Nature Of Business Environment Analysis

MEANING OF BUSINESS ENVIRONMENT:

Understanding the environment within which the business has to operate is very important for running a business unit successfully at any place. Because, the environmental factors influence almost every aspect of business, be it its nature, its location, the prices of products, the distribution system, or the personnel policies. The success of every business depends on adapting itself to the environment within which it functions. For example, when there is a change in the government policies, then the business has to make the necessary changes to adapt it to the new policies.

When there is a change in technology, then also the business has to make necessary up gradation to cope up with the new advancement for

 Identifying Firm’s Strength and Weakness: Business environment helps to identify the individual strengths and weaknesses in view of the technological and global developments.

NATURE OF A BUSINESS ENVIRONMENT:

The nature of Business Environment is simply and better explained by the following approaches.

Fig 1.2 Different approaches to the Nature of Business Environment

(i) System Approach:

In original, business is a system by which it produces goods and services for the satisfaction of wants, by using several inputs, such as, raw material, capital, labour etc. from the environment.

(ii) Social Responsibility Approach:

In this approach business should fulfil its responsibility towards several categories of the society such as consumers, stockholders, employees, government etc.

(iii) Creative Approach:

As per this approach, business gives shape to the environment by facing the challenges and availing the opportunities in time. The business brings about changes in the society by giving attention to the needs of the people.

On the basis of the above approaches we can conclude the characteristics of the business which are as

It is the group of many such forces that is why, its nature is of totality. (2) Specific and General Forces:

The forces present outside the business can be divided into two parts – specific and general.

(i) Specific: These forces affect the firms of an industry separately, e.g., customers, suppliers, competitive firms, investors, etc.

(ii) General: These forces affect all the firms of an industry equally, e.g., social, political, legal and technical situations.

(3) Interrelatedness:

The different factors of business environment are co-related. For example, let us suppose that there is a change in the import-export policy with the coming of a new government.

In this case, the coming of new government to power and change in the import-export policy are political and economic changes respectively. Thus, a change in one factor affects the other factor.

(4) Dynamic