Business Environment

INTRODUCTION

What is Business..??

A business is a legally recognized organization designed to provide goods and services to consumers with the motive of earning profits.

What is environment..??

Circumstances, influences, stresses, and competitive, cultural, demographic, economic, natural, political, regulatory, and technological factors (called environmental factors) that effect the survival, operations, and growth of an organization.

Business Environment
Business environment includes the climate or set of conditions: economic, social, political or institutional which have a direct or indirect bearing on the functioning of business. It signifies external forces, factors and institutions that are beyond the control of the business and they affect the functioning of a business enterprise.

Definition of Business environment by Davis Keith The Aggregate of all conditions events

and influences that surround and affect business.

Characteristics of Business environment.

Business is the surrounding situation that affect the business. Business environment is very Complex and needs a deep study. Dynamic nature is one of the part of business environment. Study of changes is very important for the business. Environment = Opportunities & Threats Environment is very complicated and Hence it needs minute study.

Changes in the environment cant be done by one businessman. Businessman has to adjust to the environment. Creates framework for business. Its a challenge and an opportunity for the business man and its study can help make or brake the business. As the business environment is very complex and cannot be changed hence It needs adaptability.

Need of Business Environment.

The study of Business Environment helps keeping the business flexible. To exploit business opportunities fully. To make business socially acceptable. To keep the business enterprise alert. To maintain adaptability to socio-economic changes. To understand future problems and prospects. To ensure optimum utilization of resources.

Importance of Business Environment

Business environment is complicated and active in nature and has a far-reaching impact on the survival and growth of the business. Determining Opportunities and Threats Giving Direction for Growth Continuous Learning Image Building Meeting Competition Identifying Firms Strength and Weakness: Business environment helps to identify

Types of environment

Internal environment

External environment

Micro environment

Macro environment

Internal environment

The internal environment is the environment that has a direct impact on the business.
Important internal factors which have a bearing on the decisions of a business firm and which are generally controllable because the company has control over these factors: Value system Vision, mission and objectives Management structure and nature Internal power relationship Human resources Company image

External environment
Micro environment consists of the actors in the companys immediate environment that affect the performance of the company. They are more intimately linked with the company.

Macro environment consists of larger societal forces that affect all the actors in the companys micro environment.

Micro environment
Suppliers Customers Competitors Marketing Financiers Public

intermediaries

Macro environment

Economic environment Political environment Technological environment Social environment Global environment

Types of Business Environment.

Political Demographic Economic

International

Business Environment

Social

Natural

Technological

Economic environment

Economic environment refers to the aggregate of the nature of economic system of the country, business cycles, the socio-economic infrastructure etc. The successful businessman visualizes the external factors affecting the business, anticipating prospective market situations and makes suitable to get the maximum with minimize cost.

The economic environment is an amalgamation of various economic factors, such as total employment, productivity, income, wealth, inflation and interest rates.

Components of the Economic Environment

Income and wealth: Income in an economy is measured by GDP, GNP and per capita income. High values of these factors show a progressive economic environment. Employment levels: High employment represents a positive picture of the economy. However, there are many forms of unemployment, including partial employment and disguised unemployment.

Productivity: This is the output generated from a given amount of inputs. High levels of productivity support the economic environment

Classifications of the Economic Environment Microeconomic environment: It includes the economic

environment of a particular industry, firm or household and is primarily concerned with price determination of individual factors. The main consideration from a microeconomic perspective is the efficient allocation of resources. This is necessary to maximize total output.

Macroeconomic environment: It includes all the economic factors in totality. The main consideration here is the determination of the levels of income and employment in the economy. Over the course of the twentieth century, the focus has shifted from cities and countries to the global economy being the chief economic unit.

Factors Affecting the Economic Environment

The economic environment of a nation as well as the world is impacted by: Inflation and deflation: Inflationary and deflationary pressures alter the purchasing power of money. This has a direct impact on consumer spending, business investment, employment rates, government programs and tax policies. Interest rates: Interest rates determine the cost of borrowing and the flow of money towards businesses.

Exchange rates: This impacts the price of imports, the profits made by exporters and investors and employment levels (also through the impact on the tourism industry). Monetary and fiscal policy: This helps in attaining full employment, price stability and economic growth. The economic environment is also influenced by various political, social and technological factors. These include a change in government and the development of new technology and business tools.

Political environment

It includes factors such as characteristics and policies of the political parties, nature of Constitution and government system relating to business policies and regulations. Important economic policies such as industrial policy, policy towards foreign capital and technology, fiscal policy and foreign trade policy are often political decisions.

Technological 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.

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 labour etc. have farreaching impact on the business. These factors determine the work culture and mobility of labour, work groups etc.

Global environment

The global environment refers to those factors which are relevant to business such as:

WTO principles and agreements

International conventions

Treaties, agreements, declarations, protocols, economic

Sentiments in other countries, hike in crude oil prices etc.

Current Indian Business Environment.

current Business environment of India.

Inflation Rate - 2009 Jun 27 - (-1. 55)% - 2009 Aug 22 - (-0. 21)%. Rs.40 billion transferred from Rural Infrastructure Development Fund (RIDF) to Small Industries Development Bank of India (SIDBI)

current Business environment of India.

FDI investments into India went up from US$ 25. 1 billion in calendar 2007 to US$ 46.5 billion in calendar 2008. SEBI has increased the investment limits for FDIs to invest in India.

liberalisation of import and export policies.

Conclusion.
The business environment of India is better than the other countries. The GDP of India is recorded 6.7% in the year 2008-09 which is better than other countries. The Indian government has taken many steps to improve the conditions of the country and which have helped the business environment to improve and expand.