COMPONENTS OF BUSINESS ENVIRONMENT
Hello! Students, welcome to series on business environment. The topic of this lecture is Components of Business Environment. The objectives of this lecture are to make you understand the meaning of business environment,
relationship between business and business
environment, characteristics of business environment and to study the various components of the business environment.
In the last lecture we studied that internal and external factors affect the business and together the internal and external factors form the business environment.
We also discussed that the business and society are inter related that is the goods or services are provided by the business to the society for the consumption. In the last lecture we discussed the meaning and the characteristics of the business.
We also talked about the old and modern concept of business. The old concept of business emphasizes on earning of profit through buying and selling of goods and services. Whereas the modern concept of business says that business should earn profit through customer satisfaction and fulfilling the social responsibility.
2. MEANING OF BUSINESS ENVIRONMENT
To begin with let’s understand the meaning of business environment. We live in the world which is completely dynamic. Rapid changes keep taking place and are frequent because of the changes in social, political and economic environment.
These changes occur because of the advancement in technology
so the new ideas for a better society enriched with high standard of living
demands the business to be adjustable to these changes and it demands the business to be very flexible to provide the right thing at right price at right time.
But the thing should be of high quality to ensure customer
So, these changes surround the business enterprise and influence it in various aspects.
A business organization is successful only when it quickly adapts itself to these changes. As per Keith Davis “Business Environment is the aggregate of all conditions, events and influences that surround and affect the business” It means that all the happening in the surroundings of the business, affect it. So it is important for the business to identify and understand these changes and change the business strategies accordingly. In the words of Bayard O. Wheeler “business environment is the total of all things external to business firms and industries which affect their organization and operations” And In the words of Dunham and Pierce “business environment represents a set of conditions, circumstances and influences that surround and affect the functioning of the organization. This environment is made up of different individuals (like customers, local citizens etc); organizations (like suppliers, labor unions) and government bodies (like regulatory agencies, legislators etc.)” Both the definitions highlight on the external factors affecting the business. The operations of the business enterprises are highly affected by the external environmental factors. Customers, suppliers, labor unions and government bodies form the business environment.
3. CURRENT INDIAN BUSINESS ENVIRONMENT
Let’s talk about the current Indian business environment. Before the Indian industrial policy of 1991, more and more control of commerce and trade was in the hand of public sector. Lot of problems like bureaucracy and red tapism resulted in formation of Industrial policy of 1991 which emphasized on Liberalization, Privatization and Globalization. Before the year 1991 India was hit by economic crisis and accelerated growth of economy was required.
The current Indian business environment is the result of the Indian industrial policy of 1991.
Earlier lot of restrictions were imposed by the Indian government like price control, import license and foreign exchange control. This resulted in corruption,...