A Business Environment is the physical and operational factors, both internal and external, that affect the flow of activities in a business. They include; customers, competitors, suppliers, distributors, industry trends, substitutes, regulations, government activities, the economy, demographics, social and cultural factors, innovations and technological developments. (2)What Are the Types of External Business Environments?
There are many types of external business environments. Just to name a few you have consumers, finance, public reputation, macro environment, economics and politics. For financing this is an important centerpiece in a business because many businesses base their structure on the cash flow of the company. (3)What Is Business Environment?
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. 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. On the other hand, the word ‘Environment’ refers to the aspects of surroundings. Therefore, Business Environment may be defined as a set of conditions – Social, Legal, Economical, Political or Institutional that are uncontrollable in nature and affects the functioning of organization. Business Environment has two components: 1. Internal Environment
2. External Environment
Internal Environment: It includes 5 Ms i.e. man, material, money, machinery and management, usually within the control of business. Business can make changes in these factors according to the change in the functioning of enterprise. External Environment: Those factors which are beyond the control of business enterprise are included in external environment. These factors are: Government and Legal factors, Geo-Physical Factors, Political Factors, Socio-Cultural Factors, Demo-Graphical factors etc. It is of two Types: 1. Micro/Operating Environment
2. Macro/General Environment
Micro/Operating Environment: The environment which is close to business and affects its capacity to work is known as Micro or Operating Environment. It consists of Suppliers, Customers, Market Intermediaries, Competitors and Public. (1) Suppliers: – They are the persons who supply raw material and required components to the company. They must be reliable and business must have multiple suppliers i.e. they should not depend upon only one supplier. (2) Customers: - Customers are regarded as the king of the market. Success of every business depends upon the level of their customer’s satisfaction. Types of Customers: (i) Wholesalers
(iv) Government and Other Institutions
(3) Market Intermediaries: - They work as a link between business and final consumers. Types:- (i) Middleman
(ii) Marketing Agencies
(iii) Financial Intermediaries
(iv) Physical Intermediaries
(4) Competitors: - Every move of the competitors affects the business. Business has to adjust itself according to the strategies of the Competitors. (5) Public: - Any group who has actual interest in business enterprise is termed as public e.g. media and local public. They may be the users or non-users of the product. Macro/General Environment: – It includes factors that create opportunities and threats to business units. Following are the elements of Macro Environment: (1) Economic Environment: - It is very complex and dynamic in nature that keeps on changing with the change in policies or political situations. It has three elements: (i) Economic Conditions of Public
(ii) Economic Policies of the country
(iv) Other Economic Factors: – Infrastructural Facilities, Banking, Insurance companies, money markets, capital markets etc. (2) Non-Economic Environment: - Following are included in non-economic environment:- (i)...