Impact of Business Environment

The impact of business environment in today’s business

Business, now-a-days is vitally affected by the economic, social, legal, technological and political factors. These factors collectively form business environment. Business environment, as such, is the total of all external forces, which affect the organisation and operations of today’s business. The environment of an organisation has got internal, operational and general levels, managers must be aware of these three environmental levels and their relationship and importance. The term business environment implies those external forces, factors and institutions that are beyond the control of individual business organisations and their management and affect the business enterprise. It implies all external forces within which a business enterprise operates. Business environment influence the functioning of the business system.

Now we discuss the factors which have great impact over today’s business:

Economic dimensions of environment
Economic environment refers to the aggregate of the nature of economic system of the country, the structural anatomy of the economy to economic policies of the government the organisation of the capital market, the nature of factor endowment, business cycles, the socio-economic infrastructure etc. The successful businessman visualizes the external factors affecting the business, anticipating the prospective market situations and makes suitable to get the maximum with minimize cost.
Social dimensions or environment
The social dimension or environment of a nation determines the value system of the society which, in turn affects the functioning of the business. Sociological factors such as costs structure, customs and conventions, cultural heritage, view toward wealth and income and scientific methods, respect for seniority, mobility of labour etc. have far-reaching impact on the business. These factors determine the work culture and mobility of labour, work groups etc.

Political Environment
The political environment of a country is influenced by the political organisations such as philosophy of political parties, ideology of government or party in power, nature and extent of bureaucracy influence of primary groups etc. political stability in the country, foreign policy, Defence and military policy, image of the country and its leaders in and outside the country. The political environment of the country influences the business to a great extent. For instance, the Government of India, bottling and sale of coca-cola was discontinued in India in the late seventies following policy of restricting the growth of multinationals in Indian markets.
Legal regulatory environment
Legal environment includes flexibility and adaptability of law and other legal rules governing the business. It may include the exact rulings and decision of the courts. These affect the business and its managers to a great extent.
Technical environment
The business in a country is greatly influenced by the technological development. The technology adopted by the industries determines the type and quality of goods and services to be produced and the type and quality of plant and equipment to be used. Technological environment influences the business in terms of investment in technology, consistent application of technology and the effects of technology on markets. In India, advancements in automation and information technology have posed the challenging situation for the organisation in future.