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Concept of Business Environment

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source:www.slideshare.net

The sum total of all factors and forces that affect and influence the operation of a business is called business environment. It is surrounding where the business organization exists. Business starts, operate and die in an environment. Business environment either provide opportunities or threat.

According to S.P Robbins, "Environment refers to the institution or forces that affect business performance."

According to Keith Davis, "Business environment refers to institutions or forces that affect the organization's performance."

Business is surrounded by many factors like employees, politics, technologies, suppliers, customers etc. A business institution gets the input from the environment and transfers them into the output to supply again in an environment. When the environment in the business is supportive it will be a reason for success. In another case, it will import the threat to business.

In conclusion, the business environment refers to the aggregate of all the factor which influences the business operation. It is composed of an internal and external environment. The internal environment is controlled by business whereas externally is not controllable by business.

Components of Business Environment

source:blendedstuff.blogspot.com
source:blendedstuff.blogspot.com

The business environment is broadly categorized into two types that is an internal and external environment.

Internal Environment

The sum total of all factor and process that are inside the business and affects the operation of a business is called internal environment. The environmental factors such as employee, organization structure, corporate culture, employees, union etc. compose the internal environment. Internal environment makes the organization stronger or weak if they are supportive and against the business respectively. Internal environment factors are controllable and can be managed by the business. The elements of the internal environment are as follows:

  1. Employee
  2. Organizational Structure
  3. Co-operativeCulture
  4. Shareholders
  5. Employee Union
  1. Employee
    They are the people who work in the organization for salary. They provide mental and physical ability when employees are talented, skilled, and experienced, this will make the business strong. In the opposite case, the organization will be weak.
  1. Organizational Structure:
    The flow of communication and proper position relation in business is called organizational structure. It is a framework of an organization. The structure of the organization has an impact in operation of the business. When the organization structure is simple and easy to understand it will help in the achievement of an objective.
  1. Co-operative culture:
    The norms, values, system, and beliefs of the organization refer to the organization culture. The organizations that have co-operative culture help in achieving goal effectively. The non-cooperative and conflicting culture makes organization weak. Therefore, co-operative culture is an important internal environment to affect the business operation.
  1. Shareholders:
    They are the investor of business. They are the key people to elect the board of directors. Therefore, the shareholders of the company are important internal environmental factors.
  1. Employees Union:
    It is a preventive body of employees. It helps and solves the employee's problem when employees union is stronger. It also makes the organization weak. To operate successfully, a business needs supportive employees union.

External Environment

The sum total of all the factor and forces that are outside the business and affects the operation of a business is known as the external environment of business. The environmental factors like legal, political, technological, social, competitors, customers, suppliers etc. are the elements of the external environment. As these factors are outside the business they can't be controlled by business. Business has to accept and adopt the external environment that will provide opportunities and the threat to business.

The external environment is broadly classified in the following ways:

  1. General Environment
  2. Specific/Task environment

1. General environment:

The environmental factor that belongs to the external environment and business has long-term effects with this. Some of the factors of the general environment are as follows.

  • Political/Legal Environment:
    The number of political parties and their ideology represent the political environment. The legal environment such as the legislature, executive, judiciary etc. has an impact on the operation of a business. A business must be proactive to know the changes in this environment and to adopt in this business because this environment is not the controllable factors.
  • Economic Environment:
    The Economic system determines the economic environment. The factors like level of income (per capita income), the output of a country, a rate of influences etc. make economic environments. A business has a higher chance of growths expansion in a good economic environment.
  • Socio-cultural environment:
    It involves norms, values, and beliefs of society. The culture of society provides the basis for accepting specific business and its product. A business has to accept and respect the social culture where it does exist. Therefore, socio-culture is an important external environment to determine business success or failure.
  • Technological Environment:
    The method and forces of converting raw materials into output largely depend upon the level of technology. The application of modernized technology in business operation will help in the achievement of objectives efficiently and effectively. The technological factors like new methods of production, new communication tools, and modernized equipment are the key factors for business success. Therefore, a business has to consider the technological environment.

