‘Business’ and Its ‘Environment’
Every business organization has to interact and transact with its „environment‟. The effectiveness of interaction of an enterprise with its environment primarily determines the success or failure of a business.
The environment imposes several „constraints‟ on an enterprise and has a considerable impact and influence on the scope and direction of its activities. The enterprise, on the other hand, has very little control over its environment. The business environment presents two challenges to the enterprise, viz., the challenge to combat the environmental threats (such as intensification of competition, declining market etc.) and to exploit the business opportunities. The basic job of the enterprise, therefore, is to identify with the environment in which it operates and to formulate its policies in accordance with the forces which operate in its environment.
What is business?
Business is a way of dealing with the problem of scarcity. Businesses act as mediators between households who supply labour for production and share out the resulting goods and services.
Scarcity creates the problem of how to allocate available resources of all kinds between competing wants which can’t all be satisfied at once.
Business can be defined in terms of the activity of production:
involves the transformation of inputs (‘factors of production’) into outputs (goods & services) to meet particular needs or wants of people in society (consumers)
What is business? (cont.)
This is a broad definition of business We often equate business with the private sector. However this is a narrow conception of business. Production can be organised in different ways, e.g. the public sector (involved in production of some key services, such as healthcare and education services). Boundaries between public and private sectors are not fixed, but can, and do, largely as a result of political decisions (privatization;