Components

Business establishes, grows or operates and dies in environment. It exchanges resources I environment. It collects inputs i.e. Man money, materials, machines etc. And provides output i.e. Goods and services in the environment. Environment means surrounding. Business environment defines as a force that affects on organizational performance. It includes internal an eternal factors. It provides opportunities and threats.

1.. Internal environment

It is defined as all the forces or conditions that are available within an environment that affects on organization and business. It is also known as controllable factors because business can control them. It includes

I. Employees Business hires employees. It is the major internal factor. It works inside the business. It can be controlled by the business. Employees differ in skill, knowledge, morality, and attitude and so on. When managers and employees have difference in goals an beliefs then conflict may arise. The task of management is to divide the work and assign the work to the suitable employee and handle the conflict.

Ii. Shareholders: Management deals with many shareholders. Shareholders have the right of ownership, power of management and voting right. The actual management of organization is carried out by elected representative of shareholders jointly known as boar of directors. Boards of directors have the responsibility of overseeing the management of organization. It plays the major role in formation of objectives, policies, strategies of the organization as well as their implementation.

Iii. Organization structure: It is located inside the organization. The arrangement of various facilities, pattern of relationships among the various department, responsibility, authority and communication is the organization structure. It also included specialization and span of control. Iv. Organization culture: The sets of values that help the members to understand what organization stand for how it does work, what it considers, cultural values of business forces of business and so on. It helps in direction of activities.

2. External environment (PEST)

All the forces and condition that cannot be controlled by the business is called external environment. . It is also known as uncontrollable factors because business cant control them. It is located outside the business. It affects on organizational performance. It includes: I. Economic environment. It indicates the condition of economy in which business organization operates. It has continuous and great impact on business. It includes national income, production, inflation, savings, investment, price, government activities. Business person must have constant watch on this factor.

Ii. Political or legal environment It is defined as rules and regulations determined by the government. Business must fulfill demand of government. There should be non violation of rules and regulation of government. Business should avoid unfair trade and should provide essential information to the government. Iii. Social environment. Business must have good environment where a business can be established neatly. Business also helps in employment opportunities generation. There should be socio cultural understanding and application of anti pollution measures. Iv. Technological environment: It defines about the methods available for converting resources into product or services. It transforms inputs into output. Inputs means material, capital, man, machine. It affects on business. It helps to change the level of job, skill, and product and so on. There can be innovation, development of scientific techniques which encouraged mass

*MICRO ENVIRONMENT *intro:Micro environment factors, are factors close to a business that have a direct impact on its business operations and success. Before deciding corporate strategy businesses should carry out a full analysis of their micro environment. In this article we discuss common micro environment factors.

Customers

As all businesses need customers, they should be Centred (Orientated) around customers. The firm's marketing plan should aim to attract and retain customers through products that meets their "wants and needs" and excellent customer service.
Employees

Employing staff with relevant skills and experience is essential. This process begins at recruitment stage and continues throughout an employee's employment via ongoing training and promotion opportunities. Training and development play a critical role in achieving a competitive edge; especially in Service Sector Marketing. If a business employs staff without motivation, skills or experience it will affect customer service and ultimately sales.
Suppliers

Suppliers provide businesses with the materials they need to carry out their business activities. A supplier's behaviour will directly impact the business it supplies. For example if a supplier provides a poor service this could increase timescales or product quality. An increase in raw material prices will affect an organisation's Marketing Mix strategy and may even force price increases. Close supplier relationships are an effective way to remain competitive and secure quality products. . Shareholders As organisations require investment to grow, they may decide to raise money by floating on the stock market i.e. move from private to public ownership. The introduction of public shareholders brings new pressures as public shareholders want a return from the money they have invested in the company. Shareholder pressure to increase profits will affect organisational strategy. Relationships with shareholders need to be managed carefully as rapid short term increases in profit could detrimentally affect the long term success of the business.
Media

Positive media attention can make an organisation (or its products) and negative media attention can break an organisation. Organisations need to mange the media so that the media help promote the positive things about the organisation and reduce the impact of a negative event on their reputation. Some organisations will even

employ public relations (PR) consultants to help them manage a particular event or incident. Consumer television programmes with a wide and more direct audience can also have a very powerful impact on the success of an organisation. Some businesses recognise this and will change their reaction when consumers mention that they are going to contact a consumer television programme or the newspapers about the business.
Competitors

