Importance of Business Environment

Business environment: definition

The business environment is those factor which beyond the control of the business and affects the operating of any business. These factors can be controllable and uncontrollable in nature. Those are controllable are micro and uncontrollable are macro. These are explained here:-

(A) Micro environment:

The environment is that factor that is controllable or their impact can be reduced through planning. These factors are:-

• Supplier
• Customer
• Intermediaries
• Public 
• Competitors

(B) Macro environment: - 

Macro Environment is the factor which is beyond the control of the management and con does not make any Proper prediction regarding this.

That includes:-

 1. Economical Environment: 

That includes planning, economical policies, and economical structure. To know the economic environment of a country or a business one has to understand the economic policies of the nation. These policies put a direct impact on the working and success of the business.Economic conditions, economic policies, and the economic system are the important factors that constitute the economic environment of the business.

2. Natural Environment: 

Geographical factors such as natural resources endowments, weather, and climatic conditions, location aspects in the global context, port facilities, etc., are all relevant to business.

3. Socio-Cultural Environment:  

Socio-cultural environmental factors consist of human relationship and development. Some of the important factors in the social environment are the buying and consumption habit of people, their languages, belief and values, custom and traditions, etc that affects the business.

4. Legal Environment: 

Every country follows its own system of law.  The companies operating in the global market have to take into account the provisions with respect to the legal environment prevalent in the countries in which they do business. These laws and regulations affect the day-to-day operations of the business.

    5. technological Environment: 

     technological environment comprises both machines (hard technology) and scientific thinking (soft technology) used to solve problems and promote progress. It also represents the degree of advancement of goods and services that are prevalent in a country or a region.

6. Political Environment: 

The business decision is base on government policies, frequently change In these policies would force change in the organization's policies too. the political environment consists of factors related to the management of public affairs that have a considerable impact on the business of an organization. It impacts the legislation and government rules and regulations under which business organizations operate in a country.

   7. Educational and cultural Environment: 

    Educational factor means the literacy level of the population of the country. And cultural factor means norms, value, and belief of the people.

Objectives of business environment

Knowledge of information:

Every businessman should be aware of the current environment of the business to change accordingly.

Basis of decision:

It contains all the information needed to make a good decision.

E.g. if business knew 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 the business environment study.

HANDPICKED RELATED CONTENT: Economic Environment: Element, Components, importance

Significance of the business environment

First mover advantage:

Awareness of environment helps an enterprise to take advantage of early opportunities instead of losing them to competitors.

Ex: Maruti Udyog became leader in small car

Early warning signal:

Environment awareness serves as an early warning signal. It makes a firm aware of the future threats or crises so that the firm can take timely action to minimize the adverse effects.

Customer focus:

Environment understanding makes the management sensitive to the changing needs and expectations of the consumers.

Ex: apps in mobile

Strategy formulations:

Environment monitoring provides relevant about the business opportunities on the basis of which firms make their strategies.

Ex: ITC in the travel and tourism sector

Public image:

A business firm can improve its image by showing that it is sensitive to its environment and responsive as per the need of customers.

Continuous learning:

Environment analysis serves as broad and ongoing education for business executive so that they can react in an appropriate manner to the changing scenario and thereby increase the success of their organization.