What are the different concepts of Business Environment        

Introduction :

    A business is a part and parcel of the environment surrounding. Its activity is influenced by the needs and requirements of the environment. A business exists for satisfying social and economic needs. Its working is influenced by the economic social and political environment. For producing goods and services to satisfy consumer needs, business need necessary input such as materials, energy, money, human, force, etc., All these inputs are obtained from the society.

    These inputs are transformed into products and services by passing through various production/ manufacturing processes and are offered to society for its used. The society does not get these products and services free of cost but pays a price for it, known as price i.e., the price received from the society is used to acquire various inputs for continuing production processes. Business and society are both keeping each other. A business will exist so far as its output is demanded by the society. In case the products of an enterprise are not in demand than either it will have to change its line of production or close down its working.

Classification of Business Environment : 

    A business has to take into account the environment in which it exists. It will be successful only if it pays heed to  the prevailing situation and adjusts its working accordingly, the environment of a business may be classified as :

Internal Environment :

    These are the factors which business has acquired and acquire according to its needs and capacity. These factors determine the level of activity which a business may achieve. Internal factors are discussed as such :

Financial Resources :

    Every type of business needs funds for carrying out its activities. The level of production is directly influenced by the availability of funds. Every enterprise will determine its financial requirements and then select the sources from which these funds will be collected. In case the required funds have not been raised then business activities will be readjusted to suit them.

    A business should attempt to make best use of its resources. If the funds are not economically and profitably used in one activity then these may be shifted to cover other activity. Sometimes investments are diversified to cover up possible risks in some activity. A lose in one activity may be compensated by the profit in another activity. A business should make best use of its available resources otherwise it will endanger its existence.

Physical Resources : 

    Physical resources include assets such as plant and machinery, land and building, raw materials, etc. Before setting up a unit the continuous availability of raw materials will be ensured.  The location of a plant should, have a place where physical resources may be easily acquired and properly used.

Technological Resources :

    The use of technology is needed to produced goods and services. A business enterprise will determine its technological needs; it may develop its own technology or may acquire it from the market. To remain in competitive business the latest technology will have to be acquired by a business.

Human Resources :

    Human resources influence the working of an organization. If it has employed competent and efficient persons then the business will be run smoothly and effectively. Among workers there may be a needs person with a variety of experience. Among worker there will be a need for skilled, semi- skilled or unskilled persons. On managerial level persons specialized to take up different functions may be required. For example, a technically a qualified person may be able to run production department more scientifically, a marketing expert may be the suitable choice for running market function, a financial expert may be able to plan finance function more suitably and so on. The availability of personnel resources will greatly influence the working of an organization.

External Environment : 

    A business has to deal with external environment also. External factors are as importance as internal. These factors include customers, competitors, governmental agencies, society in general, etc. these factors are discussed as under:

Customers : 

    The demand for products  and services depend upon the reaction of customers. Business and customer are dependent upon each other. All business activities are meant to satisfy the demand arising from customers. Business should regularly collect information about the demand, liking and disliking of customers, there expectation from goods, paying capacity of customers, etc. This information will help the business in arranging its production schedules, etc. A business should always respond to the production schedules, etc. A business should always respond to the customer’s needs. This will help in the development of business.

Competitors : 

    There are a number of enterprises dealing in the same type of products or services. Every one of them  tries to capture as much market as possible. In a free economy there is intense competition among various producers. It will be necessary to known the strengths and weaknesses of competitors. For example, marketing strategy adopted by a competitors should help a business unit to plan its own selling. The price fix by a competitors, terms and condition offered for sale, the quality of products, services provided to the customers, etc. should be properly observed for planning one’s policies.

Government  : 

    The policies and plans of the government have a direct bearing on thee working of the business. Various regulatory laws and economic policies of the government determine the areas  where private sector can enter and also fix the parameters of growth. Government may offer a number of concessions in taxes, allow subsides and give financial incentives for setting up units at particular places and specific fields.

