Concept of business environment

1. 1
Topic Name :- Concept of Business Environment
Shubham Nigam

2. Content
1:-Concept
2:-Nature
3:-Significance
4:-Environmental Factors
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3. Concept
• Business Environment has a direct relation
with the business organization as they interact
and transact with its environment.
• Organization has to tackle its External and
Internal Environment
• Internal – Strength and Weakness
• External – Opportunities and Threat
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4. Meaning
• Keith Davis defines the environment of
business as ‘the aggregate of all conditions ,
events and influence that surround and affect
it’
• There are two set of factors
i) Internal - Also k/a Controllable factors
ii) External - Also k/a Uncontrollable factors
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5. 5
External Environment
Micro
Macro
Suppliers Customers Competitors Market
Intermediaries
Government
Agencies
Economic Legal Governmental
Technolo
gical
Geographi
cal
Social

6. Importance
• Helps to develop strategies and long term
policies.
• Analyze competitor’s strategy and formulate
counter strategy.
• To foresee the impact of socio economic
changes.
• To keep the organization dynamic.
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7. Environmental Factors
• A/c to W.F Glueck and I.R Jauch the
environment includes the factors outside the
firm which can lead to opportunities or
threats to the firm.
• Most imp environmental factors are socio –
economic , technological, suppliers ,
competitors and government.
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8. • Social Factors – Business operates within the norms
of society and satisfy its needs. It has a social
responsibility .They influence the policy and strategy
of business organization . Culture , Value , Taste ,
Belief must be considered before formulating
policies.
• Economic Factors – per capita income, national
income , exploitation of natural resources,
infrastructure development , capital formation ,
propensity to consume , industrial development
these influence the business environment .
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9. • Legal Factors-Every aspect of business is
regulated by law. In India, it is the government
that draws the rules and the industry has to
adhere to the rule book. Laws relating to
industrial licensing, company formation ,
factory administration , industrial dispute ,
payment of wage , foreign exchange
regulation, shops and establishments,.
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10. • Technological factors – It is the most
important factor of any business. Technology
can create or even decimate existing
businesses or even entire industries. Ex- Shift
from vacuum tubes to transistors, from steam
locomotives to diesel and electric engines,
from fountain pens to ball points, from
typewriters to computer-based word
processor.
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11. • Suppliers – Suppliers of raw materials,
equipment, parts and money are a very
important part of an organisation’s external
environment. Without a continuous flow of
supplies, the organisation’s profitability will
suffer.
• Competitor- Competitors’ actions and responses
to them are key in determining whether a firm
will prosper. Important data about competitors
should be examined from time to time include
number of product lines, product differentiation,
prices, quality, market share, etc. Competition
may be local, regional, national or international.
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12. • Socio – Cultural - It consists factors like social
traditions, values and beliefs, level and standards of
literacy and education, etc. which influence the
industry structure, its success, growth and
profitability. The culture is the result of complex
factors such as religion, language, education, ethical
beliefs etc. Socio-cultural components of the
environment influence the ability of the firm to
obtain resources, market its goods and services, and
function within the society. Observing the socio-
cultural factors enable to identify the opportunities
and threats for the business organization.
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Thank You