business enviroment

Topics: Economics, Business, Economy Pages: 18 (8207 words) Published: October 7, 2014
 2 1.1 INTRODUCTION

Understanding the environment within which the business has to operate is very important for running a business unit successfully at any place. Because, the environmental factors [internal or external] influence almost every aspect of business, be it its nature, its location, the prices of products, the distribution system, or the personnel policies. Hence it is important to learn about the various components of the business environment, which consists of the economic aspect, the socio-cultural aspects, the political framework, the legal aspects and the technological aspects etc. A vehement attempt will be made to discuss the concept of business environment, its types and the various components of the environment. 1.2 BUSINESS ENVIROMENT

Meaning: - The term business environment is composed of two words Business and Environment. In simple terms, the state in which a person remains busy is known as business. According to The Wikipedia Online Dictionary, business implies; the state of being busy, and implies commercially viable and profitable work. The word business in its economic sense means human activities like production, extraction or purchase or sales of goods that are performed for earning profits. Secondly The Wikipedia Online Dictionary states that; the term business has at least two usages, depending on the scope in which it is used. A business can mean a particular organization, while a more generalized usage refers to a particular market or economic sector, e.g. the music business. With the above definitions, it can be concluded that the term business generally has to do with economic activities or processes such as management, production, sales etcetera. With that understanding, we can proceed to the definition of the term environment in a bid to further understanding what the term business environment implies. On the other hand, the word environment refers to the aspects of surroundings. According to the Oxford Advanced Learner’s Dictionary, an environment is the totality of the conditions that affect someone, something or somebody. Therefore, business environment may be defined as a set of conditions – social, legal, economic, political or institutional that are uncontrollable in nature and affects the functioning of organization. The term business environment connotes external forces, factors and institutions that are beyond the control of the business and they affect the functioning of a business enterprise. These include customers, competitors, suppliers, government, and the social, political, legal and technological factors etc. While some of these factors or forces may have direct 3 influence over the business firm, others may operate indirectly. Thus, business environment may be defined as the total surroundings, which have a direct or indirect bearing on the functioning of business. It may also be defined as the set of external factors, such as economic factors, social factors, political and legal factors, demographic factors, technical factors etc., which are uncontrollable in nature and affects the business decisions of a firm [Hsc Business Notes]

The business environment has two components:
1. Internal Environment
2. External Environment
The chart below illustrates the structure of a business environment:

1.2 INTERNAL ENVIROMENT
The internal environment refers to the conditions, entities, events, and factors within an organization that influence its activities and choices, particularly the behaviour of the employees. Factors that are frequently considered part of the internal environment include the 4 organization's mission statement, leadership styles, and its organizational culture. 1.3 MAJOR...
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