Society :

     A business works to serve the society in general. It has to produce goods and services as per the likings of  the consumers. A business has also to obey the social values and  ethics. The attitude of the people towards business influences it’s working. A business has to work according to the expectation of the society.

Environmental components :

    Environmental factors greatly influence business plan and policies.  The structure of the economy, social set-up, etc. are important components or constituents of environment. Some of these components are discussed in detail :

Economic Environment :

   A business undertaking gets various inputs from the society and returned it back to the society in the form of  finished products. The economic environment consists of the following :-

Suppliers of inputs :

    Every organization needs physical, human and financial resources from the environment in order to produce its input. These inputs will be essential to run a business organization.

    A business needs the regular supply of raw materials. These should be available at reasonable prices and be of a good quality. A number of suppliers are engaged to supply raw materials. This will help in avoiding dependence on one or two suppliers who may start exploiting later on .

    The human resources is the other important input for a business concern. It has to employ persons to man various jobs. The organization may employ persons though its own channels or through outside employment agencies. Besides supply, the suitability of persons for the jobs for which they are employed is also an important consideration. The organization should have attractive wage policies and good working conditions to attract and retain competent employees. The demand and supply factor in labor market will also play an important role. If the supply is more than the demand, the availability of workers will be easy and vice-versa.

    Financial resources may be raised by issue of shares, debentures, bank loans and from other financial institutions. The demand and supply factor plays and important role in financial market also. In a booming economy when profitability is good and the investors are assured of an increasing return there will be no problem in raising funds. On the contrary. If a recession hits market, funds will not be easily available because of uncertain returns.

    The supply of various resources will be influenced by the dependency relationship with the suppliers. If the suppliers have an upper-hand in comparison with the organization then they will dictate their terms in charging prices, fixing the terms of job and delivery schedule. On the other hand, if the organization is placed in a better position vis-a-vis the suppliers then it will get supplies on its own terms.

Customers : 

    An organization produces goods and services for the used of customers. The demand and supply situation will determine its relationship with customers. If there is a competition from other producers then the goods will have to be supplied at prices fixed by the market. In order to increase sales, offering incentives on buying, improving after sales services, giving more discount to dealers, undertaking extensive advertisements, etc. in a situation of monopoly, the customer will be at the mercy of producers. The producers will have an upper hand in fixing prices, deciding supply schedules, etc. if the substitution of the goods is available then the organization will have to fix reasonable prices and proper quality of goods etc. otherwise the customers will start buying substitutes.

Political Environment : 

    political conditions of a country influence the course of business activities. Every business is required to operate within and through various political systems. The functioning of the government and the political system exert influenced on one another.

    The most important component of political environment is the government at the center, at state level and local level, the ideology of  political party in power has a direct influence on the business. The thinking of political party is influenced by the needs, preferences and attitude of the voters. So, the working of the business should be in tune with the thinking of political parties and voters. Changes in the government policies and programs may be of (a) long-term and (b) short-term.

    The long-term changes are due to the change in attitude of the voters. The voters will expert from the government such policies and programs which will reduce unemployment, control pollution, create economic security, protection of consumers, etc. The short-term changes may be due to impending elections or due to unforeseen reasons such as earthquake, drought, floods, etc. In such situations the government is more responsive to the popular opinion and need of the hour. Any amount of political uncertainty will keep the business guessing about the likely impact on business.

Social Environment : 

   The social environment greatly influences the working of a business. A business gets its inputs from the society and returns output again to the society as per it needs. The social environment is made up of population trends, individual needs and culture factors.

Population trend : 

    The population trends may be studied with reference to (i) age brackets, (ii) education, (iii) income level and, (iv) mobility. The age bracket of people working in the organization greatly influences productivity. If the seniority is respected then certain benefits are clearly in evidence. Age brings experience, it makes older persons more competent than the youngers. The older workers will be more reliable, responsible, devoted and loyal to the organization. The higher age bracket brings some disadvantages too. These people become slow, accident- prone, averse  to change and inclined to drift to safer jobs.

