Business environment refers to the conditions prevailing in a society in which a business is to be operated. It is defined as the total of all things external to business firms and industries, which effect their organization and operation. The number and scope of environmental factors, which effect business, is broad. There should be included all aspects of our social, scientific, economic, political and cultural life which have some bearing upon business.
Relationship of Environment to Business
To understand fully the nature of business, its structure, its organization and its behavior, one must look not only at the business properly, but also at the environment within which business operates. More specifically, this means that business exists in surroundings external to its direct or operating components of firms and industries.
The significant elements of environment for a business house comprise persons, physical resources and climate, economic and market conditions, altitudes and laws of the land. These elements effect the course of action of the company.
Business and its environment interact. In our business-oriented society, business has influenced environmental conditions probably as much as or even more than environmental forces have shaped business.
The firm depends upon its environmental conditions for the resources and opportunities necessary for its existence. The environment determines the limits of the firms’ activities. The environment contributes valuable resources to the business firm only if the firm provides the desired goods or services to the environment. A firm must look to public needs and attitudes remain sensitive to human values and alert to the social set up. Good businesses, therefore, are always responsive to the total environment in which they operate.
Business is greatly influenced by the economy of the country. Its operational success depends upon an adjustment and meeting the requirements of the economy. The important factors that are to be looked into and effectively handled are:
1. Desires, Customers and Markets
The purpose of business is to anticipate desires of people and purpose goods and services accordingly to satisfy them. Let these goods and services so produced be carried effectively to the place of customers. But it is not possible unless businessman produces them at proper time and makes them available to customers at reasonable price. Hence, timing of production and reasonable price. Hence, timing of production and reasonable price of products are important considerations. Further, the intensity of competition existing in the market and the degree of marketing strategies to be adopted also are important points to be considered by a business entrepreneur.
Businessmen must assess the source or sources of capital as well as the cost at which it is available. For a developing country like ours, obtaining capital is not so easy. It is definitely a problem as its availability depends upon will and capacity of people to save and invest, existence of good capital and money market, and economic and financial policy of the government etc.
3. Availability of Labour
Operational efficiency of a business enterprise greatly depends upon the availability of labour at a reasonable price. If such manpower in the shape of skilled and unskilled workers is sufficiently available to a business according to its requirement and within reasonable wage rate, it can carry on its activities and expect profit. But to get workers at right time and at right price is not so easy. There are many factors that influence their availability.
4. Level of Productivity
Productivity at a reasonable level depends upon how the activities are planned, organized, directed and controlled. The use of the latest production techniques, machines, manpower, and motivation and techniques of people to work sincerely and...