BUSINESS ENVIRONMENT

After studying this chapter, you will be able to:

1. Understand the concept of business environment with its characteristics and importance.

2. Understand what is environmental analysis and why is it needed.

3. Know the environmental factors that influence a business.

4. Have a basic knowledge of various types of environment.

5. Have an understanding of different micro-economic factors that are affecting business.

6. Know the various macro-economic factors and how they are related to business.

SUMMARY

We began this chapter by understanding the concept of business. A business is society’s organ of economic expansion, growth and change. A business for our purpose can be any activity consisting of purchase, sale, manufacture, processing, and/or marketing of products and/or services. This chapter explains the three basic goals of environmental analysis and business environment with its characteristics such as complexity, dynamism, multifaceted nature and far reaching impact. The relationship between organization and its environment is also discussed in terms of interactions between them in several major areas.

The environment in which an organization exists could be broadly divided into two categories - external and internal environment. The external environment is further classified into two categories micro and macro environment. Micro environment relates to those forces that fall within immediate small periphery of an organization. It consists of customers, competitors, organization, market, suppliers, intermediaries, etc. Macro environment is at a distance and has broader dimensions. It consists of demographic, economic, political-legal, socio-cultural, technological and global environment, etc. We studied PESTLE analysis which is used to analyze the external macro environment, and it differs from SWOT analysis. The approaches of strategic response to the environment which may be followed by the business have also been discussed in this chapter.