    Education levels of the population will greatly influence social environment. The level of education and training will determine the occupational preference of the people. The urban areas where educational and professional opportunities are available the population will consist of industrial workers, engineers ,doctors, lawyers and employees on white collar jobs. In rural areas where inadequate educational and training facilities are available, the population consist of farmers, agriculture workers, artisans and craftsmen engaged in traditional jobs.

    The income levels of people are associated with education, experience training, etc. since people in urban areas are more educated, they get better job opportunities a compare to those living in rural areas and they have low-income levels too. The growing income level of people in the last few years have forced business units to change their marketing strategies to take to take advantage of better buying capacity.

    The rapid industrialization requires better educated and trained persons to take up new jobs. Such a stage of development necessitates shifting of people from one place to another and from one job to other. The mobility rate of people at lower and higher levels will be higher.

Individual needs :

   The primary reason of people taking up work is the satisfaction of their bodily needs like food, clothing, shelter and physical needs like economic activities. As a person acquires better knowledge of the job, his skill and competence also go up. He starts expecting more than satisfying his basic needs. He wants a greater say in planning his work and expects to be associated with decision- making.

    In a tradition bound business, there is a tendency to centralized all decision making at top levels. The employees with initiative and ability will feel suffocated in such a business, a  business will have to associate the workers in decision making  process and delegation of power at lower levels will have to be undertaken otherwise the services of dynamic employees will not be retained. With the increase in pay scales and other allowances, the workers are aspiring for changed life styles. They are demanding more leisure like five-day work and reduction in working hours.

Cultural factors :

    The cultural factors refer to the common characteristics of the individuals forming part of a group such as language, value system, religious beliefs, prejudices, preferences, etc. cultural factors have the capacity both to facilitate or hinder the functioning of a business. It is, therefore, necessary to study the cultural background of the people.

    A study of cultural background will be possible by going through political, legal, economic and sociological aspects. Every country has a set of laws which regulate the life of citizen and also the business. For example, in India there are laws providing for non-discrimination on the basis of caste, creed, sex, religion, equality before la, equal pay for equal work, pollution control, prevention of concentration of economic power in fewer hands and so on.

    The economic laws of a country influence the working of business. For example, industrial policy provides for encouragement to small scale sector, balanced regional development and restricts entry of private sector into certain areas concerning defense. The monopolies and restrictive trade practices act curbs unfair trade practices. Similarly, there are such other laws which regulate the business activities.

    The sociological factors influence the behavioral patterns of people. For example, in countries like Japan and Germany work is considered as worship. The rehabilitation of these countries was possible after destruction in second world war due to the hard work of their people. In some other countries people may prefer leisure to work and business activities will be adversely affected in these societies.

Egal Environment :

    Legall environment is  the offshoot of political environment. Either based on the ideology of the ruling party or due to public pressure, a number of laws enacted which regulate and control every aspect of business. The measure reflects the long-term adjectives of the business. In India business is regulate with the help of the following legislation :-

(a)The contract act (b) companies act (c) foreign exchange regulation act (d) factories act (e) industrial disputes act (f) workers compensation act (g) industrial development and regulation act (h) minimum wages act (i) essential commodities act (j) tax laws dealing with income tax

, exercise, customs, sales tax, etc.

Science and Technology :

    There has been an unprecedented development of science and technology in the last 50 years. A radical change has taken place in consumption pattern and economic welfare. Many developments have occurred in transportation, automation, electronics, etc. markets are expanding in both developed and developing countries. There is an incentive for increasing profit through meeting market needs. Technology forces help to shape changes in the life styles of living of consumers.

    Technological changes offer new opportunities for business. The preference and likings of consumers also change with technological revolution. The consumer may like to buy latest thing in every field. The luxuries of yesterday may become necessities of today. Business should capture opportunities offered by new changes.

Ecological Environment : 

    The expansion of industrial activities has created a problem of pollution. A healthy social system requires balanced ecological environment. Natural resources should be judiciously and economically used so that these are preserved for long. It is the responsibilities of the business to make best use of natural resources. Business executives should also ensure a better life and environment to the society. The proper use of scare resources and prevention of pollution can restore the balance in our ecological environment.