UNIT -I

Definition: According to Androse “The term

business environment of a company is defined as

a pattern of all external influences that effect its
life and development.
Business environment consist of all those factors

that have a bearing on the business.

The survival of a business firm depends on its

innate strength resources at its command and its

adaptability to the environment and the extent to
which the environment is favorable to
development of the firm
The survival and success of a firm, thus, depend

on two major factors, viz,- the internal

environment - the external environment.
 A SWOT analysis i.e analysis of strengths
and weaknesses of the organisation and
opportunities and threats in the environment.
• The internal environment has two components:
strengths and weaknesses of the organisation.
• The internal factors are generally regarded as
controllable factors because the company has
control over these factors: it can alter or modify
such factors as its personnel, physical facilities,
organisational and functional means, such as
marketing mix, to suit the environment.
The external environment has two components:

opportunities and threats to business.The external

factors such as economic factors, socio-cultural
factors, govt and legal factors, demographic
factors, geo-physical factors etc are uncontrollable
factors.
Business Environment at 3 levels:

Internal environment
cro/task/operating environment
Macro/general/remote environment
Customers

Those people & organizations in the environment who

acquire goods or services from the business are
customers.

As recipients of the business’ output, customers are

important because they determine the business’ s

Types of Customers
 Industrial Customers

 Institutional Customer

 Foreign Customer
 • Retail Customer

• Multiple Customer

• Globalization

• Customer Segmentation

Competitors

Other firms in the same industry or type of business that

provide goods & services to the same set of customers.

In today’s environment most competitors are cooperating to

achieve common goals.
Suppliers
The people & organizations who provide the raw

material the business uses to produce its output.

The relationship among them must of cooperative

in nature in order to save money, maintaining

quality, and speeding products to market.
Reliability

Multiple Supplier
Market Intermediates

Types of Market Intermediates

Middlemen

Marketing Agencies

Financial Institution

Physical Intermediates
PUBLIC
Media Publics

Local Public
 Significance of Business Environment:

There is a mutual interdependence between business

and its environment. A business enterprises is an
open system. It continously interacts with its
environment. Business takes inputs raw materials,
capital, labour, energy etc. from its environment, and
transform them into goods and services and then
send them back to the environment.
 Business and its external environment interact in the

following ways.
. Exchange of information
. Exchange of resources.
. Exchange of influence and power.
 For incorporating dynamic behavior of environment

 Complete knowledge of internal environment

 To understand international events, pressures& impact

 Economic policies of the govt.

Economic policies of the govt.

To face business problems &challenges

Vigilant regarding dangers

Administrative system

Optimum utilization of resources

Market conditions

Scientific & industrial advancement

Development & success of business

Dimensions of Business Environment:
The main dimensions elements of business
Environment are as follows:-
Economics Environment: The economics
environment comprises of the factors and forces
concerned with means of production and
distribution of wealth. It refers to the nature of
economic system ,organisation of capital and
money markets, income level ,price level,
economic policies of the country etc.
Social Environment: This environment includes

social factors such as attitudes of people ,social

customs and traditions ,education level, size of
population ,trade unions, occupational structure
etc.
 Political Environment: Political environment

refers to the country's political system, type of

government, government policies towards
business ,government ,centre state relations
,public opinion, law and order etc.
 Legal/ Regulatory environment:

Legal environment of business includes all the

laws, legal system and judiciary system of the
country. A business has to work within framework
of country's laws and regulations.
 Socio-Cultural Environment

Social and Cultural environment refers to the

influence exercised by certain social factors which

are ‘beyond the company’s gate.’ Such factors
include, among others, attitude of people to work,
attitude to wealth, family, marriage, religion,
education, ethics and social responsibility of
business.
LEVELS OF CULTURE: Four levels
 National Culture: National culture is the dominant culture
within the political boundaries of a country.
 Business Culture: Business culture guides everyday
business transaction.
 Organisational Culture: It refers to the philosophies,
ideologies, values, assumptions, beliefs, expectations, and
norms that knit an organisation together and are shared by
its employees.
Occupational Culture: Different Occupational

groups such as physicians, lawyers, accountants,

professors, and crafts people have distinct
cultures- called Occupational cultures.
Technology:
Includes scientific and technological

advancements in a specific industry as well as in

society at large. E.g. Computer industry, etc.
Technological advances can change the rule of the

game; thus every business must be ready to

respond.
Legal and Political
The legal-political element includes the legal and
governmental systems within which a business must
function.
a. Business must operate within the general legal
framework of the countries in which they do business.
b. Businesses are subject to an increase in lawsuits filed
by customers or employees.
c. The political issues which affect businesses include
those which influence the extent of government
regulation.
Natural Environment
 Climatic & weather condition.

 Availability of Natural resources.

 Topographical factors: Physical features of place.

 Pollution Control

Demographic Environment
 Age Composition

 Sex Composition

 Education Level

 Family size & structure

 Urban-rural population
Business Environment
 International Business
When business activities are performed on an international
level, these can be termed as international business.
Basic functions, processes and techniques of international
business are essentially the same as those involved in
domestic business.

What is different is the environment within which these

functions are performed and processes are carried out.
International Business environments are unfamiliar
and different from the domestic environment
These variations may need adaptation for business
success.
International Business Environment

In the context of a business firm, environment can be

defined as various external actors and forces that
surround the firm and influence its decisions and
operations.
The two major characteristics of the environment as
pointed out by this definition are:
these actors and forces are external to the firm

these are essentially uncontrollable. The firm

can do little to change them

Concept of Globalisation:

Globalisation means " to make global ,that is world

wide or effecting or taking into consideration the
whole world or all people ".Globalisation is a
process of integration of business activities and
growing economic interdependence between
countries in the world economy.
Factors that lead to globalisation:

Growing similarities of countries in terms of available

infrastructure.

Globalisation exposes firms to international competition.

Employment opportunities wil be increase over a period

of time.

Widening of competition.