2. Task/Specific Environment:

The environmental factors which are outside the business and are not controllable but can be managed are called task/ specific environment. The effects in the task environment in business can be seen directly in the general environment. The task environment is composed of the following factors:

  • Customers:
    They are the people who purchase product or service by paying money. A satisfied customer is an important element for business success. Therefore, a business must understand changing needs, interest, and preference of a customer.
  • Suppliers:
    They are the people and institution who provides resources and materials to business. To become successful, an enterprise has to maintain a warm and healthy relationship with suppliers.
  • Competitors:
    They are the business institution who provides similar kind of product or services. If the business doesn't give a care about competitor’s activities, the business may lose its customers. Therefore, a manager must be careful regarding the activities of competitors.
  • Government:
    It is a regulatory institution who provides laws and facilities for business control and growth. A business has to understand changing rules, regulation, and laws of government regarding business because business cannot go against government rules.
  • Pressure groups:
    The organization like customer rights association, social clubs, media clubs, environmental list etc. form pressure group for business. For any business, to be successful, it has to maintain a healthy relationship with pressure groups.
  • Financial Institution:
    It consists of commercial and development bank, finance companies, insurance, etc. These institutions provide loan facilities to business in case of money shortage. Therefore, a business has to maintain good relation with financial Institution.

 

 

 

 

 

References:

Khanal, Soma Raj, Surendra Thapa Aslami and Sitaram Dhakal.Business Studies.Kathmandu: Taleju Prakashan, 2067.

Pant, Prem R., et al.Business Studies.Kathmandu: Buddha Academic Publishers and Distributors Pvt. Ltd., 2010.

 

 

 

 

 

 

 

 

 

 

 

  1. The sum total of all factors and forces that affect and influence the operation of a business is called business environment.
  2. Business is surrounded by many factors like employees, political, technological, suppliers, customers, etc
  3. The sum total of all factor and process that are inside the business and affects the operation of a business is called internal environment.
  4. The sum total of all the factor and forces that are outside the business affects the operation of a business is called external environment of business
.

Very Short Questions

Business environment established and operated in the environment. The sum total of all factors and forces that affect and influence the operation of a business is called business environment. It is a surrounding where the business organization exists. Business starts operate and die in an environment. Business environment either provide opportunities or threat. Monitoring environmental changes have a very important place and role in the efficient functioning of a business. 

According to S.P Robbins, "Environment refers to the institution or forces that affect business performance”

According to Keith Davis, "Business environment refers to institutions or forces that affect the organization's performance.

Business is surrounded by many factors like employees, political, technological, suppliers, customers, etc. A business institution gets the input from the environment and transfers them into the output to supply again in an environment. When the environment in the business is supportive it will be a reason for success. In another case, it will import the threat to business.

In conclusion, business environment refers to the aggregate of all the factor which influences the business operation. It is composed of an internal and external environment. The internal environment is controlled by business whereas externally is not controllable by business

Business environment has two factors
source:blendedstuff.blogspot.com:

Components of External environment:

  1. General Environment
  2. Political/Legal Environment
  3. Economic Environment
  4. Socio-cultural Environment
  5. Technological Environment
  6. Specific/Task environment


Components of Internal environment:

  1. Employee
  2. Organizational Structure
  3. co-operative Culture
  4. Shareholders
  5. Employee Union

0%
  • According to __________"Business environment is the aggregrate of all conditions,events,and influences that suround and affect it"

    Keith Davis
    L.H Haney
    James Stephenson
    R.N ownes
  • According to______"Environment refers to institution or forces that affect the organization's performance"

    Robbins and Coulter
    L.H Haney
    R.N ownes
    Keith Davis
  • ________are the Internal Environment of Business.

    The shareholders or owners
    Organizational structure
    All
    Board of directiors
  • _________are the external Environment of Business.

    Social
    Economic
    All
    Political
  • The legal surroundings which affect the business activities are called_________.

    Technological
    legal componets
    Political
    Economic
  • The representatives of the shareholders of a joint stock company are called_____________

    Organizatinal resources
    Orrganizational culture
    Organizational structure
    Boarad of directors
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