Scribd
Upload
19 views

Be Unit 1

The document discusses the importance and features of business environment. It explains how business environment helps identify opportunities and threats, tap resources, cope with changes, assist in planning and improve performance. The features covered are that environment includes external forces, has specific and general forces, components are interrelated, dynamic in nature, uncertain, complex and relative.

Uploaded by

Hemant Kumar Ahirwar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
19 views

Be Unit 1

The document discusses the importance and features of business environment. It explains how business environment helps identify opportunities and threats, tap resources, cope with changes, assist in planning and improve performance. The features covered are that environment includes external forces, has specific and general forces, components are interrelated, dynamic in nature, uncertain, complex and relative.

Uploaded by

Hemant Kumar Ahirwar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 15

BUSINESS

ENVIRONMENT
The word ‘business environment’ indicates the aggregate total of
all people, organisation and other forces that are outside the
power of industry but that may affect its production
IMPORTANCE OF BUSINESS ENVIRONMENT

• It Helps in Identifying Opportunities and Making First Mover Advantage


• The environment provides numerous opportunities, and it is necessary to
identify the opportunities to improve the performance of a business.
• Early identification gives an opportunity to an enterprise be the first to
identify opportunity instead of losing them to competitors. Example: ‘Airtel’
identified the need for fast internet and took first-mover advantage by
providing 4G speed to its users followed by Vodafone and Idea.
• Asian paints lost market share to Nerolac because it failed to match its
technology.
It Helps the Firm Identify Threats and Early Warning Signals
•The business environment helps in understanding the threats which are likely to happen
in the future.
•Environmental awareness can help managers identify various threats on time and serve
as an early warning signal. Example: Patanjali products have become a warning signal
to the rest of the FMCG
•The sector to develop similar products. Similarly, if an Indian firm finds that a foreign
multinational is entering the Indian market with new substitutes; it needs to prepare
accordingly.
•Chinese mobile phones have become a threat for Indian mobile phone manufacturers.
It Helps in Tapping Useful Resources
•Business and industry avail the resources (inputs) from the environment and convert
them into usable products (outputs) and provide to society.
•The environment provides various inputs (resources) the like finance, machines, raw
materials, power and water, labour, etc.
•The business enterprise provides outputs such as goods and services to the customers,
payment of taxes to the government, to investors and so on.
Example: With the demand for the latest technology, manufacturers will tap the
resources from the environment to manufacture LED TVs and Smart TVs rather than
collecting resources for colour or Black & White TVs.
It Helps in Coping With Rapid Changes
•The business environment is changing very rapidly, and the industry is getting affected
by changing market conditions.
•Turbulent market environment, less brand loyalty, divisions of markets, changes in
fashions, more demanding customers, and global competition are some examples of
changing the business environment.
Example: Jack Ma started Alibaba as he could see the potential of interest in E-
Commerce.
It Helps in Assisting in Planning and Policy Formulation
•The business environment brings both threats and opportunities to a
business.
•Awareness of business environment helps in deciding future planning or
decision making.
Example: Multiple entries of Chinese phones like VIVO, Gionee, OPPO, etc. have
posed a threat to local players like Micromax, Karbonn, Lava etc. to think
afresh how to deal with the situation.

(F) It Helps in Improving Performance


•Environmental studies reveal that the success of any enterprise is closely
bound with the changes in the environment.
•The enterprises which monitor and adopt suitable business practices not
only improve their performance but become leaders in the industry also.
Example: Apple has been successful in maintaining its market share due to
its proper understanding of the environment and making suitable innovations
in its products.
Features of Business Environment:
(A) The totality of External Forces
•Business environment includes everything which is outside the organisation.
•If we add all these forces, they will form a business environment.
Example: When Pepsi and Coca-Cola got permission to set up their business in
India, it was an opportunity for them and threat for local manufacturers like gold
spot, camp-cola etc.
(B) Specific and General Forces
•Specific forces are those forces which directly affect the operational activities of
the business enterprise.
•Example: Suppliers, Customers, Investors, Competitors, Financers etc.
•General forces are those forces which indirectly affect the functioning of
business enterprises.
Example: Economic, Social, Political, Legal and Technological conditions.
Inter-relatedness
•Different forces of business environment are interrelated to each other.
•One component of the business environment affects the functioning of other
components.
Example: The increased life expectancy of people and awareness of health
consciousness has increased the demand for many health products like diet coke,
olive oil, and so many health products.
(D) Dynamic Nature
The business environment is dynamic in nature and keeps on changing in terms of :
(a) Technological improvement,
(b) Shifts in consumer preferences,
(c) The entry of new competition in the market.
Example: Many established companies in FMCG (Fast Moving Consumer goods)
sector are focusing on producing the goods with natural ingredients with the entry of
‘Patanjali Products’.
Uncertainty

The changes in the business environment cannot be predicted accurately because of future
uncertainties.
It is very difficult to predict the changes in the economic and social environment.
Example: There has been a sharp decline in the prices of Android smartphones due to the entry
of many new companies.

(F) Complexity

All forces of the Business environment are interrelated and dynamic, which makes it difficult to
understand.
Complex nature of Business environment can be understood if we study it in parts.
Example: Increase in goods and service tax to 15 % would increase the revenue of the
government (economic), which would help the government to improve social being of people
(social) and reduce the personal disposable income of rich people and thereby controlling
inflation.
Relativity
•Business Environment differs from place to place, region to region and country to
country.
Example: In China, the electricity to the industry is provided at cheaper rates as
the consumption increases and hence, it leads to mass production whereas, in
India, it is otherwise, higher consumption of electricity leads to costly electricity
which results in lower production & higher cost of production.

You might also like