Business Env Meaning and Nature

Business Environment
Business: Business is a human activity carried out by the unified efforts of different
categories of people, to produce the wealth through production and distribution of
the goods and services.
According to Malvin Anshen : “ Business is the way by which men make

their living.”
According to Bayard O’Wheeler : “ Business is an institution organized and
operated to provide goods and services to society under the incentive of
private gain.”
Environment: The birth, growth and continuous development of organization

are influenced by a wide range of variables like employees, customers,
suppliers, producers, competition etc.
Business Environment: Business Environment refers to those aspects of the
surroundings of business enterprise, which affect or influence its operations and
determine its effectiveness.
According to Keith Davis: “Business environment is the aggregate of all

conditions, events and influence that surrounds and affects it”
Nature of Business Environment
Complex: Environment consists of a number of factors, events, conditions arising from

different sources which impact business thus making the business complex.
Interdependence : Factors affecting business environment like social, economic, legal,
cultural etc are inter dependent. E.g. A rich country can make sufficient expenditure on
the research and development.
Dynamic: Business environment is dynamic as it keeps on changing in terms of
technological improvement, changes in consumer preferences, entry of new
competitors
Uncertainty: Business environment is largely uncertain as it is very difficult to predict
future happenings. 
Relativity: Business environment is a relative concept as it differs from country to
country and region to region. e.g. Demand of saree is high in India comparative to other
countries.
Specific and General forces: Specific forces affects individual enterprises directly and
immediately whereas general forces have impact on all business enterprises. 
Forecasting is not possible for all developments: Many developments such as interest
rate fluctuations, the rate of inflation etc are difficult to predict on log term basis which
makes difficult to maintain business environment.
Objectives of Business Environment
Knowledge of Information: Every businessman should be aware about the

current environment of the business to change accordingly.
Basis of Decision: It contains all the information which is needed for taking good
decision. e.g. If a business knows about its competitors, suppliers and customers
they take decision about price, purchase, salary etc.
Helpful in making of policies: For making good business policies one needs to
know and scan business through business environment.
Technological Planning: In today's environment it is really important for the business

houses to keep themselves changing according to the technological changes in the
market.
Survive in the business: Sometimes industry may face recession. In such condition
only those business will survive who estimate this entire situation in advance
through business environment study.

Types of Business Environment
Internal Environment External Environment
• Financial Resources • Physical and human Resources • Objectives of Business • Work

Environment • Corporate Image • Labour management Relationship • 7) Technological
Capabilities Micro Environment Macro Environment
. Internal Environment: Internal environment refers to factors existing within a business

firm.These factors are generally regarded as controllable factors because the company has
control over these factors.  Financial Factors: Factors like financial policies, financial
procedures and capital structure are also important internal environment affecting business
performance, strategies and decisions.  Physical and Human Resources: The characteristics
of the human resources like skill, quality, moral, commitment etc., contribute to the
strength and weakness of an organization.  Objectives of Business: The business domain of
the company, direction of development, business policy etc., are guided by the objectives
of the company
 Work Environment: The organisational structure, company policies, extent of
professionalism in management etc., are important factors influencing business
decisions. 
Company Image and Brand: The image of the company matters while raising
finance, forming joint ventures, entering purchase or sales contract etc. 
Labour Management Relationship: Factors like the amount of support top

management enjoys from different level of employees, and other participants
influences company decisions and their implementations. 
R&D and Technological Capabilities: It determines a company’s ability to innovate

and compete.
External Environment The external environment refers to the factors existing outside
the business firm. The external factors are beyond the control of a company, hence its
success depends to the adaptability of the environment. Again external environment is
divided in two parts: 1)Micro Environment 2)Macro Environment
14.  Micro Environment The factors which are close to the company and affects its
ability to work constitutes micro environment. It is known as the operating environment
of business. When competing form in the industry have the same micro elements, the
success of the firm depends on their relative effectiveness in dealing with these
elements.  Suppliers: Suppliers are those who supply the inputs like raw material and
components to the company. Uncertainties regarding the supply constraints the
company to maintain high inventories causing cost increase.  Customers: Success of
any business depends upon identifying customers, their needs, likes etc., and enhancing
the level of customer satisfaction. The major task of a business is to create and sustain
customers.
15.  Competitors: Competitors mans other business units which are marketing or
producing similar products or a very close substitute of our product. Business has to
adjust its various activities according to the action and reactions of competitors. 
Marketing Intermediaries: These are the firms that aid the company in promoting ,
selling and distributing its goods to final buyers. They are the vital links between the
company and the final consumers. Public: A public is any group that has an actual or
potential interest in or impact on an organization's ability to achieve its interest. Some
companies are seriously affected by such public. E.g. Media
16.
Macro Environment Macro environment
means general environment of business.
Macro forces are uncontrollable in comparison
to the micro forces of environment. The
growth and survival of business depends upon
its adaptability to macro environmental
factors. The important macro environment are:
1)Economic Environment 2) Non Economic
Environment  Economic Environment: To
know the economic environment of a country
or a business one has to understand the
economic policies of the nation. These policies
put direct impact on the working and success
of the business. Economic conditions,
economic policies (Industrial policies,
monetary and fiscal policy etc) and the
economic system are the important factors
that constitute economic environment of the
business.
few common steps can be identified as the
process of environmental analysis they are: 
Identifying Environmental Factors: All strategist
should identify all the relevant factors that
might affect their business. In this process, one
should first know what the internal areas
(internal structure, culture, labour
management) of the business are. Similarly, a
business daily interacts with the close
environmental components outside the
business such as customers, competitors.
Furthermore, general factors such as political,
legal, economic etc. are to be identified. 
Scanning and Selecting Relevant Key Factors:
Out of all the business environmental factors, a
strategist should focus on the relevant factors
for analysis. This step basically avoids the
overload of unnecessary information.
26.  Defining Variables for Analysis: Selected
environmental factors are to be further
specified into the variables. For example,
political situation can be measured using few
variables such as instability, reliability and long
term effect. Economic environment might
cover many variables such as per capita, GDP

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Business Environment

According to Malvin Anshen : “ Business is the way by which men make

Environment: The birth, growth and continuous development of organization

According to Keith Davis: “Business environment is the aggregate of all

Complex: Environment consists of a number of factors, events, conditions arising from

Knowledge of Information: Every businessman should be aware about the

Technological Planning: In today's environment it is really important for the business

• Financial Resources • Physical and human Resources • Objectives of Business • Work

. Internal Environment: Internal environment refers to factors existing within a business

Labour Management Relationship: Factors like the amount of support top

R&D and Technological Capabilities: It determines a company’s ability to innovate

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