Introduction and Feature & Importance of Business Environment

Business Environment: Means the external forces influencing the business decisions. They can be forces of economic, social, political and technological factors. These factors are outside the control of the business.

Features:

1. Complexity:

• Environment is  easier to understand in parts but difficult to understand as a whole
• Easier to understand the fall in demand but difficult to explain the reasons for fall

2. Relativity:

• Differs from country to country and even region to region. Political conditions in Gujarat are, different from Kashmir
• Demand for woolen is high in north India and not in south India

3. Dynamic nature:

• Keeps on changing in terms of technological improvement, consumer preferences, or entry of new competition in the market.
• Urbanization has increased the demand for housing

4. External forces:

• Sum total of all things external to business firms and, as such, is aggregative in nature

5. Specific and general forces:

• Specific forces (such as investors, customers, competitors and suppliers) affect individual enterprises directly.
• General forces (such as social, political, legal and technological conditions) affect an individual firm indirectly.

6. Inter-relatedness:

• Different forces in a business environment are closely interrelated.
• For example, health awareness has increased the demand for many health products like diet Coke, fat-free cooking oil, gyms, etc

7. Uncertainty:

• Business environment is largely uncertain as it is very difficult to predict future happenings, especially when environment changes are taking place too frequently as in the case of information tech­nology or fashion industries

Importance of Business Environment

1. Recognize Opportunities To Get The First Mover Advantage

Early identification of opportunities helps an enterprise to be the first to exploit them instead of losing them to competitors.

1. • Maruti Udyog became the leader in the small car market because it was the first to recognize the need for small cars in India.
2. Assist In Improving Performance:
   • The enterprises continuously observing the environment can succeed in the market for a longer period. MCDONALS TIKKI CHTAT
   • A leading food service retailer with 155 restaurants in India, McDonald’s India caters to 3 lakh customers every single day
3. Coping with rapid changes:
   •  All sizes and all types of enterprises are facing an increasingly dynamic environment.
   •  To cope with changes, managers must understand the environment and develop a suitable plan. Increasing traffic in Delhi led to the development METRO.
4. Early Warning Signals And Threats
   • Threats refer to the external environment trends and changes that will hinder a firm’s performance.
   • Environmental awareness can help managers to identify various threats on time and serve as an

early warning signal

• • Indian firms can compete with foreign firms by improving the quality of the product, reducing the cost of production, engaging in aggressive advertising, and so on.

                                FMCG major GODREJ is competing with foreign giants like HUL, Pepsi

5. Resources utilization
   • Environment is a source of various resources for running a business.
   • Business enterprise uses various resources called inputs like finance, machines, and raw materials
6. Support In Planning And Policy Formulation
   • Environment brings both opportunities and threats for a business enterprise.
   • Its understanding can convert threats into opportunities.