The name of the game in marketing is differentiation. Can the organisation offer benefits that are better than those offered by competitors? Does the business have a unique selling point (USP)? Competitor analysis and monitoring is crucial if an organisation is to maintain or improve its position within the market. If a business is unaware of its competitor's activities they will find it very difficult to beat their competitors. The market can move very quickly for example through a change in trading conditions, consumer behaviour or technological developments. As a business it is important to examine competitors' responses to these changes so that you can maximise the impact of your response.
Conclusion

Businesses can not always control micro environment factors but they should endeavour to manage them along withMacro Environment and Internal Environment factors. *MACRO-ENVIRONMENTAL

FACTORS*intro:-

A business and its forces in its micro environment operate in larger macro environment of forces that shape opportunities and pose threats to the business. It refers the major external and uncontrollable factors that influence an organization's decision making, and affect its performance and strategies. These factors include the economic factors; demographics; legal, political, and social conditions; technological changes; and natural forces. The important environmental factors are; (1) Economic Environment (2) Political and Governmental Environment (3) Socio-cultural Environment (4) Natural Environment (5) Demographic Environment (6) Technological Environment (7) International Environment.

1. Economic Environment: - Economic environment of business has reference to the board

characteristics of the economic system in which the business operates. The business sector has economic relation with the government, capital market; household sector and global sector. These sectors together influence the trends and structure of the economy. The form and functioning of the economy vary widely. The importance external factors that affect the economic environment of a business are; (i) Economic Conditions: The general Economic conditions prevailing in the country viz. national income, per capita income, economic resources, distribution of income and assets, economic development etc. are important determinants of the business strategies. Business cycles and economic growth of the economy are important factors defining the economic environment. (ii) The economic system operating in the country also affects the business enterprise to a very great extent. The economic system of a country may be capitalist, socialist, communist or mixed.

(iii)Economic Policies: - The government decides the economic environment of business through Budges, Industrial regulations, Economic planning, Import and Export regulations, Business laws, Industrial policy, Control on prices and wages, Trade and transport policies, the size of the national Income, Demand & supply of various goods etc. (iv) Economic Growth: - The stage of economic growth of the economy has direct impact on the business strategies. Increased economic growth rate and increase in consumption expenditure, lower the general pressure within an industry and offers more opportunities then threats. (v) The rate of interest affects the demand for the products in the economy, particularly when general goods are to be purchased through borrowed finance. Low interest rated provides opportunities to the industries to expand whereas rising interest rates pose a threat to these institutions. (vi) Currency Exchange: - Current exchange rates have direct impact on the business environment. When the rupee was devalued in 1991, it was to make Indian products cheaper in the world market and consequently boost India's exports.

2. Political and Governmental Environment: - Political environment refers to the

influence exerted by the three political institutions they are; Legislature, Executive, Judiciary etc. The legislature decides on a particular course of action. Government is the executive and its job is to implement whatever was decided by parliament. The judiciary has ensure that both the legislature and executive function in public interest and within the boundaries of constitution. Legal and political environment provides a framework within the business is to function and its existence depends on the success with which it can face the various challenges constructed out of political and legal framework. 3. Socio-cultural Environment: - Changes in social trends can impact on the demand for a firm's products and the availability and willingness of individuals to work. Social class and caste of a person goes a long way in deciding the business activities in relation to its production and marketing activities. Tradition, customs and social attitudes have changed the attitude and beliefs of the persons which have their effect on organizational environment. Class and caste are influencing the purchasing pattern. Socio-cultural environment may include expectations of the society from business, attitudes of society towards business and its management, views towards achievement of work, views towards structure, responsibility and organizational positions, views towards customs, traditional and conventional, class structure and labour mobility and level of education. 4. Natural Environment: - Environmental factors include the weather and climate change. Changes in temperature can impact on many industries including farming, tourism and insurance. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider. The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries (for example, more taxes being placed on air travel and the success of hybrid cars) and the general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities. 5. Demographic Environment: - Demographic factor include Size, growth rate, age composition, sex composition etc. of population, Family size, Economic stratification of population, Educational level, Caste, religion etc. All these demographic factors are relevant to business. These factors affect the demand for goods and services. High population growth rate indicates an enormous increase in labour supply. Population with varied tastes, preferences, beliefs, temperaments etc. gives rise to differing demand pattern and calls for different marketing strategies. 6. Technological Environment: In order to survive in today's competitive world, a business has to adopt technological changes from time to time. New technologies create new products and new processes. Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organizations providing the products. MP3 players, computer games, online gambling and high definition TVs are all new markets created by technological advances. Online shopping, bar coding and computer aided design are all improvements to the way we do business as a result of better technology. 7. International Environment: - Another environmental factor which is fast emerging as the force to reckon with is the international environment. Implications of global or international environment are; (i) Due to liberalization, Indian companies are forced to view business issues from the global perspective. (ii) Safe and protected markets are no longer there. World is becoming small in size due to advanced means of transport and communication facilities. (iii) Learning of foreign languages is must for every business manager. (iv) Acquiring familiarity with foreign currencies is also must. (v) Facing political and legal uncertainties is

