2. It is an economic activity undertaken in a
systematic manner with the intention of making
profit which involves risk and it results in the
production or exchange of goods or services.
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3. Business environment includes set of conditions
or situation that affect business activities or
decision making.
These conditions are broadly classified into
internal environment and external environment.
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4. • Internal environment consists of factors which are
within the control of the organization.
• Business ethics, Objective of the firm, Value
system, Management structure, Physical assets,
Technological resources, Financial resources,
Stakeholders, Human resources etc. are part of
the internal environment of business.
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5. External environment include factors which are
outside the control of the business organization
but it provide opportunities or pose threats.
External environment is further classified into two
categories micro environment and macro
environment.
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6. Micro environment include factors which have a
direct impact on the functioning of the
organization.
Micro environment consist of general public,
competitors, customers, suppliers, trade union,
marketing intermediaries (distributors, dealers,
retailers) etc.
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7. Macro environment provides the business firms a
framework within which they have to operate and
adapt themselves. It indirectly affect any business
firm’s operation and working condition.
Macro environment can be categorized into
economic environment and non-economic
environment.
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8. Economic environment include the economic
factors only and it consist of both national and
international factors.
Economic conditions, economic policies,
economic systems, global environment etc. are
part of economic environment of business.
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9. • Economic condition reflects the current status
of the economy in terms of prices, aggregate
demand, aggregate supply, investment, saving,
consumption, employment etc.
• Recession, depression, recovery, boom are
different type of economic condition.
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10. Economic policies of the government can have a
great impact on business.
Industrial policy, trade policy, foreign exchange
policy, monetary policy, foreign investment policy,
fiscal policy etc. are some of the important
economic policies.
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11. Economic system determines the framework
within which major decisions are taken in the
economy. It decides the role of individuals, market
and the government.
There are three major types of economic system-
free market economy or capitalism, planned
economy or communism, mixed economy.
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12. The main characteristics of capitalism are
Private ownership of means of production
Freedom of enterprise
Profit motive
Competition and active entrepreneurship
Limited role of government
Absence of central plan
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13. Key features of communism are
Public ownership of means of production
Planning authority
Economic equality and classless society
Prices and Quantities to be produced are
determined by government
Social welfare is the motive of the government
State is the final arbiter of all issues
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14. In mixed economy we see the coexistence of both
private sector and public sector.
Government controls and regulate the private
sector
Resource allocation is through the price system
and government directions
Welfare of poor is taken care by the government
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15. Economic policies of the government can have a
great impact on business (Fiscal Policy)
Credit Policy announced by the RBI (Monetary
Policy
Industrial policy, trade policy, foreign exchange
policy, monetary policy, foreign investment policy,
fiscal policy etc. are some of the important
economic policies
Sub-Prime Crisis of 2007-08
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16. Economic system determines the framework
within which major decisions are taken in the
economy. It decides the role of individuals, market
and the government.
There are three major types of economic system-
free market economy or capitalism, planned
economy or communism, mixed economy.
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