B.

COM
SEMESTER III
Business Environment –I
100 Marks-75 Lecture

Objectives: The basic objectives of this course are to apprise

commerce students to different aspects of environment. It
also aims at making students aware of how different factors
in the environment can affect business. The course is also
designed to make students aware of business environment
in Goa. It also focuses on important changes in economic
environment after liberalization.
 Unit 1: Business and its Environment (25
marks -19 lectures)
• Definition, scope, nature and objectives of
business; Characteristics of modern business,
Business environment – meaning,
importance & features; Components of
environment - Internal and external, micro
and macro environment (brief explanation of
each component) Social responsibilities of
business
 Unit 2: Socio-Cultural and Demographic Environment (25 marks -19 lectures)

• Culture—meaning, elements - Family, religion,

language and their impact on business Social
groups such as caste, class & nouveau riche - their
impact on business Customs, traditions and values
and their impact on business Demographic
environment - meaning and composition; Impact of
demographic environment on business, Migration -
meaning, reasons for migration, impact of
migration (positive and negative)
 Unit 3: Natural and Technological
Environment (25 marks -19 lectures)
• Natural environment - meaning and
composition; impact of natural environment
on business , Technological environment –
meaning; main features of technology;
management of technology; Impact of
technology on business; Status of technology
in India, Impact of Information Technology on
business, e-business in India
 Unit 4: Political Environment (25 marks -18 lectures)

• Meaning, Role of government (regulatory,

entrepreneurial, planning and promotional)
Components of political environment -
political systems (such as Democracy and
dictatorship), political stability, international
relations, government bureaucracy, special
interest groups and their impact on business
(25 marks 12-13 lectures)
 Books for Study and Reference:
1. Misra, S.K. & Puri, V.K. (2007) Economic
environment of Business, Himalaya Publishing
House, Delhi  
2. Menon, Lydia & Mallya, Prita, Business
Environment
3. Cherunillam, Francis Business Environment,
Himalaya Publishing House
4. Ashwathappa, K, Business Environment,
Himalaya Publishing House
 5. Dutt & Sundaram, Indian Economy, S. Chand &
Company
 Unit 1: Business and its Environment

• When it comes to the nature and the scope of business, it

looks like it is very wide. It covers all the activities related
to production and distribution of goods and services from
the place productions to the final consumers with an aim
to earn profit.
• There are two types of business activities. These Business
Activities also known as business components.
• These components of business are actually define the
scope of business to us. So lets talk about the 
scope of business organization with the help of these
components.
• What Is a Business?
A business is defined as an organization or enterprising
entity engaged in commercial, industrial, or professional
activities.
Businesses can be for-profit entities or non-profit
organizations that operate to fulfill a charitable mission or
further a social cause. 
The term business also refers to the organized efforts and
activities of individuals to produce and sell goods and
services for profit.
Businesses range in scale from a sole proprietorship to an
international corporation. Several lines of theory are
engaged with understanding business administration
including organizational behavior, organization theory, and
strategic management.
 Definition of Business
• An organization or economic system where
goods and services are exchanged for one
another or for money.
• Every business requires some form of
investment and enough customers to whom its
output can be sold on a consistent basis in order
to make a profit.
• Businesses can be privately owned, not-for-
profit or state-owned.
Nature and the Scope of Business
• When it comes to the nature and the scope of
business, it looks like it is very wide. It covers
all the activities related to production and
distribution of goods and services from the
place productions to the final consumers with
an aim to earn profit.
 Scope of Business
• Business which Produce Goods
– Commodities
– Products
• Business which Produce Service
• Business which Distributes Goods
• Business which facilitate Distribution of Goods
• Business which deals in Finance and Financial
Services
 Business Environment
• A business can be established, but to successfully sustain
a business, the business needs resources like finance, for
which it has to depend on financial institutions.
• Acceptance of social norms, for which it has to depend
on society.
• Proper market conditions, for which it has to depend on
the market.
• The sale of products/services, for which it has to depend
on the customers.
• The labour, for which it has to depend on society.
• Then there are natural resources and raw
material, for which it has to depend on Nature.
• Also, the legal support of the government, for
which it has to depend on the government.
• There are many factors and 
dimensions that affect Business Environment.
These factors are many different components of a
single concept called Business Environment.
• These factors which business depends upon aren’t
standstill, they are very dynamic and ever-changing.
• The changing needs of customers and new
innovations in the market are a part of the business
environment.
• The challenge for businesses in this technological era
is not to enter the market but to survive in the
market. 
• To survive in the market means to adapt to the
changes as fast as possible.
•  To adapt to the changes means to be aware of the
business environment.
 Meaning of Business Environment

• The definition of Business Environment, “The

sum total of all individuals, institutions and
other forces that are outside the control of a
business enterprise but the business still
depends upon them as they affect the overall
performance and sustainability of the
business.”
• The forces which constitute the business
environment are its suppliers, competitors,
consumer groups, media, government,
customers, economic conditions, market
conditions, investors, technologies, trends,
and multiple other institutions working
externally of a business constitute its business
environment. These forces influence the
business even though they are outside the
business boundaries.
• For example, changes in taxes by the
government can make the customers buy less.
Here the business would have to re-establish
its prices to survive the change. Even though
the business had no involvement in initiating
the change it still had to adapt to it in order to
survive or use the opportunity to make profits.
Now let us discuss the importance of the
business environment.
COMPONENTS OF BUSINESS ENVIRONMENT
• The various components of business environment are–
• (i) External Enviornment
(ii) Internal Environment.

External Enviornment : External environment consists of those factors that

affect a business enterprise from outside.
• External environment includes shareholders, competitors, customers, society,
government laws and regulations, policies and technology.
• External environment is generally classified into micro environment and macro
environment. We will explain below micro and macro types of external
environment of business.
• Different players in the micro environment normally do not affect all the
companies of a particular industry in a similar way. However, sometimes micro
environment of the various firms of an industry remains almost same.
• A. External Micro- Environment 
Micro environment includes those players whose decisions and actions have a direct
impact on the company. Production and selling of commodities are the two important
aspects of modern business. The various constituents of micro environment are as under:

a. Suppliers of inputs : An important factor in the external micro environment of a firm is

the supplier of its inputs such as raw materials and components. 

b. Customers : The people who buy and use a firm’s product and services are an
important part of external micro environment. Since sales of a product or service is critical
for a firm’s survival and growth, it is necessary to keep the customers satisfied. 

c. Marketing intermediaries : In the firm’s external micro environment, marketing

intermediaries play an essential role of selling and distributing its products to the final
customers. Marketing is an important link between a business firm and its ultimate
customers.

d. Competitors : Different firms in an industry compete with each other for sale of their
products. This competition may be on the basis of pricing of their products and also non-
price competition through competitive advertising such as sponsoring some events to
promote the sale of different varieties and models of their products. 
• Demographic factors such as age, gender,

education, income and experience has a

considerable impact on business performance.

While much attention has been devoted to

business skills and the problems faced by

small businesses, little attention has been paid

to demographic factors.