inevitable.

MEANING OF BUSINESS ENVIRONMENT

As stated earlier, 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 polices,the business has to make the necessary changes to adapt itself to the new policies. Similarly,a change in the technology may render the existing products obsolete, as we have seen that the introduction of computer has replaced the typewriters; the colour television has made the black and white television out of fashion. Again a change in the fashion or customers taste may s hift the demand in the market for a particular product, e.g., the demand for jeans reduced the sale of other traditional wear. All these aspects are external factors that are beyond the control of the business. So the business units must have to adapt themselves to these changes in order to survive and succeed in business. Hence, it is very necessary to have a clear understanding of the concept of business environment and the nature of its various components. The term business environment connotes external forces, factors and institutions that are beyond the control of the business and they affect the functioning of a business enterprise. These include customers, competitors, suppliers, government, and the social, political,legal and technological factors etc. While some of these factors or forces may have direct influence over the business firm, others may operate indirectly. Thus, business environment may be defined as the total surroundings, which have a direct or indirect bearing on the functioning of business. It may also be defined as the set of external factors, such as economic factors, social factors, political and legal factors, demographic factors, technicalfactors etc

What is external environment

A business converts inputs into outputs in order to make a profit. However, the business does not exist in a vacuum, it exists within an external environment consisting of the actions of other players who are outside the business. The external environment consists of:

competitors the economic system

the social system the monetary system the political/legal system the environmental system.
Competitors actions affect the ability of the business to make profits, because competitors will continually seek to gain an advantage over each other, by differentiating their product and service, and by seeking to provide better value for money. The economic system is the organisation of the economy to allocate scarce resources. The economy tends to go through periods of faster and slower growth. Businesses prosper when the economy is booming and living standards are rising. The social system is the fabric of ideas, attitudes and behavior patterns that are involved in human relationships. In particular businesses are influenced by consumer attitudes and behaviours which depend on such factors as the age structure of the population, and the nature of work and leisure. The monetary system facilitates business exchange. Monetary activity is based around earning, spending, saving and borrowing. Money has been likened to the oil that lubricates the wheels of commerce. Monetary activity involves businesses in a web of relationships involving financial institutions (e.g. banks and building societies), creditors, debtors, customers and suppliers. A key monetary influence for business is the interest rate. Higher interest rates increase business costs and act as a break on spending in the economy. The political/legal system creates the rules and frameworks within which business operates. Government policy supports and encourages some business activities e.g. enterprise, while discouraging others e.g the creation of pollution. The environmental system is the natural system in which life takes place. Increasingly businesses have become aware of the relationship between their economic activity i.e. making goods and services for profits and the effects that this has on the environmental system.

factors of external environmnt

PESTEL analysis stands for "Political, Economic, Social, and Technological, Environmental and Legal analysis". It is a part of the external analysis when conducting a strategic analysis or doing market research and gives a certain overview of the different macroenvironmental factors that the company has to take into consideration. Political factors, or how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads). Furthermore, governments have great influence on the health, education, and infrastructure of a nation. Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. For example, an ageing population may imply a smaller and less-willing workforce (thus increasing the cost of labor). Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers). Technological factors include ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation. Environmental factors include weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance.Furthermore, growing awareness to climate

change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones. Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.

d affects the business decisions of a firm.