Introduction to Business Environment

Introduction to Business Environment

The word ‘Business Environment’ has been

defined by various authors is as follows:

“Business Environment encompasses the -climate’ or set of conditions, economic, social, political or institutional in which business operations are Conducted.”—

Arthur M. Weimer

“Environment contains the external factors that create opportunities and threats to the business. This includes socio-economic conditions, technology and political conditions.” – William Gluck and Jauch

‘‘Business environment is the aggregate of all conditions, events and influences that surround and affect it.”—Keith Davis

“The environment of business consists of all those external things to which it is exposed and by which it may be influenced directly or indirectly”. —Reinecke and Schoell.

“The total of all things external to firms and industries that affect the function of the organization is called business environment.”—Wheeler

“Civilizations require challenges to survive. Thus environment also contains hostilities and dangers that may be overcome by individuals and organizations.”— Arnold J. Toynbee

On the basis of the above definitions, it is very clear that the business environment is a mixture of complex, dynamic and uncontrollable external factors within which a business is to be operated.

Apart from this, Business Environment can also be defined as a set of conditions – Social, Legal, Economical, Political or Institutional that are uncontrollable in nature and affects the functioning of organization.

Features of Business Environment:

Following are the features of business environment:

1. Dynamic: Business environment is dynamic in nature that means, it keeps on changing as the time pass by.
2. Unpredictable: The change in business environment is unpredictable. It is a very difficult to predict the exact nature of future happening and the changes in economic and social environment.
3. Differ from place to place: Business environment differs from place to place, region to region and country to country. Political, economical, etc conditions in Nepal differ from China and other nations.
4. Interrelatedness: The different factors of business environment are co-related. For example: Change in government may lead to change in economic policies
5. Complex: Business environment comprises of many factors. All these factors are related to each other. Therefore, their individual effect on the business cannot be recognized. This is perhaps the reason which makes it difficult for the business to face them.

Significance/Importance of Business Environment:

Business Environment refers to the “Sum total of conditions which surround man at a given point in space and time. In the past, the environment of man consisted of only the physical aspects of the planet Earth (air, water and land) and the biotic communities. But in due course of time and advancement of society, man extended his environment through his social, economic and political function.”

In a globalised economy, the business environment plays an important role in almost all business enterprises. The significance of business environment is explained with the help of the following points:

1. Help to understand internal Environment: It is very much important for business enterprise to understand its internal environment, such as business policy, organization structure etc. In such case an effective management information system will help to predict the business environmental changes.
2. Help to Understand Market Conditions: It is necessary for an enterprise to have the knowledge of market structure and changes taking place in it. The knowledge about increase and decrease in demand, supply, monopolistic practices, government participation in business etc., is necessary for an enterprise.
3. Determining Opportunities and Threats: The interaction between the business and its environment would identify opportunities and threats to the business. It helps the business enterprises for meeting the challenges successfully.
4. Giving direction for growth: The interaction with the environment leads to opening up new frontiers of growth for the business firms. It enables the business to identify the areas for growth and expansion of their activities.
5. Continuous learning: Environmental analysis makes the task of managers easier in dealing with business challenges. The managers are motivated to continuously update their knowledge, understanding and skills to meet the predicted changes in realm of business.
6. Image building: Environmental understanding helps the business organization in improving their image by showing their sensitivity to the environment with which they are working.
7. Meeting competition: It helps the firms to analyze the competitors’ strategies and formulate their own strategies accordingly.
8. 1. Identifying firm’s strength and weakness: Business environment helps to identify the individual strengths and weakness in view of technological and global developments.