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Importance of Studying the Business Environment.

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Importance of Studying the Business Environment.

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  • September 2011
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BUSINESS ENVIRONMENT.
The business environment is the aggregate of all conditions, events, and influences that surround and affect a business firm. Business environment generally refers to the external factors affecting, either positively or negatively, the operation of a firm. The most important external factors include economic, legal, political, social and technological factors Business environment is classified as follows:- (a) Internal Environment: These are the environmental factors which include :-

(i) Man
(ii) Machine
(iii) Material
(iv) Material
(v) Management
(b) External Environment : they are classified as
(i) Macro
(a) Government
(b) Political factors
(c) Social factors
(d) Cultural factors
(e) Demographic factors
(f) Economic factors
(ii)Micro
(a) Human resources to include jobs, hygiene, security
(b) Company Board
(c) Management structure

An analysis of business environment helps to identify strength, weakness, opportunities & threats. Analysis is very necessary for the survival and growth of the business enterprise. The importance of business environment is briefly explained in an analysis below.

(1) Identification of Strength: The analysis of the internal environment helps to identify strength of the firm. For instance, if the company has good personal policies in respect of promotion, transfer, training, etc than it can indicates strength of the firm in respect of personal policies. This strength can be identified through the job satisfaction and performance of the employees. After identifying the strengths the firm must try to consolidate its strengths by further improvement in its...