government or the
central bank of the country which affect, directly or indirectly , supply of
the money, interest rate, and the baking system. Basically its affect the
cost and availability for credit in the economy.
Fiscal Policy:- Fiscal policy is basically concerned with the use of taxes
and government expenditure, through the issues relating to non tax
revenue, government borrowings and fiscal federalism are closely
associated with these factors for achieving pre-determined objectives.
Industrial Policy:- The central objectives of an industrial policy are to
promote industrialization, correcting regional imbalances enhancing
competitiveness of firms, developing inter- sectoral linkage, promoting
exports and imports substitutions.
Trade Policy:-Basic objectives of trade policy are to promote exports,
regulate imports, improve terms of trade enhance export competitive and
create condition of export- led growth.

Competitive Environment:- The state of market competition is


one of the major factors affecting the rate of growth , income distribution
and consumer welfare. Its affect the entry and exit in business and
affects its price and scale of output under long run and profit maximizing
behaviour.

Basic Concept of Competitive Environment:Trust


Predatory Pricing
Price Discrimination
Non- Economic Environment:- Non-economic environment has
heterogeneous layer the understanding of which is very important for a
business manager.
Types of Non-Economic Environment:Political Environment.
Legal Environment.
Cultural Environment
Demographic Environment.

Sectoral Environment:Supplier.
Customers.
Distribution Channel Members.
Rivals.
Other Entities.

Internal Environment

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