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UNIT -I
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Definition: According to Androse The term
business environment of a company is defined as
a pattern of all external influences that effect its
life and development.
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Business environment consist of all those factorsthat have a bearing on the business.
The survival of a business firm depends on its
innate strength resources at its command and its
adaptability to the environment and the extent to
which the environment is favorable to
development of the firm
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The survival and success of a firm, thus, dependon two ma or factors, vi!," the internal
environment " the external environment.
A #$%T analysis i.e analysis of strengths
and wea&nesses of the organisation and
opportunities and threats in the environment.
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The internal environment has two components:
strengths and wea&nesses of the organisation.
The internal factors are generally regarded as
controllable factors because the company has
control over these factors: it can alter or modify
such factors as its personnel, physical facilities,
organisational and functional means, such asmar&eting mix, to suit the environment.
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The external environment has two components:
opportunities and threats to business.The external
factors such as economic factors, socio"cultural
factors, govt and legal factors, demographicfactors, geo"physical factors etc are uncontrollable
factors.
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Business 'nvironment at ( levels:
)nternal environment
cro*tas&*operating environment+acro*general*remote environment
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Customers
Those people organi!ations in the environment whoac-uire goods or services from the business are
customers.
As recipients of the business output, customers areimportant because they determine the business s
Types of Customers
)ndustrial /ustomers
)nstitutional /ustomer
0oreign /ustomer
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Suppliers
The people organi!ations who provide the raw
material the business uses to produce its output.
The relationship among them must of cooperative
in nature in order to save money, maintaining
-uality, and speeding products to mar&et.
1eliability
+ultiple #upplier
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Market Intermediates
Types of Market Intermediates+iddlemen
+ar&eting Agencies
0inancial )nstitution
3hysical )ntermediates
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PUBLIC
+edia 3ublics
4ocal 3ublic
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Significance of Business Environment:
There is a mutual interdependence between business
and its environment. A business enterprises is an
open system. )t continously interacts with its
environment. Business ta&es inputs raw materials,
capital, labour, energy etc. from its environment, and
transform them into goods and services and then
send them bac& to the environment.
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Business and its external environment interact in the
following ways.. 'xchange of information
. 'xchange of resources.
. 'xchange of influence and power.
0or incorporating dynamic behavior of environment
/omplete &nowledge of internal environment
To understand international events, pressures impact
'conomic policies of the govt.
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'conomic policies of the govt.
To face business problems challenges
5igilant regarding dangersAdministrative system
%ptimum utili!ation of resources
+ar&et conditions
#cientific industrial advancement
Development success of business
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Dimensions of Business Environment:
The main dimensions elements of business
'nvironment are as follows:"
Economics Environment : The economics
environment comprises of the factors and forces
concerned with means of production and
distribution of wealth. )t refers to the nature of
economic system ,organisation of capital and
money mar&ets, income level ,price level,
economic policies of the country etc.
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Social Environment: This environment includes
social factors such as attitudes of people ,socialcustoms and traditions ,education level, si!e of
population ,trade unions, occupational structure
etc. Political Environment: 3olitical environment
refers to the country6s political system, type of
government, government policies towardsbusiness ,government ,centre state relations
,public opinion, law and order etc.
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Legal/ egulator! environment :
4egal environment of business includes all the
laws, legal system and udiciary system of the
country. A business has to wor& within framewor&
of country6s laws and regulations.
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#ocio"/ultural 'nvironment#ocial and /ultural environment refers to theinfluence exercised by certain social factors which
are 7beyond the company s gate. #uch factors
include, among others, attitude of people to wor&,attitude to wealth, family, marriage, religion,
education, ethics and social responsibility of
business.
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LE"ELS #$ CULTU E : 0our levels
8ational /ulture: 8ational culture is the dominant culturewithin the political boundaries of a country.
Business /ulture: Business culture guides everyday
business transaction.
%rganisational /ulture: )t refers to the philosophies,
ideologies, values, assumptions, beliefs, expectations, and
norms that &nit an organisation together and are shared by
its employees.
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%ccupational /ulture: Different %ccupationalgroups such as physicians, lawyers, accountants,
professors, and crafts people have distinct
cultures" called %ccupational cultures.
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Tec%nolog! :
)ncludes scientific and technological
advancements in a specific industry as well as in
society at large. '.g. /omputer industry, etc.
Technological advances can change the rule of the
game9 thus every business must be ready to
respond.
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Legal an& Political
The legal"political element includes the legal and
governmental systems within which a business must
function.
a. Business must operate within the general legal
framewor& of the countries in which they do business.
b. Businesses are sub ect to an increase in lawsuits filed
by customers or employees.
c. The political issues which affect businesses includethose which influence the extent of government
regulation.
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Natural Environment
/limatic weather condition.
Availability of 8atural resources.Topographical factors: 3hysical features of place.
3ollution /ontrol
Demographic Environment Age /omposition
#ex /omposition
'ducation 4evel0amily si!e structure
rban"rural population
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Business Environment
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International Business
$hen business activities are performed on an internationallevel, these can be termed as international business.
Basic functions, processes and techni-ues of international
business are essentially the same as those involved in
domestic business.
$hat is different is the environment within which these
functions are performed and processes are carried out .
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)nternational Business environments are unfamiliar
and different from the domestic environmentThese variations may need adaptation for business
success.International Business Environment
)n the context of a business firm' environment can be
defined as various external actors and forces that
surround the firm and influence its decisions and
operations.
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The two ma or characteristics of the environment as
pointed out by this definition are:
these actors and forces are external to the firm
these are essentially uncontrollable. The firm
can do little to change them
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Concept of (lo)alisation :
2lobalisation means ; to ma&e global ,that is worldwide or effecting or ta&ing into consideration the
whole world or all people ;.2lobalisation is a
process of integration of business activities andgrowing economic interdependence between
countries in the world economy.
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$actors t%at lea& to glo)alisation :
2rowing similarities of countries in terms of available
infrastructure.
2lobalisation exposes firms to international competition.
'mployment opportunities wil be increase over a period
of time.
$idening of competition.
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